§ 153.26. Sales factor.
(a) Interest on United States securities and dividends received. Gross receipts in the form of interest on United States securities and dividends received shall be excluded from sales. Reference should be made to section 401(3)2.(a)(1)(E), (15) and (17) of the TRC (72 P. S. § 7401(3)2.(a)(1)(E), (15) and (17)).
(b) Sales of tangible personal property. The following sales factors shall apply to the sale of tangible personal property.
(1) When sales of tangible personal property are in this Commonwealth. Sales of tangible personal property are in this Commonwealth if the property is delivered or shipped to a purchaser within this Commonwealth regardless of the f.o.b. point or other conditions of the sale. Reference should be made to section 401(3)2.(a)(16) of the TRC (72 P. S. § 7401(3)2.(a)(16)).
(2) General rule. Sales of tangible personal property are in the state in which delivery to the purchaser occurs.
Example: A taxpayer produces beer in New York. Taxpayer sells the beer to a distributor located in this Commonwealth. Distributor sends its truck into New York to taxpayer’s plant to pick up the beer and brings the beer back to its Commonwealth business location. Delivery has occurred in New York and these taxpayer’s sales are in New York.
(3) Definitions. The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
(i) Delivered—The physical transfer of possession of tangible personal property to the purchaser.
(ii) Purchaser—The term includes the following:
(A) The ultimate recipient of the property if the taxpayer, at the designation of the purchaser, delivers property in this Commonwealth to the ultimate recipient.
Example: A taxpayer in this Commonwealth sold merchandise to a purchaser in New York. Taxpayer directed the manufacturer of the merchandise in Ohio to ship the merchandise to the purchaser’s customer in this Commonwealth under purchaser’s instructions. The sale by the taxpayer is in this Commonwealth.
(B) A consignee if the taxpayer (consignor) delivers or ships property in this Commonwealth to a consignee which the consignee subsequently sells.
Example: The taxpayer (consignor) located in Ohio ships property to this Commonwealth to a consignee. Consignee, also a taxpayer, sells and ships such property to New York to its purchaser. The consignor’s sale is in this Commonwealth and the consignee’s sale is in New York.
(iii) Shipped—The transportation of tangible personal property, including delivery, to the purchaser.
(4) Application of general rule. The general rule shall be applied as follows:
(i) Property shall be deemed to be delivered to a purchaser within this Commonwealth if the shipment terminates in this Commonwealth, even though the property is subsequently transferred by the purchaser to another state.
Example: A taxpayer makes a sale of desks to a purchaser who maintains a central warehouse in this Commonwealth at which merchandise purchases are received. The purchaser reships sale. The taxpayer’s desks shipped to the purchaser’s warehouse in this Commonwealth are sales in this Commonwealth.
(ii) When property is being shipped by a taxpayer (consignor) from the state of origin to a consignee in another state and is diverted while enroute and shipped in this Commonwealth to a purchaser, the sale is in this Commonwealth.
Example: The taxpayer begins shipment of property from Ohio to the purchaser’s place of business in New York. While enroute the property is diverted to and shipped to the purchaser’s place of business in this Commonwealth. The sale by the taxpayer is in this Commonwealth.
Source The provisions of this § 153.26 amended through November 16, 1984, effective November 17, 1984, 14 Pa.B. 4163. Immediately preceding text appears at serial pages (81525) to (81526) and (89263).
Notes of Decisions Construction
This section is contrary to the clear wording of § 401(3)2(a)(16) of The Tax Reform Code. Commonwealth v. Gilmour Manufacturing Co., 822 A.2d 676 (Pa. 2003).
Interest on United States Securities and Dividends Received
In determining that the regulation excluding gross receipts in the form of interest on U.S. securities and dividends received from ‘‘sales’’ for sales factor purposes applies to computation of the Capital Stock Tax as well as the Corporate Net Income Tax, the court held that the Revenue Department’s interpretation of the tax code as expressed in the regulation is reasonable and not clearly inconsistent with the statute. SmithKline Beckman Corp. v. Commonwealth, 482 A.2d 1344 (Pa. Cmwlth. 1984); order affirmed 498 A.2d 374 (Pa. 1985).
Cross References This section cited in 61 Pa. Code § 153.29 (relating to corporation tax: interest in partnership/joint venture); and 61 Pa. Code § 170.11 (relating to documentation requirements to establish out-of-State sales after Gilmour Manufacturing decision).
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