State & Local Tax Controversy Case Study www.cbiz.com/saltcontroversy Issue A Colorado-based marketing and media services provider underwent a California state tax audit. The state auditor determined the marketer owed approximately $190,000 in California income taxes before interest and penalties. Solution Our state and local tax controversy team helped the marketer evaluate and address the state auditor’s conclusions. The company’s third-party tax preparer had made a single sales factor election and incorrectly taken a cost of performance approach to determine apportionment, which indicated the marketer would owe no income taxes in California. When the state auditor applied the correct market-based sourcing approach, the auditor determined the marketer’s apportionment factor was 1

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