C.A. 1st;
A147642

The First Appellate District reversed a trial court judgment. The court held that an out-of-state company's transfer of retail operations from its California warehouses to a California-based subsidiary changed the cities to which its retail sales taxes needed to be attributed.

Illinois corporation Medline Industries, Inc. shipped its retail health care products to warehouses in the City of Fontana and the City of Lathrop for retail distribution. In late 2005, Medline changed its sales model and, in January 2006, began selling its product through a wholly-owned subsidiary, MedCal Sales, LLC, located in the City of Ontario. As of the same date, Medline ceased reporting retail sales from its warehouses in Fontana and Lathrop, and MedCal began reporting retail sales in Ontario. Fontana and Lathrop filed protest. After six years of administrative proceedings, the State Board of Equalization ultimately rendered judgment in favor of Ontario, finding that MedCal was the retailer, and not Medline.