Q&A with Pennsylvania Department of Revenue

The PICPA State Taxation Committee meets annually with the Pennsylvania Department of Revenue to discuss issues affecting both practitioners and their clients and to bring clarity to complex regulations. Topics covered include personal income tax and corporate tax, sales and use tax, and administrative issues.

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Q&A with Pennsylvania Department of Revenue

Corporate Tax

How should a corporate taxpayer apply the IPA/COP method to source goodwill from the sale of a business?

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?

Should a corporate taxpayer apply the income producing activity/cost of performance (IPA/COP) method to source royalties or other receipts from the licensing of marketing and non-marketing intangibles for CNIT purposes?

Personal Income Tax

Recently, the DOR indicated that services like CCH, RIA, LEXIS, and Bloomberg constitute taxable sales of software and/or taxable sales of digital products. What is the basis for the DOR’s change of position?

In 2016, a question was posed asking DOR’s position regarding the PIT treatment of an IRC sec. 351 transaction with boot. The Department never provided an answer. What is the DOR’s position on this issue?

For PIT purposes, are federal income tax principles “acceptable by standards of the accounting profession” ?

Administrative

Would the DOR consider posting a comprehensive, searchable database of redacted Office of Chief Counsel rulings for tax issues on the Department's website?

How can a LLC or S Corp. that was only subject to CS/FFT for tax years beginning prior to 1/1/16 be removed from the tax rolls in instances where the entity did not complete RCT101, SectionE?

How does the Board of Appeals determine whether to abate a penalty under 72 Pa.C.S. § 9706?

Sales and Use Tax

What is the time span for the Department to complete an audit after receipt of information?

Scenario: An IT provider bills a client via a flat, lump-sum, recurring monthly charge, of which the largest portion relates to the value of the services provided by the vendor’s employees

Scenario: Claiming a refund for the sales tax paid on the purchase of wine which is then resold

Pass-Through Entities

Scenario: A taxpayer is a resident of Pennsylvania who receives an inter-vivos gift of an interest in a pass-through entity which does business in Pennsylvania. The Donor is not a resident of Pennsylvania.

Scenario: A taxpayer is a Pennsylvania resident who owns 100 percent of a PA S Corporation which does business in PA and several other states, including Ohio.

If a partnership fails to provide a noncorporate partner with a NRK-1 and/or RK-1 a corporate partner with a Schedule H – Corp. would it be subject to the penalty in Section 352 (f)(2) and/or Section 352 (f)(3)?

Specialty Taxes

Why is filed inheritance tax return response from the Department taking so long (4 - 6 months) now? In the past written response was received in about 30 days.

Can insolvent insurance companies participate in amnesty, similar to bankrupt entities?

Is a PA trust company subject to the Bank Shares Tax also subject to the Corporate Net Income Tax and the Capital Stock and Franchise Tax?