Skip to Main Content


Legal Ruling No. 123

May 4, 1954


Payments to a nonresident under a personal service contract are not from sources within California when no services were performed under the contract for such payments.

A, a nonresident, entered into an agreement with X Motion Picture Co. to perform certain personal services in either California or New York. The agreement provided that if A was not called upon to perform any services prior to the termination date, he would be paid a certain amount. The option was never exercised and A was paid the amount less an amount withheld for California Personal Income Tax. A claim for refund of the amount has been filed. Advice is requested whether the payment was from California sources.

Section 17951 and the corresponding regulations provide that payments for personal services performed in California have their source in California.  Since no services were performed for the amounts paid, the amounts did not have their source in California. A agreed to perform his services either in New York or California. Since he may have performed the services in New York, such contingency prevents the contention that the payments were for services that would have been performed in California. Nor would the fact that the contract contained a negative covenant preventing A's performing similar services for other companies give the amounts a California source. Under the agreement A not only agreed not to engage in such services in California but not to perform such services anywhere else. The further fact that X Co. knew well in advance they were not going to perform on their part does not bring into application Section 17596 and thus give the amount a California source. Under the contract A had no right to the income until the termination date and since he became a nonresident prior to that date Section 17596 is not applicable.

Is there something wrong with this page?

Help Us Improve Our Website

Don't include social security numbers or other personal/confidential information.

Feedback received: Thank you for your help.

If you need assistance, contact us.

Oops! Something went wrong.

We appreciate your feedback. Please try again later

Chat with an FTB Representative

You are leaving

We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. Review the site's security and confidentiality statements before using the site.

If you have any issues or technical problems, contact that site for assistance.

Ahora está saliendo de

Nosotros no controlamos el sitio web al que se destina y no podemos aceptar ninguna responsabilidad por su contenido, enlaces, u ofertas. Revise las declaraciones de seguridad y confidencialidad del sitio antes de usar el sitio. Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.

Si tiene algún problema en general o técnico, comuníquese con ese sitio para obtener asistencia.