Q&A with the Pennsylvania Department of Revenue

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

We provide here a written summary of answers provided by the Department Revenue to the committee at periodic question and answer sessions. 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 a specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.

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We provide here a written summary of answers provided by the Department of Revenue to the committee at periodic question and answer sessions. These documents are classified as 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 a specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.

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Q&A with the Pennsylvania Department of Revenue

By Topic

Corporate Tax

Has the Department of Revenue further considered any income tax implications of the Wayfair decision? If so, can it provide guidance?

When can we expect market-based sourcing regulations?

Is Form REV-986 required for taxpayers claiming PL 86-272 protection?

Personal Income Tax

Does Pennsylvania follow IRC Sec. 336(e) for C Corporation, S corporations, and/or partnerships?

A taxpayer sells stock in an S Corporation. The sales price is a base amount up front plus future payments depending on revenue for the following three years. How is this reported for sales price and basis for PIT purposes in the year of sale?

How should PA-40 non-resident sellers (individual shareholder) of a PA S Corp present the gain from the sale of stock to the buyer when an IRC 338(h)(10) election has been made?

Administrative

Can the Department of Revenue provide an update on the Certified Service Provider arrangement and other regulations, bulletins, and upcoming guidance?

If a non-C-Corp hasn't had other registrations in PA in the past (sales tax, employer withholding, etc.), is it required to go through the bulk sale reporting process when it sells its assets? For example, a real estate LLC selling its real estate.

When can Pennsylvania expect realty transfer tax regulations?

Sales and Use Tax

Why is the turn-around time to provide third-party credits in an audit so short (sometimes less than one month) even though the audit could go on for months or even years?

In regard to Act 13 of 2019, Will additional guidance on the definition of an "animal housing facility" be provided by Jan 1, 2020?

Scenario: A client is under a PA sales tax audit. PA auditors note that sales tax on delivery charges of SLO wine/liquor orders from the PA fine wine and liquor stores is not charged on their invoices and should be.

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

Concerns and suggestions regarding the Pennsylvania R&D credit online application

This was the first year for the online R&D credit application. Does the Department of Revenue anticipate making any changes to the process in subsequent years?

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.