A. General. Receipts from transactions involving more than one state are not exempt from the business privilege tax, but are to be included in the tax base either in their entirety, excluded in their entirety, or apportioned as provided in these regulations. [Amended 1-22-2007 by Ord. No. 9-2007]
B. What constitutes "interstate commerce." Transactions will be deemed to involve interstate commerce only when there are significant transactions or activities conducted in states other than Pennsylvania that contribute to the generation of gross receipts. The citizenship or residence of the parties to any transaction has no relevance in determining the interstate character of a business. Where a sales transaction is involved, it is of no importance in which state title to the goods passes, or whether the goods are shipped FOB one state to another. [Amended 1-22-2007 by Ord. No. 9-2007]
C. Sale and delivery in Pennsylvania. Interstate commerce is not deemed to be involved in sales made by a City of Reading seller to customers located outside of Pennsylvania where the property is delivered directly to the purchaser or his agent within Pennsylvania, notwithstanding the fact that the purchaser or his agent intends to, and later does, transport the property to a point outside Pennsylvania.
D. Shipment from Reading by seller. Sales will be considered as having been made in interstate commerce when the seller, as a necessary incident to the contract of the sale, agrees to, and does, deliver the property to the purchaser at a point outside of Pennsylvania, or delivers the property to a common carrier consigned to the purchaser at a point outside Pennsylvania.
E. Delivery to packing company in the City of Reading. Whenever property is sold by seller to a customer located outside Pennsylvania and, pursuant to the terms of the contract of sale, delivery is made from the seller's place of business in the City of Reading to a packing company located in the City of Reading for delivery to the purchaser at a point outside of Pennsylvania, said transaction constitutes "interstate commerce."
F. Delivery to buyer's Pennsylvania place of business. Where a purchaser maintains an office, warehouse or receiving station in Pennsylvania for the purpose of receiving, or inspecting or assembling, or routing, or combining shipments destined for out-of-state places of business, interstate commerce is not deemed to be involved with respect to deliveries made to such premises by a City of Reading seller, notwithstanding the fact that the purchaser intends to, and later does, transport the property received at such premises to a point outside Pennsylvania.
G. Shipments into the City of Reading from seller's out-of-state place of business. With respect to sales made by a City of Reading seller, the transaction will be considered to be one in interstate commerce if, by the express terms of the contract of sale, or the established practice of doing business, the seller is required to deliver by transporting or shipping the property from his place of business situated outside of Pennsylvania directly to the purchaser at a point within the City of Reading.
H. Shipments into the City of Reading from a third party's out-of-state place of business. Interstate commerce is not deemed to be involved if the City of Reading seller causes direct delivery to be made to the purchaser at a point in the City of Reading from an out-of-state source of supply owned or operated by a third party (one from whom the seller buys).
I. Delivery from seller's out-of-state place of business via his office. Interstate commerce is not deemed to be involved with respect to sales made to a Pennsylvania purchaser if the property is shipped from the seller's place of business located outside of Pennsylvania to the seller's place of business in the City of Reading from which point the goods are delivered to the purchaser.
J. Apportionment of receipts from interstate commerce. Where receipts cannot be allocated as set forth above in Subsections C through I, receipts from interstate commerce may be apportioned in a manner similar to the sales factor for purposes of the Pennsylvania Corporate Net Income Tax under Article IV of the Tax Reform Act of 1971, as amended,
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and the regulations thereunder. [Amended 1-22-2007 by Ord. No. 9-2007]
K. Apportionment for professional services. [Amended 1-22-2007 by Ord. No. 9-2007]
(1) Professional fees derived from services billed on an hourly basis shall be apportioned by excluding receipts attributable to charges to the client for services performed out- of-state.
(2) Professional services rendered on a flat or fixed-fee basis or a contingent-fee basis shall be apportioned according to a ratio whose numerator consists of hours spent on the engagement while out-of-state and whose denominator consists of total hours spent on the same engagement for the same client.
(3) Professional services performed under a contract which sets forth the percentage or amount of the total contract price attributable to a specific activity to be performed out-of-state shall be apportioned according to the contract terms, as long as such amount is a reasonable allocation.
L. The following is a list of factors which are relevant but not conclusive, for determining whether a person's activities in another state constitute interstate commerce: [Amended 1-22-2007 by Ord. No. 9-2007]
(1) A nexus in the foreign jurisdiction sufficient to support the imposition of a similar tax by the state.
(2) A provision in the contract or agreement between the taxpayer and his client or customer which specifically assigns a reasonable portion of the overall fee to activities required to be performed in the foreign jurisdiction.
(3) The length of time spent by the taxpayer in the out-of-state location.
(4) The necessity for the services that are performed out-of-state in generating the overall gross receipts.
(5) The inability of the taxpayer to perform the service which generates gross receipts in its entirety in Pennsylvania.
(6) The number of employees who are required to perform the activities in the foreign jurisdiction. Utilizing an independent contractor located in the foreign jurisdiction to carry out of the taxpayer's out-of-state activities does not constitute the taxpayer's presence in a foreign jurisdiction for purposes of excluding receipts from the City of Reading's business privilege tax.
(7) The person manages, directs and controls business activities in the foreign jurisdiction.
8. Editor's Note: See 72 P.S. § 7401 et seq.