Business profits principle: taxable in resident state unless attributable to a permanent establishment in the other state.

Article 7 provides that business profits are taxable only in the enterprise's State of residence unless the enterprise operates in the other State through a permanent establishment; in that case, only profits attributable to the permanent establishment may be taxed there. Attribution is made as if the permanent establishment were a distinct and separate enterprise under similar conditions, using a consistent method year to year unless a sufficient reason warrants change. Deductions for expenses, including executive and general administrative costs, are allowed subject to the host State's tax law limitations; profits are not attributed merely by purchases of goods, and other Articles govern items dealt with separately.

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