Texas teleradiologist wins appeal in California tax dispute

A Texas-based radiologist has won an appeal in a California income tax dispute involving remote interpretation of medical imaging studies.

The California Court of Appeal reversed a trial court ruling that had granted summary judgment to the California Franchise Tax Board (FTB), according to the court opinion in Garcia-Rojas v. Franchise Tax Board. 

Xavier Garcia-Rojas worked as an independent contractor for a California-based radiology services company while living in Texas. From his home, he interpreted imaging studies from facilities in California and other states, using software and equipment provided by the company. 

The FTB argued that Garcia-Rojas operated a sole proprietorship carrying on a “unitary business” within and outside California. The trial court accepted that argument in 2024. 

The appellate court disagreed, holding that the FTB did not demonstrate that Garcia-Rojas operated a unitary business under California regulation 17951-4(c). The court reversed the judgment and remanded the matter for further proceedings. 

The opinion said the unitary business theory has historically applied to commonly owned and integrated business entities, not to a single person engaged in 1 business activity. 

Greenberg Traurig, which represented Garcia-Rojas, said the decision limits California’s ability to apply the unitary business doctrine to nonresident professionals who provide services remotely. 

The law firm said the appellate court agreed that a taxpayer conducting a single activity, in this case interpreting medical imaging studies, cannot be treated as a unitary business on that basis. 

The decision reversed summary judgment in favor of the state but did not decide whether California could tax Garcia-Rojas under another legal theory. 

Garcia-Rojas performed contract work for San Diego-based StatRad during the tax years in question, 2018 to 2020, and had sought a refund after paying taxes, penalties, and interest to California. 

Greenberg Traurig’s team was led by State & Local Tax shareholder Bradley R. Marsh and associate Jennifer A. Vincent. Litigation associates Shauna E. Imanaka and Brian C. Gee also worked on the matter, according to the firm.