Microsoft Corporation v. Franchise Tax Board

Dr. Sarin was engaged by the California Franchise Tax Board to opine on the extent to which Microsoft’s marketing intangibles contribute to its success, whether Microsoft’s intangible assets should be included in the apportionment formula to calculate its California taxable income, whether there is any justification for changing the allocation weights in the apportionment formula, and whether gross receipts from the sale of marketable securities by Microsoft’s treasury department should be included in the apportionment formula.

The Superior Court of California favorably cited Dr. Sarin’s testimony with respect to the distortion caused by using Microsoft’s gross receipts from marketable security sales in the apportionment formula and found that the overall distortive impact from Microsoft’s inclusion of the full redemptive price from its trading of marketable securities is substantial.