Assignment task: Take a look at the following provision of North Carolina law and see if you can determine where the revenue generated from the transaction should be sourced.
The assignment of receipts to a state or states in the instance of a sale of a service that is delivered to the customer or on behalf of the customer, or delivered electronically through the customer, depends upon the method of delivery of the service and the nature of the customer. Separate rules of assignment apply to services delivered by physical means and services delivered by electronic transmission. Services delivered to a customer or on behalf of a customer through a physical means include, for example, product delivery services where property is delivered to the customer or to a third party on behalf of the customer; the delivery of brochures, ?iers or other direct mail services; the delivery of advertising or advertising- related services to the customer's intended audience in the form of a physical medium; and the sale of custom software (e.g., where software is developed for a speci?c customer in a case where the transaction is properly treated as a service transaction for purposes of corporate taxation) where the taxpayer installs the custom software at the customer's site. The rules in these guidelines, Section IV.(3)(B)1, apply whether the taxpayer's customer is an individual customer or a business customer.
Your client, Software Corp, a software development corporation located in California, enters into a contract with a business customer, Buyer Corp, which is physically located in North Carolina, to develop custom software to be used in Buyer Corp's business. Software Corp develops the custom software at their offices in California, and then physically installs the software on Buyer Corp's computer hardware located in North Carolina. For California purposes, the accountant who works for you has attempted to determine where the customers are located that will be accessing the software and reasonably approximating the $10,000,000 fee to the location where the customers will use the software program.
Determine the sourcing rule that will apply under North Carolina law?