ALLOCATIONS AND APPORTIONMENTS
§ 153.21. Transacting business outside.
(a) A taxpayer may allocate and apportion if in addition to transacting business outside this Commonwealth as established in subsection (b) it is either ‘‘subject to’’ a tax in another state as provided in § 153.22 (relating to subject to) or another state has ‘‘jurisdiction to subject’’ as provided in § 153.23 (relating to jurisdiction to subject) the taxpayer to a Corporate Net Income Tax.
(b) What constitutes transacting business outside cannot be precisely defined. It may be generally stated that a taxpayer is ‘‘transacting business outside’’ when its presence outside this Commonwealth is related to its actual business activity. The presence may be through, but not limited to, administrative functioning, property ownership, or sales activity.
Example 1. Taxpayer actively engaged in manufacturing farm equipment in this Commonwealth. In State W taxpayer owned a manufacturing plant. Taxpayer leased the plant to another company to be used for the manufacturing farm equipment. Taxpayer acquired the lessee’s products and subsidized its operations by advancing money to it. Upon the expiration of the lease, the manufacturing operations in State W ceased completely. Up to the expiration of the lease, taxpayer was transacting business outside this Commonwealth. After the expiration of the lease, taxpayer’s ownership of the property in State W was not related to its actual business activity, and, therefore, taxpayer was not transacting business outside this Commonwealth. Example 2. Taxpayer manufactures sparkplugs in this Commonwealth and all activities are carried on in this Commonwealth except that administrative function and executive policies are performed and established by taxpayer’s officers located in the State O. The activities in State O are related to the manufacturing activity in this Commonwealth and are part of the taxpayer’s business. Thus, taxpayer is transacting business outside of this Commonwealth.
Source The provisions of this § 153.21 adopted January 27, 1978, effective January 28, 1978, 8 Pa.B. 257.
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