On June 16, the Department of Revenue released draft guidance on
applying Pennsylvania's new market-based, sales factor sourcing
legislation that was signed into law in July 2013.* The new
market-sourcing legislation is effective for tax years beginning on
or after January 1, 2014. Because Pennsylvania's apportionment
formula is now based entirely on the sales factor, understanding
the recent changes to the sourcing rules is essential.
The new market-sourcing rules apply to receipts from: (i)
services; (ii) sales, leases and rentals of real property; and
(iii) rentals, leases and licenses of tangible personal property.
The Department's draft guidelines further explain the new rules
for sourcing services and provide several examples applying these
rules to specific services and specific industries. The draft also
includes some guidance on the Department's interpretation of
the "cost of performance" sourcing rule, which continues
to apply to receipts from intangibles.
