Proposed new regulations from the New York State Department of Taxation and Finance would, in general, source the sales of digital products to the "primary use location," that is "the location or locations where the customer derives value from the digital product purchased from the taxpayer." If the customer is an individual, this is presumed to be that person's billing address. If the customer is a business, however, "the primary use location is presumed to be in New York State" to the extent that its activities indicate use of that product in New York, though in cases where it cannot be determined where the customer primarily used the product, the taxpayer must "make reasonable inquiries to the customer." 

If, after conducting due diligence, the taxpayer still can't determine what the primary use location is, the draft says the receipt should be sourced to where the product was received. 

If, after once again conducting due diligence, the taxpayer can't determine where the product was either used or even received, then the draft says the taxpayer will need to determine an "apportionment fraction" of sales of that type of product for the preceding taxable year to the extent that the preceding year's fraction remain substantially similar to the current year. Then the taxpayer determines the numerator of its apportionment fraction for the current taxable year by multiplying such receipts by another fraction: receipts sourced to New York from sales of that type of product in the preceding taxable year over the total number of its receipts from sales of that type of product in the preceding taxable year. However, said the draft, this method can't be used in a taxpayer's first taxable year beginning beginning on or after Jan. 1, 2015 and before Jan. 1, 2016, not can it be used on a new taxpayer's first taxable year. 

In such cases, the draft says the taxpayer should use an apportionment fraction determined for the current taxable year for receipts that be sourced using the first two methods, with these receipts included in the numerator of the current taxable year's apportionment fraction. This is done by multiplying the receipts by another fraction: receipts sourced to New York state from all digital products using the first two methods, over receipts from all digital products sourced using the first two methods. 

People have until Jan. 16, 2016 to comment on the draft rules.