The Pennsylvania Board of Finance and Revenue recently published a decision regarding the sourcing of receipts and property of a satellite television provider. The Board held that the taxpayer’s receipts from sales of satellite television services were properly included in the taxpayer’s Pennsylvania numerator based on the location of subscribers in the state. The Board held that the taxpayer failed to meet its burden of proof to show that a greater portion of its income-producing activities occurred outside the state under Pennsylvania’s cost of performance sourcing rules applicable to the tax year at issue. Pennsylvania sourcing rules changed for tax years beginning after December 31, 2013 to require market-based sourcing for sales of services.
The Board also upheld the inclusion of orbiting satellites in the Pennsylvania property factor numerator. On audit, the taxpayer’s property numerator was increased to include a percentage of the satellite values as shown on the taxpayer’s federal return, based on the percentage of subscription fees from Pennsylvania customers to subscription fees everywhere. The Board upheld this adjustment to the property factor, which noted that the satellites were owned by the taxpayer and used in the state to provide satellite television service. In re Dish DBS Corporation, Docket No. 1713444 (Pa. Bd. Fin. & Revenue May 14, 2018).
See our previous coverage of a similar South Carolina decision involving this taxpayer.