1

Filed 10/24/18 (unmodified opn. attached)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

BUNZL DISTRIBUTION USA, INC.,

Plaintiff and Appellant,

v.

FRANCHISE TAX BOARD,

Defendant and Respondent.

 A137887

 (City & County of San Francisco

 Super. Ct. No. CGC-10-506344)

 ORDER MODIFYING OPINION;

 NO CHANGE IN JUDGMENT

THE COURT:

It is ordered that the opinion filed herein on September 28, 2018, be modified as 

follows:

1. On page 1, the second sentence of the first paragraph, “Bunzl contends the 

judgment must be reversed because the FTB should have excluded income 

from Bunzl’s LLC’s in calculating its California tax liability under UDITPA,” 

is modified to read as follows:

Bunzl contends the judgment must be reversed because the FTB should 

have excluded property, payroll, and sales factors from Bunzl’s LLC’s 

in calculating its California tax liability under UDITPA.

2. On page 6, the second and third sentences of the first full paragraph, beginning 

“In doing so, Bunzl excluded the income of its single member LLC’s” and 

ending “thereby reducing the amount of Bunzl’s income that was apportionable 

to California,” are modified to read as follows:

In doing so, Bunzl excluded the property, payroll, and sales factors of its 

single member LLC’s from the numerator of the apportionment formula 
2

on the basis that it had already paid California a tax and fee for those 

LLC’s under section 18633.5. Excluding the property, payroll, and 

sales factors of the six single member LLC’s from the numerator of the

apportionment formula drastically decreased the overall apportionment 

ratio, thereby reducing the amount of Bunzl’s income that was 

apportionable to California.

3. On page 6, the first and second sentences of the last full paragraph, beginning 

“The FTB rejected Bunzl’s approach” and ending “boosted Bunzl’s California 

income tax liability under UDITPA to slightly more than $1.4 million,” are 

modified to read as follows:

The FTB rejected Bunzl’s approach and found that the property, payroll, 

and sales factors of the six single member LLC’s should have been 

included in the numerator of the UDITPA apportionment formula. 

Including the property, payroll, and sales factors of the six LLC’s in the 

numerator of the apportionment formula boosted Bunzl’s California 

income tax liability under UDITPA to slightly more than $1.4 million.

4. On page 7, the second sentence of the second full paragraph, beginning 

“Bunzl’s argument appears to be twofold” and ending “could be included in 

the apportionment formula,” is modified to read as follows:

Bunzl’s argument appears to be twofold: (1) because its LLC’s paid the 

requisite fees and taxes under section 18633.5, the LLC’s property, 

payroll, and sales factors should have been excluded from UDITPA’s 

apportionment formula; and (2) because the owners of the LLC’s did 

not do any business in California apart from the LLC’s, they had no 

property, payroll, and sales factors attributable to California that could 

be included in the apportionment formula.

5. On page 7, the first sentence of the third full paragraph, “Bunzl first argues that 

section 18633.5 constitutes an ‘alternative’ taxation scheme that allows an 

otherwise disregarded single member LLC to be taxed for all purposes as a 
3

separate, stand-alone entity, so that its income is removed from the 

apportionment formula of UDITPA, even if it is part of a unitary business,” is 

modified to read as follows:

Bunzl first argues that section 18633.5 constitutes an “alternative” 

taxation scheme that allows an otherwise disregarded single member 

LLC to be taxed for all purposes as a separate, stand-alone entity, so that 

the LLC’s property, payroll, and sales factors are removed from the 

apportionment formula of UDITPA, even if it is part of a unitary 

business.

There is no change in the judgment.

Dated: October 24, 2018 Jenkins, J._________ Acting P. J.

A137887/Bunzl Distribution USA, Inc. v. Franchise Tax Bd.
4

A137887/Bunzl Distribution USA, Inc. v. Franchise Tax Bd.

Trial Court: San Francisco Superior Court

Trial Judge: Marla J. Miller

Counsel: Reeder Wilson LLP, Kimberley M. Reeder and Margaret C. Wilson; Law 

Office of Kimberley M. Reeder and Kimberley M. Reeder; Morgan 

Lewis & Bockius LLP, Thomas M. Peterson and William B. Clayton 

for Appellant.

Silverstein & Pomerantz LLP, Amy L. Silverstein and Edwin P. Antolin for 

California Taxpayers Association, as Amicus Curiae on behalf of 

Appellant.

Kamala D. Harris and Xavier Becerra, Attorneys General, Paul D. Gifford, 

Senior Assistant Attorney General, Joyce E. Hee, Supervising 

Deputy Attorney General, and Karen W. Yiu, Deputy Attorney 

General, for Respondent.
1

Filed 9/28/18 (unmodified version)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

BUNZL DISTRIBUTION USA, INC.,

Plaintiff and Appellant,

v.

FRANCHISE TAX BOARD,

Defendant and Respondent.

 A137887

 (City & County of San Francisco

 Super. Ct. No. CGC-10-506344)

Plaintiff Bunzl Distribution USA, Inc. (Bunzl), a multinational entity comprised of 

numerous subsidiary corporations and limited liability companies (LLC), appeals from 

the trial court’s judgment upholding defendant Franchise Tax Board’s (FTB) 

determination that Bunzl owed $1,403,595 in taxes to the State of California for the 

year 2005 under the Uniform Division of Income for Tax Purposes Act (UDITPA) 

(Rev. & Tax. Code, § 25120 et seq.).1 Bunzl contends the judgment must be reversed 

because the FTB should have excluded income from Bunzl’s LLC’s in calculating its 

California tax liability under UDITPA. We reject Bunzl’s contention and affirm the 

judgment.

I. BACKGROUND

A. UDITPA

The United States Constitution prohibits states from taxing income earned outside 

their borders. (Container Corp. v. Franchise Tax Bd. (1983) 463 U.S. 159, 164 

(Container Corp.).) “However, it permits taxation of ‘an apportionable share of the 

 

1 All further, undesignated statutory references are to the Revenue and Taxation 

Code.
2

multistate business carried on . . . in the taxing State’ [citation] and grants states some 

leeway in separating out their respective shares of this multistate income, not mandating 

they use any particular formula [citation].” (Microsoft Corp. v. Franchise Tax Bd. (2006) 

39 Cal.4th 750, 755 (Microsoft Corp.).)

The District of Columbia and 22 states including California have adopted 

UDITPA, which sets forth an apportionment formula for states to use when taxing 

entities that do business both inside and outside the states’ borders. (Microsoft Corp., 

supra, 39 Cal.4th at p. 755; §§ 25121, 25101.) UDITPA seeks to establish uniform rules 

for the attribution of corporate income that are “equitable to the taxpayer, who in the 

absence of uniform rules faces the prospect of having the same income taxed by two, 

three, or more different states.” (Microsoft Corp., at p. 755) UDITPA provides that if 

the taxpayer, invariably a foreign corporation or other entity, is part of a “unitary 

business,” it is required to “allocate and apportion its net income as provided in 

[UDITPA].” (§ 25121.)

UDITPA does not define the term “unitary business,” likely because it had a 

recognized meaning in California long before the state adopted UDITPA. (See, e.g., 

Gorham Mfg. Co. v. Tax Comm. (1924) 266 U.S. 265, 270; Bass, Etc., Ltd. v. Tax Comm. 

(1924) 266 U.S. 271, 282.) “ ‘A unitary business is generally defined as two or more 

business entities that are commonly owned and integrated in a way that transfers value 

among the affiliated entities.’ ” (General Motors Corp. v. Franchise Tax Bd. (2006) 

39 Cal.4th 773, 779, fn. 3.) There are four defining features of a unitary business: 

(1) unity of ownership; (2) unity of operations, as evidenced by central accounting, 

purchasing, advertising, and management divisions; (3) unity of use in a centralized 

executive force and general system of operation; and (4) the operation of the business 

done within California is dependent upon or contributes to the operation of the entirety of 

the taxpayer’s operations. (See, e.g., Edison California Stores v. McColgan (1947) 

30 Cal.2d 472, 479–481.)

Under UDITPA’s apportionment formula, “[t]he portion of a taxpayer’s business 

income attributable to economic activity in a given state is determined by combining 
3

three factors: payroll, property, and sales. (§ 25128.) Each factor is a fraction in which 

the numerator measures activity or assets within a given state, while the denominator 

includes all activities or assets anywhere. (§§ 25129, 25132, 25134.) The combination 

of these fractions is used to determine the fraction of total global business income 

attributable to the given state.” (Microsoft Corp., supra, 39 Cal.4th at p. 756.)2

Throughout the years since California adopted UDITPA, and ever since its 

constitutionality was upheld (Matson Nav. Co. v. State Bd. of Equalization (1935) 

3 Cal.2d 1, affd. (1936) 297 U.S. 441), businesses have used various strategies in 

attempting to evade or reduce their tax liability under UDITPA. They have been largely 

unsuccessful. (See, e.g., Exxon Corp. v. Wisconsin Dept. of Revenue (1980) 447 U.S. 

207, 221–223 [a company may not use internal accounting to remove income from the 

apportionment formula]; Scripto v. Carson (1960) 362 U.S. 207, 211 [“To permit such 

formal ‘contractual shifts’ to make a constitutional difference would open the gates to a 

stampede of tax avoidance”].) As the United States Supreme Court observed: “To 

permit the true nature of a transaction to be disguised by mere formalisms, which exist 

solely to alter tax liabilities, would seriously impair the effective administration of the tax 

policies of Congress.” (Commissioner v. Court Holding Co. (1945) 324 U.S. 331, 334.) 

California courts are in accord. (W.E. Hall Co. v. Franchise Tax Bd. (1968) 

260 Cal.App.2d 179, 183.)

B. Bunzl

Bunzl is a Delaware corporation that describes itself on its website as follows: 

“Bunzl Distribution USA, Inc. supplies a range of products including outsourced food 

 

2 Expressed as a mathematical equation, the current version looks like this:

(§ 25128, subd. (a).)
4

packaging, disposable supplies, and cleaning and safety products to food processors, 

supermarkets, non-food retailers, convenience stores and other users. Based in St. Louis, 

Missouri, Bunzl Distribution is the largest division of Bunzl plc, an international 

distribution and outsourcing group headquartered in London. [¶] Bunzl Distribution owns 

and operates more than 100 warehouses that serve all 50 states and Puerto Rico, as well 

as Canada, the Caribbean and parts of Mexico. With more than 5,000 employees and 

400,000-plus supply items, Bunzl is regarded as a leading supplier in North America. 

Worldwide sales are in excess of $10 billion.” 

(<http://www.bunzldistribution.com/aboutBunzl/default.asp> [as of Sept. 26, 2018].)

Bunzl concedes it is a unitary business under UDITPA. It has organized its affairs

in the United States using a number of corporations and LLC’s3in order “to allow the 

company to achieve standardization in management reporting for its distribution centers 

and allow the greatest amount of flexibility.” Bunzl has two wholly owned corporate 

subsidiaries, Bunzl Western Holdings, Inc. (Bunzl Western) and Bunzl Distribution 

Midcentral, Inc. (Bunzl Midcentral), both Missouri corporations. Relevant here are six 

LLC’s that are each owned by a single entity—Bunzl, Bunzl Western, or Bunzl 

Midcentral. These LLC’s, known as “single member” LLC’s, are: (1) TSN West, LLC; 

(2) Bunzl Distribution California, LLC; (3) Bunzl Utah, LLC; (4) Packers Engineering 

and Equipment, LLC; (5) Bunzl Midatlantic, LLC; and (6) Bunzl Distribution Northeast,

LLC.

Single member LLC’s may elect to be taxed as a corporation. Upon such an 

election, the LLC is taxed as a separate entity from its owner. (City of Los Angeles v. 

Furman Selz Capital Management (2004) 121 Cal.App.4th 505, 513.) However, where

 

3 An LLC is a hybrid business entity that combines aspects of both a partnership 

and a corporation. It consists of members, which can be individuals, corporations, 

partnerships, or other LLC’s. The company has a legal existence separate from its 

members and provides members with limited liability to the same extent shared by 

corporate shareholders, yet allows members to actively participate in management and 

control. (See, e.g., 9 Witkin, Summary of Cal. Law (11th ed. 2017) Partnership, §§ 142–

144, 156–157, 165–167, pp. 713–716, 726–729, 734–735.)
5

an LLC does not elect to be taxed as a corporation, it is treated as part of its owner for tax 

purposes. (Id. at pp. 513–514.) In other words, where an LLC elects not to be taxed as a 

corporation, its status as a separate entity is “disregarded” for income tax purposes, and it 

is taxed as part of its owner.

In 2005—the taxable year at issue in this case—none of Bunzl’s single member 

LLC’s elected to be taxed as corporations, and all were therefore considered disregarded 

entities for income tax purposes. That year, each of those LLC’s filed a return under 

section 18633.5, subdivision (a), which provides that every LLC doing business in 

California must file a “return.” In addition, as disregarded entities, each LLC was subject 

to section 18633.5, subdivision (i), which requires disregarded LLC’s to file a return that 

includes information necessary to verify its liability under sections 17941, which charges 

a “tax” of at least $25 “for the privilege of doing business in this state,” and 17942, which 

charges a “fee” of at least $900 depending on “the total income from all sources derived 

from or attributable to” this state. (§ 18633.5, subd. (i)(1).) Section 18633.5 further 

mandates that a disregarded LLC must provide its sole owner’s name and taxpayer 

identification number and include the consent of the owner to California tax jurisdiction. 

(Ibid.) “If the owner’s consent [to California tax jurisdiction] is not included [in the 

return], the [LLC] shall pay on behalf of its owner an amount [specified in 

subdivision (e)].” (Id., subd. (i)(2).) In accord with these provisions, Bunzl’s six single 

member LLC’s provided the necessary information in their returns. And, when the single 

member owners of the LLC’s declined to consent to California tax jurisdiction,4the 

LLC’s reported their collective income and paid a total of $244,502 on behalf of their

owners under section 18633.5.

Bunzl then calculated its California tax liability under UDITPA’s apportionment 

formula. In doing so, Bunzl excluded the income of its single member LLC’s from the 

 

4 The filing of a consent simply “facilitates California taxation of income 

attributable to California sources.” (Valentino v. Franchise Tax Bd. (2001) 

87 Cal.App.4th 1284, 1294 & fn. 11.) The lack of consent does not deprive California of 

its tax jurisdiction. (Ibid.)
6

numerator of the apportionment formula on the basis that it had already paid California a 

tax and fee for those LLC’s under section 18633.5. Excluding the income of the six 

single member LLC’s from the numerator of the apportionment formula drastically 

decreased the overall apportionment ratio, thereby reducing the amount of Bunzl’s 

income that was apportionable to California. Bunzl reported an overall California 

apportionment factor/ratio of 0.0131 percent and multiplied this factor by 

$193,908,364—Bunzl’s combined report net income for the year—concluding that only 

$25,402 of its income was attributable to, and therefore taxable in, California. 

Accordingly, Bunzl paid $2,246 in California income tax liability for the year 2005 under 

UDITPA.

The FTB rejected Bunzl’s approach and found that the income of the six single

member LLC’s should have been included in the numerator of the UDITPA 

apportionment formula. Including the income of the six LLC’s in the numerator of the

apportionment formula boosted Bunzl’s California income tax liability under UDITPA to 

slightly more than $1.4 million. Deducting the $244,502 already paid by the LLC’s

under section 18633.5, the FTB assessed Bunzl $1,159,093. Bunzl paid this amount plus 

interest, exhausted its administrative remedies to get it refunded, and commenced this 

action.5

After the trial court granted the FTB’s motion for summary adjudication of 

Bunzl’s causes of action for refund, Bunzl elected not to proceed with its remaining 

causes of action in order to expedite appellate review. To that end, Bunzl and the FTB 

stipulated to entry of the judgment, and Bunzl timely appealed.

 

5

In commencing this action, Bunzl not only sought a refund, but also claimed the 

FTB engaged in unfair settlement practices by adopting “artificial settlement constructs” 

that “result in corporate taxpayers conceding a significantly larger percentage of the 

amount in dispute . . . than individuals.” On appeal, Bunzl raises this and other claims 

relating to settlement and discovery but concedes it has no interest in pursuing them if it 

loses on its substantive claim for a refund. In light of our conclusion that Bunzl was not 

entitled to a refund, we need not—and therefore will not—address the additional claims.
7

II. DISCUSSION

A. Bunzl’s Argument

Bunzl’s essential argument can be summarized as follows: Where the nonresident 

corporate owner of a single member, disregarded LLC declines to consent to California 

tax jurisdiction, and the LLC files a return and pays a tax and fee under section 18633.5, 

the LLC becomes a separate, “stand-alone” entity that is no longer treated as part of its 

owner for income tax purposes. Bunzl’s argument appears to be twofold: (1) because its

LLC’s paid the requisite fees and taxes under section 18633.5, its income should have 

been excluded from UDITPA’s apportionment formula; and (2) because the owners of 

the LLC’s did not do any business in California apart from the LLC’s, they had no 

income attributable to California that could be included in the apportionment formula. 

We reject Bunzl’s argument. The plain language of section 18633.5 and its legislative 

history show that the statute was limited in scope and was not intended to reduce the tax 

liability of disregarded single member LLC’s that are part of a unitary business.

Bunzl first argues that section 18633.5 constitutes an “alternative” taxation 

scheme that allows an otherwise disregarded single member LLC to be taxed for all 

purposes as a separate, stand-alone entity, so that its income is removed from the 

apportionment formula of UDITPA, even if it is part of a unitary business. There is, 

however, nothing in the language of section 18633.5 that suggests the statute was meant 

to replace the well-established apportionment principles set forth in UDITPA.

Instead, section 18633.5 merely provides that a disregarded LLC must pay a 

certain tax and fee on behalf of its owner when its owner declines to consent to California 

tax jurisdiction. (§ 18633.5, subd. (i)(2).) It does not state that an owner is absolved of 

all other tax liability so long as the LLC pays that tax and fee on the owner’s behalf. In 

fact, the statute presumes the owner will be responsible for paying taxes separate and 

aside from what is required under the section. Subdivision (g) provides: “Any amount 

paid by the [LLC] to this state pursuant to [this section] shall be considered to be a 

payment by the member on account of the income tax imposed by this state on the 

member for the taxable period.” (Italics added.) In other words, the tax and fee an LLC 
8

pays under section 18633.5 is to be credited against its owner’s separate tax liability. 

This supports our conclusion that section 18633.5 did not replace other tax-assessing 

statutes such as UDITPA.

Further, although the disregarded LLC can be viewed as a separate entity for the 

limited purpose of paying the tax and fee required by section 18633.5, the statute does 

not state that the LLC is to be treated as a separate entity for all purposes, including 

income tax purposes. California Code of Regulations, title 18, section 23038(b)-1, 

subdivision (a)(4), supports our conclusion that section 18633.5 was not intended to treat 

the LLC’s as separate entities for all purposes. The regulation provides that single 

member LLC’s “can choose to be recognized or disregarded as entities separate from 

their owners, subject to certain statutory provisions which recognize the existence of 

otherwise disregarded entities for certain purposes including the tax and fee of [an LLC] 

under Sections 17941 and 17942 . . . , the return filing requirements of [an LLC] under 

Section 18633.5 . . . , and the credit limitations of a disregarded entity under 

Sections 17039 and 23036 . . . .” (Italics added; see also § 23038 [a disregarded LLC can 

be treated as a separate entity under four limited circumstances, including for the purpose 

of section 18633.5].) In other words, a single member LLC that elects to be considered a 

disregarded entity will be treated as a separate entity for “certain purposes” only, 

including for the purpose of paying a tax and fee under sections 18633.5, 17941 and 

17942.

Recent California authority also supports our conclusion. The Court of Appeal in 

City of Los Angeles v. Furman Selz Capital Management, supra, 121 Cal.App.4th at 

pages 516 to 517, declined to treat a disregarded LLC as a separate entity from its owner 

for income tax purposes. The court observed: “Had the Legislature intended to adopt 

other exceptions to the disregard of the separate existence of the [LLC] for tax purposes, 

it would certainly have so stated. . . . It did not do so.” Similarly, we observe that if the 

Legislature had intended for section 18633.5 to immunize a single member LLC or the 

owner of the LLC from the standard apportionment and tax rules of UDITPA, it would 

have so provided. It did not.
9

Bunzl next argues that the legislative history of section 18633.5, as well as 

section 230386—which incorporates section 18633.5 by reference—supports its position 

that the Legislature intended to remove the income of “stand-alone” LLC’s from the 

apportionment formula of UDITPA. We disagree.

The bill analyses on which Bunzl relies show the Legislature amended 

sections 18633.5 and 23038 simply to bring California into conformity with the federal 

practice of allowing LLC’s to elect whether to be taxed as a corporation. The bill passed 

without a dissenting vote in both the Senate and the Assembly. (Sen. Bill No. 1234

(1997–1998 Reg. Sess.) Complete Bill Hist., p. 1.) The appropriations committee for 

each chamber evaluated the measure as essentially revenue-neutral (see Sen. Com. on 

Appropriations, fiscal summary of Sen. Bill No. 1234 (1997–1998 Reg. Sess.) as 

amended May 1, 1997, pp. 1–2 [“FTB estimates . . . relatively little net revenue effect”]; 

Assem. Com. on Appropriations, Rep. on Sen. Bill No. 1234 (1997–1998 Reg. Sess.) as 

amended Aug. 25, 1997, p. 1 [“the [FTB] stated this bill would not significantly impact 

personal income tax or bank and corporation tax revenues” and would “result[] in minor 

net revenue effect”]), as did the revenue and taxation committees. (See Sen. Com. on 

Rev. & Tax., 3d reading analysis of Sen. Bill No. 1234 (1997–1998 Reg. Sess.) as 

amended Aug. 25, 1997, p. 2 [“FISCAL EFFECT: Minor”]; Assem. Com. on 

Rev. & Tax., Rep. on Sen. Bill No. 1234 (1997–1998 Reg. Sess.) as amended July 11, 

1997, p. 2 [same]; Sen. Com. on Rev. & Tax., Rep. on Sen. Bill No. 1234 (1997–1998 

Reg. Sess.) as amended May 1, 1997, p. 2 [“FISCAL EFFECT: [¶] None”].) These 

references reveal that the Legislature expected relatively minor revenue loss from the 

amendments to the statutes upon which Bunzl relies. Moreover, the comments 

accompanying the amendments to these statutes support our conclusion that the 

 

6 Section 23038 provides in relevant part: “If the separate existence of an eligible 

business entity is disregarded for federal tax purposes, the separate existence of that 

business entity shall be disregarded for purposes of this part, Part 10 . . . , and 

Part 10.2 . . . , other than Section 17941 (relating to the tax of [an LLC]), Section 17942 

(relating to the fee of [an LLC]), Section 18633.5 (relating to the return of [an LLC]), and 

Sections 17039 and 23036 (relating to tax credits).” (§ 23038, subd. (b)(2)(B)(iii).)
10

Legislature, in amending the statutes, did not intend for a unitary business to significantly 

reduce its tax liability absent a “change in the underlying economic realities” of its 

business. (Mobil Oil Corp. v. Commissioner of Taxes (1980) 445 U.S. 425, 441.)

We also find it significant that the terms “UDITPA,” “unitary business,” and 

“interstate taxation” are not mentioned anywhere in the numerous committee reports and 

bill analyses. Courts are reluctant to accept that legislatures enact important or 

fundamental changes by silent indirection. (See, e.g., California Cannabis Coalition v. 

City of Upland (2017) 3 Cal.5th 924, 940; California Redevelopment Assn. v. Matosantos

(2011) 53 Cal.4th 231, 260–261.)

Simply put, we find nothing in the legislative history of sections 18633.5 and 

23038 that supports Bunzl’s view that the Legislature intended for the amendments to 

these sections to alter the rules of apportionment for unitary businesses with single 

member LLCs. Because section 18633.5 does not replace the apportionment formula of 

UDITPA, Bunzl should have included the property, payroll, and sales of its single 

member LLC’s in the numerators of its combined reporting group’s apportionment 

factors.

B. Bunzl’s Additional Arguments

Joined by the California Taxpayers Association as amicus curiae, Bunzl argues 

that the owners of the single member LLC’s “do not have [a] nexus with California” and 

therefore are beyond the state’s taxing power. Bunzl relies in part on Swart Enterprises, 

Inc. v. Franchise Tax Bd. (2017) 7 Cal.App.5th 497, but the case is distinguishable. 

There, the Court of Appeal held that an out-of-state corporation was not doing business in 

California and was therefore not subject to an $800 minimum franchise tax because the 

corporation’s only connection to California was its passive ownership of a 0.2-percent 

membership interest in a California LLC. (Id. at p. 504.)

Here, in contrast, there is substantial nexus because Bunzl, Bunzl Western, and 

Bunzl Midcentral are 100-percent owners of LLC’s that conduct significant business in 

California. Moreover, as discussed above, because the LLC’s in this case are part of a 

unitary enterprise, Bunzl, Bunzl Western, and Bunzl Midcentral cannot remove 
11

themselves from the reach of UDITPA simply by filing returns and paying taxes and fees 

under sections 18633.5, 17941, and 17942.7

In a similar vein, Bunzl suggests through a few references in its opening brief that 

it is the victim of double taxation, raising the specter that California is exceeding its 

proper territorial jurisdiction. For example, Bunzl argues: “Limitations imposed by the 

‘Due Process and Commerce Clauses . . . do not allow a State to tax income arising out of 

interstate activities—even on a proportional basis—unless there is a “minimal 

connection” or “nexus” between the interstate activities and the taxing State, and a 

rational relationship between the income attributed to the State and the intrastate values 

of the enterprise.’ [Citation.]” Bunzl argues: “This case involves an attempt to tax a 

legal entity’s California income twice . . . .” We reject Bunzl’s suggestion that it is a 

victim of double taxation.

Preliminarily, we note the double taxation issue is not sufficiently raised in 

Bunzl’s opening brief. Isolated references in a brief do not constitute a cognizable 

argument. Under identifying headings, “a brief must contain ‘ “meaningful legal analysis 

supported by citations to authority and citations to facts in the record that support the 

claim of error” ’ and contain adequate record citations, or else we will deem all points ‘to 

be forfeited as unsupported by “adequate factual or legal analysis.” ’ ” (Fernandes v. 

Singh (2017) 16 Cal.App.5th 932, 942–943; Cal. Rules of Court, rule 8.204(a)(1)(B)–

(C).)

 

7 To the extent Bunzl is claiming that the owners of its LLC’s should not have 

been required to pay California taxes because they declined to consent to California tax 

jurisdiction, the claim is meritless. Bunzl presents no relevant authority to support its 

position that an LLC owner can, simply by withholding consent, deprive California of its 

jurisdiction to tax the portion of a business’s income that is generated from California 

sources. As noted, the jurisdiction to tax is not dependent upon a taxpayer’s consent. 

(Valentino v. Franchise Tax Bd., supra, 87 Cal.App.4th at p. 1293.) While the filing of a 

consent “facilitates California taxation of income attributable to California sources,” the 

lack of consent does not deprive California of its tax jurisdiction. (Id. at p. 1294 & 

fn. 11.)
12

In addition, it was not until the reply brief that the issue appeared in slightly more 

developed form, but still without constitutional underpinnings. Because the issue was not 

adequately raised, we need not address it further. (See, e.g., People v. Tully (2012) 

54 Cal.4th 952, 1075; Garcia v. McCutchen (1997) 16 Cal.4th 469, 482, fn. 10; 9 Witkin, 

Cal. Procedure (5th ed. 2008) Appeal, § 723, p. 790.)8

In any event, the argument fails on the merits. The United States Supreme Court 

and the California Supreme Court impose strict requirements for such a claim to succeed. 

“[T]he taxpayer has the ‘ “distinct burden of showing by ‘clear and cogent evidence’ that 

[the state tax] results in extraterritorial values being taxed . . . .” ’ ” (Container Corp., 

supra, 463 U.S. at p. 164, quoting Butler Brothers v. McColgan (1942) 315 U.S. 501, 

507; accord, Barclays Bank Internat., Ltd. v. Franchise Tax Bd. (1992) 2 Cal.4th 708, 

720; Butler Brothers v. McColgan (1941) 17 Cal.2d 664, 667.) That burden is only 

increased because one of UDITPA’s purposes is to avoid double taxation. (See The 

Gillette Co. v. Franchise Tax Bd. (2015) 62 Cal.4th 468, 484–485.) Bunzl makes no 

showing that what it does inside California is unrelated to its operations outside 

California (see Allied-Signal, Inc. v. Director, Div. of Taxation (1992) 504 U.S. 768, 

772–773, 777–778; Hoechst Celanese Corp. v. Franchise Tax Bd. (2001) 25 Cal.4th 508, 

538), which is hardly surprising in light of its acknowledgement that it is a unitary 

business.

Finally, Bunzl suggests that section 18633.5 and its effect on UDITPA is 

ambiguous, and that the California Supreme Court has declared that statutory ambiguities 

should be resolved in favor of the taxpayer. (Citing, e.g., Agnew v. State Bd. of

 

8 Nor can it be raised for the first time by amicus. “ ‘[A]n amicus curiae must 

accept the case as it finds it and . . . “friend of the court” cannot launch out upon a 

juridical expedition of its own . . . . “[The] rule is universally recognized that an 

appellate court will consider only those questions properly raised by the appealing 

parties. Amicus curiae must accept the issues made and propositions urged by the 

appealing parties, and any additional questions presented in a brief filed by an amicus 

curiae will not be considered . . . .” ’ ” (Younger v. State of California (1982) 

137 Cal.App.3d 806, 813–814.)
13

Equalization (1999) 21 Cal.4th 310.) In light of the fact that section 18633.5 contains no 

reference to UDITPA, it is more appropriate to view Bunzl as arguing that its LLC’s are 

not covered by UDITPA, i.e., that Bunzl is claiming an exemption from UDITPA. As a 

matter of state law, “it is the rule that exemptions are construed liberally in favor of the 

taxing authority and strictly against the taxpayer.” (Beatrice Co. v. State Bd. of 

Equalization (1993) 6 Cal.4th 767, 775.) As we discussed above, paying a tax and fee as 

a disregarded entity under section 18633.5 does not exempt a single member LLC from 

unitary business taxation under UDITPA.

DISPOSITION

The judgment is affirmed. The parties shall bear their own costs on appeal.
14

_________________________

Jenkins, J.

We concur:

_________________________

Siggins, P. J.

_________________________

Pollak, J.

A137887/Bunzl Distribution USA, Inc. v. Franchise Tax Bd.
15

A137887/Bunzl Distribution USA, Inc. v. Franchise Tax Bd.

Trial Court: San Francisco Superior Court

Trial Judge: Marla J. Miller

Counsel: Reeder Wilson LLP, Kimberley M. Reeder and Margaret C. Wilson; Law 

Office of Kimberley M. Reeder and Kimberley M. Reeder; Morgan 

Lewis & Bockius LLP, Thomas M. Peterson and William B. Clayton 

for Appellant.

Silverstein & Pomerantz LLP, Amy L. Silverstein and Edwin P. Antolin for 

California Taxpayers Association, as Amicus Curiae on behalf of 

Appellant.

Kamala D. Harris and Xavier Becerra, Attorneys General, Paul D. Gifford, 

Senior Assistant Attorney General, Joyce E. Hee, Supervising 

Deputy Attorney General, and Karen W. Yiu, Deputy Attorney 

General, for Respondent.