In This Issue:

- Sales Factor Sourcing of Services & Intangibles

- Nonresident Limited Partners Liable for Personal Income Tax

- PA Appeal Systems Changes Update

- Personal Responsibility for PA Tax Assessments

- Excerpt from Sales Factor Sourcing of Services & Intangibles:

We still are waiting for the Pennsylvania Department of Revenue (the “Department”) to publish official guidance on the apportionment changes made by Act 52 of 2013. Effective for tax years beginning after December 31, 2013, the Act provides new rules for the sourcing of receipts from services in the corporate net income tax and franchise tax sales factors. A draft information notice dated June 16, 2014, was circulated confidentially to organizations representing business and industry, the bar and CPAs. Extensive comments were submitted at the end of July. Presumably, the Department is rewriting the draft notice, taking those comments into account.

For years prior to 2014, receipts from sales of services and intangibles were subject to the UDITPA-based “income-producing activity” and “costs of performance” analysis. If the income producing activity was performed in one or more states, in addition to Pennsylvania, the receipts from those activities were sourced to PA if the greater proportion of the income producing activities, as measured by costs of performance, occurred in PA. While the Department never published a regulation addressing this analysis, and while audits sometimes took inconsistent positions, the Department did publish two letter rulings applying these rules.