[Glanford]

In this particular case 'it's' can also be possessive although it's considered non-standard, so to be correct you can always treat it like a contraction of 'it is'.

[8note]

That would be contracting "its is"?

The ambiguity makes it hard for me to say. "It's the best" vs "its is the best"

It doesn't feel right dropping the is