Q&A with the Pennsylvania Department of Revenue

How should a corporate taxpayer apply the IPA/COP method to source receipts/gain from the sale of a patent, trademark or similar intangible for CNIT purposes?

Jan 22, 2018
Unlike transactions involving receipts from the licensing of intangible property, where the income producing activity occurs where the license is used, the income producing activity for receipts from the sale of intangible property may not necessarily be sourced to the location where the intangible property is used.

Further, while the licensing of intangible property generally occurs over a continuous period of time, the sale and legal transfer of property from one party to another generally occurs just once, at a particular instant in time. Therefore, determination of where the income producing activity occurs may depend on unique facts and circumstances, including considerations such as state or federal laws governing sales of certain property, the commercial domiciles of the parties involved, and the history of licensing and/or usage of the property.

DISCLAIMER: The Department of Revenue has prepared draft regulations for sourcing receipts of services and intangibles. The initial drafts are currently under internal review and will be made available for public inspection/review/comment as soon as practical. Accordingly, any responses contained herein are based on previously-provided guidance from the Department.

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These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.