CORPORATION TAX BULLETIN 2024-01 
                                       
                             Issued: January 5, 2024 
                                       
  Sourcing Sales Other Than Tangible Personal Property and Services 
                                       
The purpose of this bulletin is to provide the Department of Revenue’s interpretation of key 
terms and concepts necessary to properly apply the statutory rules for sourcing sales affected 
by the legislative changes adopted as part of Act 53 of 2022.  The applicable provision is 72 
P.S. § 7401(3)2.(a)(17), which was amended under Section 6 of Act 53 of July 8, 2022, P.L. 
513, and shall apply to taxable years beginning after December 31, 2022.1  
 
Note that sales of tangible personal property and sales of services are sourced according to 
subparagraphs (16) and (16.1), respectively; with all other sales sourced under subparagraph 
(17) of the aforementioned statute. 
 
DEFINITIONS AND TERMINOLOGY 

Fair Market Value (FMV).  The price that property would sell for on the open market.  It is 
the price that would be agreed on between a willing buyer and a willing seller, with neither 
being  required  to  act,  and  both  having  reasonable  knowledge  of the  relevant  facts and  a 
reasonable time period for completing the transaction. If there are restrictions on the use of 
the  property,  the  FMV  must  reflect  that  restriction. The  basis,  origin,  methodology,  and 
assignment of such values should be retained in case of audit.  
Located in this State.  For individual persons, this term refers to resident individuals.  Unless 
a taxpayer has actual knowledge that the residence or domicile of a person is in a state other 
than the state in which the person’s billing address is located, the person shall be deemed to 
be located in the state of their billing address.  
 
Whether a  corporation  is located in this state  involves  consideration  of relevant  facts and 
circumstances which are often unique and will be considered on a case-by-case basis.  These 
include, but  are  not  limited  to,  headquarters  location,  billing  address,  activities  of  the 
corporation, and the location of the office from which the transaction was negotiated in the 
regular course of business. 
 
Motor Vehicle.  A vehicle which is self-propelled except an electric personal assistive mobility 
device or a vehicle which is propelled solely by human power or by electric power obtained 
from overhead trolley wires, but not operated upon rails. 
        
Regularly Lends Funds.  An established pattern of activity in which an entity lends funds to 
other entities or to individuals; depending on the facts and circumstances it may include an 
anticipated pattern of future activity.  Isolated or unique lending activity will not be construed 
as constituting regular lending.   
 
1 In keeping with existing authority, the provisions of 72 P.S. § 7401(3)2.(a)(17) apply to corporations’ 
receipts regardless of whether a corporation receives the receipt directly or based on its interest in an 
unincorporated entity. 

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Transportation Property.  A vehicle and vessel capable of moving under its own power, 
such as an aircraft, a train, a water vessel and a motor vehicle. The term includes equipment 
or a container attached to the property, such as rolling stock, a barge, a trailer or similar 
equipment or container. 

Unaffiliated  Entity.    For  purposes  of  72  P.S.  §  7401(3)2.(a)(17)  this  term  follows  the 
definitions of 72 P.S § 7401(10) and (11).  This term does not include individual persons.  
 
STATUTORY RULES, WITH EXAMPLES 
 
(17)  Sales, other than sales under paragraphs (16) and (16.1), are in this State as follows: 
 
(A), (B) Deleted by 2022, July 8, P.L. 513, No. 53, § 6, imd. effective. 
 
(C)   Gross  receipts  from  the  lease  or  license  of  intangible  property,  including  a  sale  or 
exchange of property where the receipts from the sale or exchange derive from payments 
that are contingent on the productivity, use or disposition of the property, if and to the extent 
the property is used in this State. 
 
 Example 1:  Taxpayer is a holding company located in Delaware that receives a royalty 
 payment for the license of trademarks by its Pennsylvania based affiliate for the use of 
 the trademarks in Pennsylvania.  The Pennsylvania based affiliate has a chain of ten 
 convenience stores located across Pennsylvania where the trademarks in question are 
 used on signage and products offered for sale to customers.  Taxpayer sources all of its 
 royalty  receipts  to  Pennsylvania  because  the  trademarks  were  used  solely  in 
 Pennsylvania during the year.  
  
 Example 2:  Same facts as Example 1 except the Taxpayer receives a royalty payment 
 for the license of its trademarks by its Pennsylvania based affiliate based upon the gross 
 receipts produced from each convenience store.  In this example, the affiliate has ten 
 stores  in  Pennsylvania  and  three  stores  in  New  Jersey,  but  the  New  Jersey  stores 
 produce 60% of the total gross receipts of all the stores combined.  Because the royalty 
 payment is based upon the gross receipts produced by the stores, 40% of the royalty 
 receipts would be sourced to Pennsylvania in this scenario.   
 
 Example  3:  Taxpayer  is  a  corporation  located  in  Maryland  that  grants  restaurant 
 franchises to individuals in specific locations throughout Maryland and Pennsylvania.  In 
 exchange for granting a franchise to an individual, Taxpayer leases its trademarks and 
 patented food-processing techniques to its franchisees. The leases are paid annually 
 and entitle the franchisee to use those intangibles in specific restaurants throughout 
 Pennsylvania and Maryland.  The receipts from the intangibles leased to Pennsylvania 
 franchisees are sourced to Pennsylvania because the intangibles were used in this State.    
 
 Example 4:   Retailer Corp. is preparing a new TV commercial for broadcast in all 50 
 states.  Retailer Corp. enters into a licensing agreement with Music Corp. to use a certain 
 musical  score  as  background  music  in  all  of  Retailer  Corp.’s  commercials  for  2023.  
 Retailer  Corp.  pays  Music  Corp.  $100  for  each  time  Retailer  Corp.’s  commercial  is 
 broadcast  on  national  or  local  TV  stations.  During  2023,  5%  of  Retailer  Corp.’s 

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 commercials utilizing Music Corp.’s score are broadcast in this Commonwealth.  Music 
 Corp. should source to the Commonwealth 5% of all its receipts related to the licensing 
 agreement with Retailer Corp. 
  
 Example 5:  MFG Corp. has a plant located in this Commonwealth and one in the State 
 of New York. It purchases a license to a manufacturing process that is an integral part 
 of its assembly production line from IP Corp. The payments are contingent upon the 
 productivity of the plants that are using the licensed manufacturing process.  For every 
 widget that is produced using the process, IP Corp. receives $1. IP Corp. should report 
 to  the  Commonwealth  all  the  receipts  from  MFG  Corp.  that  it  received  for  widgets 
 produced in this Commonwealth.   
 
(D)  Gross receipts from the sale of intangible property where the property sold is a contract 
right, government license or similar property that authorizes the holder to conduct a business 
activity in a specific geographic area, if and to the extent the property is used in or otherwise 
associated with this State. 
 
 Example  1:  Baker  Corp.,  located  in  Pennsylvania,  pays  Gourmet  Corp.,  located  in 
 Virginia, for the exclusive right to be the official baker and distributor of Gourmet Corp.’s 
 breads in Central Pennsylvania.  Gourmet Corp. sources 100% of the receipts from the 
 sale of this contract right to Baker Corp. to Pennsylvania because the right was solely 
 used in this State.   
 
 Example 2: Wireless Corp. purchases from Spectrum Corp. a license entitling it to use 
 a  defined  set  of  frequencies  and  exclusive  use  of  applicable  radio  spectrum  in  well-
 defined geographic areas in order to transmit data between its various cell towers and 
 a subscriber’s handset.  Spectrum Corp. earned a $10 million fee for the license from 
 Wireless Corp.  30% of the geographic license covers locations within Pennsylvania while 
 50% of Wireless Corp.’s subscriber’s billing addresses that receive their services through 
 that geographic spectrum license are located in Pennsylvania.  Because 50% of the use 
 of  the  license  occurred  in  Pennsylvania  by  Wireless  Corp.  in  providing  data  to  its 
 subscribers’ handsets, 50% of the licensing fee should be sourced to Pennsylvania.   
 
(E)  Gross receipts from the sale, redemption, maturity or exchange of securities, held by the 
taxpayer primarily for sale to customers in the ordinary course of its trade or business, if the 
customers are in this State. 
 
 Comment: “held by the taxpayer primarily for sale to customers” is interpreted by the 
 Department as requiring greater than 50% of the total receipts from such sales to be 
 derived from such transactions.    
 
 Example 1:  Security Corp.’s business is the sale of stocks and bonds it holds primarily 
 for  sale  to  customers.  Investor  Corp.,  located  in  this  Commonwealth,  purchases 
 $100,000 of bonds from Security Corp. Security Corp. sources $100,000 of the gross 
 receipts from its sale of bonds to Investor Corp. to the Commonwealth.   
  
 Example 2:  Security Corp.’s business is the sale of stocks and bonds it holds for sale 
 to  individual  investors.  Some  of  Security  Corp.’s  customers are  residents  of  this 
 Commonwealth and some are residents of other states. Security Corp. is required to 
 report receipts it earned from Pennsylvania resident investors in the numerator of its 
 sales factor.  

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(F)  Gross receipts received by a corporation that regularly lends funds to unaffiliated entities 
or to individuals from interest, fees and penalties imposed in connection with loans secured 
by real property as follows: 
 
 Comment: The Department interprets the term “unaffiliated” to apply to entities only.  
 Interest on loans to all individuals, whether or not  affiliated “ under”the provisions of 
 IRC §§ 318, 1563 or any other section of the IRC, is subject to being sourced according 
 to 72 P.S. § 401(3)2.(a)(17)(F), (G) and/or (H). 
  
 (i)  The following shall apply to a calculation under this subparagraph: 
   
  (I)  The numerator of the sales factor shall include interest, fees and penalties 
  imposed in connection with loans secured by real property if the property is located 
  within this State. 
 
          Example:    Restaurant  Corp.  seeks  to  expand  its  business  presence  from 
          solely  this  Commonwealth  to  also  include  the  State  of  New  Jersey. 
          Restaurant Corp. obtains a $25 million loan from Lender Corp. in order to 
          build new restaurants in New Jersey. The loan is secured only by Restaurant 
          Corp.’s real property in Pennsylvania. Lender Corp. shall source all interest, 
          fees and penalties received from Restaurant Corp. in connection with this 
          loan to this Commonwealth.  
 
  (II)   If  the  real  property  under  this  subparagraph  is  located  both  within  this 
  Commonwealth  and  one  or  more  other  states,  the  gross  receipts  under  this 
  subparagraph shall be included in the numerator of the sales factor if more than 
  fifty per cent of the fair market value of the real property is located within this 
  Commonwealth. 
   
          Example:  Restaurant  Corp.  seeks  to  expand  its  restaurant  business  from 
          Pennsylvania and New Jersey locations to also include New York. The FMV 
          of Restaurant Corp.’s Pennsylvania properties is $15 million, while the FMV 
          of Restaurant Corp.’s New Jersey properties is $10 million. Restaurant Corp. 
          obtains a $25 million loan from Lender Corp. to build new restaurants in New 
          York. The loan is secured by both Restaurant Corp.’s Pennsylvania and New 
          Jersey  properties,  of  which  60%  of  the  FMV  is  located  in  Pennsylvania.  
          Lender  Corp.  shall  source  all  interest,  fees  and  penalties  received  from 
          Restaurant Corp. to this Commonwealth because greater than 50% of the 
          FMV of the properties securing the loan is located in this Commonwealth.   
 
  (III)  If more than fifty per cent of the fair market value of real property under 
  this subparagraph is not located within any single state, the gross receipts under 
  this subparagraph  shall  be  included  in  the  numerator  of  the  sales  factor  if  the 
  borrower is located in this State. 
                              
          Example:  Restaurant Corp., a corporation located in Pennsylvania, seeks to 
          expand its business presence from Pennsylvania, New Jersey, and New York 
          to include several other locations in other states.  Restaurant Corp. obtains 
          a $50 million loan from Lender Corp. to build the new restaurants.  The loan 
          is secured by Restaurant Corp.’s Pennsylvania, New Jersey, and New York 
          properties, of which 40% of the FMV is located in Pennsylvania, 30% of the 

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              FMV is located in New Jersey, and 30% of the FMV is located in New York. 
              Since not more than 50% of the FMV of real property is located in any single 
              state, and since the borrower is located in this Commonwealth, Lender Corp. 
              shall  include  all  gross  receipts  from  interest,  fees,  and  penalties  in  the 
              numerator of its Pennsylvania sales factor.   
 
 (ii)  The determination of whether real property securing a loan is located within this 
 State shall be made as of the time the original agreement was made, and all subsequent 
 substitutions of collateral shall be disregarded. 
  
  Example:  Same facts as (F)(i)(II) except that three months after entering into 
  the loan agreement, Restaurant Corp. substitutes as the collateral on the loan its 
  properties in Florida which were not part of the original agreement.  Because this 
  was a subsequent substitution it is not relevant for Pennsylvania tax purposes and 
  the securing property will be considered to be the Pennsylvania, New York, and 
  New Jersey properties originally securing the loan.   
  
(G)  Gross receipts received by a corporation that regularly lends funds to unaffiliated entities 
or to individuals from interest, fees and penalties imposed in connection with loans related to 
the sale of tangible personal property. The following shall apply to a calculation under this 
subparagraph: 
  
 (i)  Except as provided under unit (ii), the numerator of the sales factor shall include 
 gross receipts  received from  interest, fees and penalties imposed in connection with 
 loans related to the sale of tangible personal property if the property is delivered or 
 shipped to a purchaser in this State.   
 
  *Note:  For all of the examples provided in paragraphs (G) and (H), assume Lender 
  Corp. regularly lends funds to unaffiliated entities. 
   
  Example:    Lender  Corp.  lends  $5  million  to  ABC  Corp.  to  purchase  laptop 
  computers  from  Computer  Corp.  for  its  field  staff  located  throughout  the  US.  
  Computer  Corp. ships  all  of  the  laptops  to  ABC’s   headquarters  in  this 
  Commonwealth  for  preloading  of  specialty  software  and  security  programs.  
  Lender Corp. shall source to the Commonwealth, all of the gross receipts from 
  interest, fees and penalties imposed in connection with its $5 million loan to ABC 
  Corp.  
 
 (ii)  The following shall apply: 
   
  (I)   Gross  receipts  received  by  a  corporation  that  regularly  lends  funds  to 
  unaffiliated entities or to individuals from interest, fees and penalties imposed in 
  connection  with  loans  related  to  the  sale  of  transportation  property  shall  be 
  included in the numerator of the sales factor to the extent that the property is 
  used in this State. 
   
              Example:  Lender Corp. loans funds to Freight Corp. for the purchase of 28 
              forklifts.      Twenty  of  the  forklifts  are  used  at  Philadelphia  International 
              Airport  and  the  rest  are  used  outside  this  Commonwealth.  Lender  Corp. 
              should source to the Commonwealth, the gross receipts for interest, fees 

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   and penalties related to the loan to Freight Corp. for the 20 forklifts used in 
   this Commonwealth.   
 
 (II)  The extent an aircraft shall be deemed to be used in this State and the amount 
 of gross receipts that shall be included in the numerator of the sales factor shall 
 be determined by multiplying all the gross receipts from the interest, fees and 
 penalties imposed in connection with loans related to the sale of the aircraft by a 
 fraction, the numerator of which is the number of landings of the aircraft in this 
 State and the denominator of which is the total number of landings of the aircraft. 
 
   Example:  Lender Corp. lends funds to Airline Corp. to purchase two jets 
   from  Aircraft  Corp.  The  first  aircraft  has  six  out  of  ten  landings  in  this 
   Commonwealth and the second aircraft has three out of 20 landings in this 
   Commonwealth. In calculating Lender Corp.’s sales factor all interest, fees 
   and  penalties  paid  to  Lender  Corp.  by  Airline  Corp.  in  relation  to  those 
   aircraft shall be multiplied by a fraction of 9/30 and the result included in 
   Lender Corp.’s Pennsylvania sales factor numerator.   
  
 (III)  A motor vehicle shall be deemed to be used wholly in the state in which it is 
 registered. 
  
   Example 1: Automaker Credit Corp. provides car loans to individuals for the 
   purpose of purchasing cars.  Automaker Credit Corp. sources to Pennsylvania 
   all  interest,  fees,  and  penalties  received  in  relation  to  the  loans  used  to 
   purchase vehicles registered in this State.   
   
   Example 2:  Lender Corp. lends funds to Freight Corp. to purchase 20 trucks. 
   Eight of the trucks are registered in this Commonwealth and the rest are 
   registered in other states. Lender Corp. should source to the Commonwealth 
   the gross receipts for interest, fees and penalties for the 8 trucks that were 
   registered in this Commonwealth.   
 
 (IV)  If the extent of the use of transportation property within this State cannot 
 be determined, the property shall be deemed to be used wholly in the state in 
 which the property was delivered or shipped to the purchaser. 
 
   Example:  Same facts as (G)(III) Example 2 except that Lender Corp. has 
   no way of determining where each of Freight Corp.’s trucks are registered. 
   However,  all  of  the  trucks  were  originally  delivered  to  Freight  Corp.’s 
   headquarters  in  this  Commonwealth.  Accordingly,  Lender  Corp.  should 
   source to the Commonwealth all of the gross receipts from interest, fees and 
   penalties collected in connection with its loan to Freight Corp.  
    
(H)  Gross receipts received by a corporation that regularly lends funds to unaffiliated entities 
or  to  individuals  from  interest,  fees  and  penalties  imposed  in  connection  with  loans  not 
described in subparagraph (F) or (G) if the borrower is located in this State. 
 
 Example:  Service Corp., located in this Commonwealth, borrows funds from Lender 
 Corp. to hire several additional field personnel. The loan is unsecured by either real 
 property  or  tangible  personal  property.  Lender  Corp.  should  source  to  the 

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 Commonwealth all of the gross receipts from interest, fees and penalties imposed in 
 connection with its loan to Service Corp. 
 
(I)  Gross receipts received from interest, fees and penalties in the nature of interest from 
credit card receivables and gross receipts from fees charged to cardholders, such as annual 
fees, if the billing address of the cardholder is in this State. 
  
 Example:  CC Corp. receives annual fees and interest from its cardholders. One hundred 
 thousand cardholders have billing addresses in this Commonwealth. All annual fees and 
 interest associated with these cardholders are included in CC Corp.’s Pennsylvania sales. 
 
(J)  Gross receipts received from interest, not otherwise described in this paragraph, shall be 
included in the numerator of the sales  factor if the lender's commercial domicile is in this 
State. 
  
 Comment:  This provision applies primarily to the following types of taxpayers: 
 (1)    Entities who regularly lend funds to entities that meet the definition of “affiliated 
       entities” under 72 P.S. § 7401(10); and 
 (2)    Entities who do not regularly lend funds. 
        
 NOTE: “Commercial Domicile” is defined under 72 P.S. § 7401(3)2.(a)(1)(B).        
  
 Example 1:  CC1 Corp., commercially domiciled in this Commonwealth, regularly lends 
 funds to affiliated entities.  CC1 Corp. lends funds to CC2 Corp, which is an affiliated 
 entity located in Indiana.   CC1 Corp’s interest receipts from this loan should be sourced 
 to  the  numerator  of  CC1  Corp.’s  sales  factor  because  its  commercial  domicile  is  in 
 Pennsylvania.    
  
 Example 2:  Sandwich Corp., commercially domiciled in this Commonwealth, receives 
 interest from a loan it made to an affiliated entity, Crepe Corp., in order to sustain its 
 business during an economic downturn.  Sandwich Corp. has never made a loan before.  
 Because it is not an entity that regularly lends funds, the interest receipts should be 
 sourced to Pennsylvania, Sandwich Corp.’s domicile.   
 
(K)   Gross  receipts  received  from  intangible  property,  not  otherwise  described  in  this 
paragraph, shall be excluded from the numerator and the denominator of the sales factor. 
 
 Comment: The Department interprets this provision to apply to the receipts from the 
 sale of goodwill and  from the sale  of  other intangibles, including but not limited to: 
 workforce  in  place,  contracts  in  place,  going  concern  value,  patents  and  copyrights, 
 customer lists, and any covenant not to compete entered into in connection with the 
 acquisition of an interest in a trade or a business.     
 
 Example 1:  ABC Corp is a corporation doing business within and outside Pennsylvania. 
 The actual value of ABC Corp. is $10 million, including all of ABC Corp.’s tangible and 
 intangible assets.  XYZ Corp.  is interested in purchasing ABC Corp. Based on current 
 and future market conditions, ABC Corp. agrees to sell its assets to XYZ Corp. for $12 
 million.  Consequently, $2 million of the sale price could accurately be characterized as 
 representing goodwill.  While the gross receipts from the sale of ABC Corp.’s assets to 
 XYZ  Corp.  totals  $12  million,  only  $10  million  is  included  in  its  sales  factor;  the 
 remaining $2 million of goodwill is an intangible asset associated with the sale of the 

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 company,  but  it  is  not  described  under  paragraphs (C)   –(J),  so  this  amount  is  not 
 included  in  either  the  numerator  or  denominator  of ABC  Corp.’s  Pennsylvania  sales 
 factor. 
  
 Example 2:  ABC Corp. is a corporation doing business within and outside Pennsylvania 
 that engages in hedging transactions via the use of futures contracts.  Because receipts 
 from hedging transactions are not primarily held for sale to customers in the regular 
 course of business and are not described under paragraphs (C)  –(J), those receipts are 
 excluded from both the numerator and the denominator of ABC Corp.’s Pennsylvania 
 sales factor.   
  
NOTE: As with any sourcing scenario, if the apportionment provisions of this section do not 
fairly represent the extent of the taxpayer’s business activity in this State, the taxpayer may 
petition the Secretary of Revenue or the Secretary of Revenue may require the employment 
of any other method to effectuate an equitable allocation and apportionment of the taxpayer’s 
income as allowed under 72 P.S. § 7401(3)2.(a)(18).  

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