New Inventory Sourcing Rules

Overview


The sourcing rules for sales of inventory manufactured by a taxpayer were changed by the TCJA. Under the new rule, 100% of the income from the sale of manufactured inventory is source based on the location of production (no portion is sourced based on the place of sale).

The article discusses proposed regulations which would modify existing regulations to implement the new rule. It also discusses rules in the proposed regulations that would modify the rules for resourcing income attributable to a US office or fixed place of business of a foreign taxpayer, which would generally treat 50% of such income from manufactured products as US source income.

The effective date is for taxable years ending on or after December 23, 2019.

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