Recently, the Pennsylvania Department of Revenue issued a letter ruling clarifying the broad application of sales and use tax to services provided for canned computer software.1 This clarification comes pursuant to Act 84 of 2016 [codified at 72 P.S. § 7201(m)(2) (effective August 1, 2016)], in which the Pennsylvania Legislature updated the statutory definition of tangible personal property to include certain specified items such as video, books, applications, games, music, audio, canned software, and other specified items.
L.R. No. SUT-17-001 emphasizes that tangible personal property now also expressly includes maintenance and support:
“Tangible personal property.” […] The term shall include the following, whether electronically or digitally delivered, streamed or accessed and whether purchased singly, by subscription or in any other manner, including maintenance, updates and support…2
Despite the unusual wording of the revised statute, the Department stops short of interpreting this to mean that maintenance is now considered tangible personal property, but specifies that any and all support services (for canned software) are subject to sales and use tax when sold at retail (charges for subsequent use of services are also taxable if their initial purchase was a taxable retail sale). This covers all types of technical support, including consulting, training, and even “support” provided via tangible media. The letter ruling does not go into detail, but presumably this would extend to charges for user manuals or instruction booklets taxed as support rather than simply as tangible personal property.
The taxation of computer software maintenance is not unusual, and computer consulting services were previously taxable in Pennsylvania,3 but the method of defining maintenance as tangible personal property makes this a unique application of sales and use tax.
1 L.R. No. SUT-17-001, Pennsylvania Dept. of Rev., Feb. 9, 2017.
2 72 Pa. Stat. § 7201(m)(2).
3 61 Pa. Code § 9.3(a)(11).
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