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Earlier this year, the California Franchise Tax Board (the “FTB”) issued Chief Counsel Ruling 2017-01 (the “2017 Ruling”), which addresses the application of the state’s market-based sourcing rules to non-marketing services under California Revenue and Taxation Code (“Code”) section 25136 and California Code of Regulations (“Regulation”) section 25136-2.  The 2017 Ruling concludes that receipts from non-marketing services should be sourced to California to the extent that a taxpayer’s direct customers (and not its customer’s customer) receive the benefit of the service in California.  The 2017 Ruling reaffirms an earlier ruling, Chief Counsel Ruling 2015-03 (the “2015 Ruling”), where the FTB reached the same conclusion regarding receipts from non-marketing services.  The 2015 and 2017 Rulings seem to foster a common theme developing under California’s market-based sourcing regime that the appropriate market is the location of a taxpayer’s direct customer (and not its customer’s customer).