United States

Pennsylvania: Prospective Enforcement Date added to Ruling that Information Retrieval Products are subject to Sales and Use Tax

Nov 13, 2017
From KPMG TaxWatch

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The Pennsylvania Department of Revenue recently added an enforcement date to a letter ruling addressing the taxability of “information retrieval products.” The ruling is dated May 17, 2017 and was posted on the Department’s website on August 3, 2017—the new enforcement date. In the original ruling, the Department concluded that a taxpayer’s subscription fees for information retrieval products were subject to tax. The information retrieval products at issue in the ruling were specialized internet-based research services that provided access to primary and secondary legal sources. The Department ruled that the information retrieval products were taxable under two theories. First, in utilizing the search function of the product, the subscriber was exercising a license to access taxable canned computer software. Second, subscribers could use the information retrieval product to electronically access digital goods (such as case reporters, statutory codifications, and journals), which the Pennsylvania legislature made subject to tax in 2016.

Pennsylvania had treated licenses to access canned computer software as taxable for some time before digital goods became taxable on August 1, 2016. Thus, there was some concern that under the first theory articulated in the ruling, information retrieval products could be considered taxable on a retroactive basis to all open tax years. The recently added “enforcement date” of August 3, 2017 suggests that the Department will not apply its ruling retroactively. Interestingly, the enforcement date is also after the date digital goods became taxable in the state. For more information on this letter ruling, please contact Joe Duch or Mark Balistrieri.

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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.