In 1993, the California Legislature amended Revenue and Taxation Code (RTC) sections 6011 and 6012 to exclude from California sales and use tax amounts charged for intangible personal property transferred with a technology transfer agreement (TTA) if the TTA separately stated a reasonable price for the tangible personal property (TPP). Nine years later, the State Board of Equalization (SBE) adopted Regulation 1507, Technology Transfer Agreements, to implement and interpret the TTA statutes and to incorporate the California Supreme Court’s holding in Preston v. State Board of Equalization, 25 Cal.4th 197 (2001). Subsequent litigation over the next 13 years in Nortel Networks, Inc. v. State Board of Equalization, 191 Cal.App.4th 1259 (2011) and Lucent Technologies, Inc. v. State Board of Equalization, 241 Cal.App.4th 19 (2015), invalidated portions of Regulation 1507, as well as Regulation 1502 (Computers, Programs and Data Processing). In the nine years since the Lucent decision, the SBE and its successor, the California Department of Tax and Fee Administration (CDTFA), have been engaged in a seemingly endless regulation project.
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