United States

Pennsylvania: Department Reissues Guidance on Taxability of Canned Software Support Services

Apr 17, 2017
From KPMG TaxWatch

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The Pennsylvania Department of Revenue recently revised and re-issued a letter ruling (Ruling No. SUT-17-001) addressing the taxability of support services provided with canned software and other digital products. This letter ruling had originally been issued on February 9, 2017, but was subsequently pulled and amended. As background, legislation signed into law in Pennsylvania last year expanded the sales tax base to include digital goods and software accessed electronically. Specifically, effective August 1, 2016, the definition of “tangible personal property” was amended to include videos, photographs, books, applications, games, music, other audio (such as satellite radio services), canned software, and any other taxable tangible personal property that is electronically or digitally delivered. Under the revised law, maintenance, updates, and support related to these items are also treated as tangible personal property. The letter ruling was intended to provide guidance on what types of support services are subject to sales and use tax. In the original ruling, the Department broadly concluded that all support services with respect to canned computer software were subject to tax, including consulting and training services. In the revised April 4, 2017 letter ruling, the Department arguably defines “support” more narrowly to mean the providing of advice or guidance concerning otherwise taxable digital or electronic tangible personal property. This includes identifying the source of problems affecting the usability of the property and/or attempting to place the property in or restore the property to a useable state, such as by means of help desk or call center support and remote desktop support. Unlike the original version, the revised letter ruling specifically provides that support services do not include training or consulting services, unless the consulting services otherwise fall within the definition of support. Please contact Joe Duch at (412) 232-1578 or Howard Sklaroff at (267) 256-2891 with questions. 

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.