As the Department of Revenue has not issued market-based sourcing regulations there are many areas not addressed in the Information Notice. How does the Department of Revenue determine on audit whether a corporate taxpayer’s method of sourcing service receipts is reasonable?
During the course of an audit, the auditor requests a full description of the taxpayer's business activities, where the service is delivered, and the method used for sourcing those receipts. When the taxpayer's business model or sourcing method does not align with the specific guidance provided in the Information Notice 2014-01, the fact pattern is reviewed and a determination is made as to a reasonable method to source using the facts presented and the sourcing rules set forth in the statute (72 P.S. § 7401(3)2.(a)(16.1)(C). These unique fact patterns may be included in future departmental guidance.