Why was my wife's salary taxed by California, while it was excluded by the Foreign Earned Income Exclusion (her wages source, ie services rendered were performed abroad)?

[rhunt137]

My wife and I live in France. I work for a foreign company. My wife works for a California-based company, but performs her job from our home in France. We both qualify for the Foreign Earned Income Exclusion, so both our salaries are excluded from our Federal income. However, in filing with TurboTax, the system recognized that my wife's income should be taxable by California. 

I understand that CA does not treat the FEIE in the same way as the fed. However, according to FTB Publication 1031, Section I, "Non-residents of California are taxed only on income from California sources". Further, "wages and salaries have a source where the services are performed", meaning that her salary is not income from a California source. Do I have that correct?

If that is the case, then I have significantly overpaid my CA taxes, and I need to file an amendment and get a refund. Thank you for your help.

[Critter]

If you live overseas and have no CA sourced income why are you even filing a CA return ?