United States

Pennsylvania removes provocative ruling on software support services

Guidance found certain technical and help-desk support taxable


UPDATE (3/14/2017): Recently, the Pennsylvania Department of Revenue removed sales and use tax Letter Ruling No. SUT 17-001 from the department’s website. The ruling extensively stated that any support services provided to canned computer software are subject to the sales and use tax as services to tangible personal property. Those taxable ‘support services’ include services that were considered exempt for the previous two decades such as help-desk support, telephone support, consulting and training, when sold with canned computer software. The department’s position that various software support is taxable, as of Aug. 1, 2016, is based on 2016 legislation that extended the definition of tangible person property to include ‘maintenance, updates and support’ associated with or provided in relation to digital goods or canned software. However, the ruling was considered by many to be overly broad because services such as help-desk support and telephone support were included in the department’s interpretation.

The department provided no explanation for the removal of the ruling, although it has been reported that the ruling is currently under evaluation. Noteworthy, Pennsylvania Gov. Wolf’s budget proposal for the 2017-18 fiscal year would statutorily reenact the sales and use tax on generally all computer services, including support services—providing no doubt that computer support services associated with canned computer software would be subject to the tax.

Pennsylvania taxpayers should be on notice that the department may provide additional guidance on the extent of what taxable support includes. Until further guidance is provided, software and computer service vendors and purchasers must navigate the uncertainty of what the legislature intended by support. Moreover, the legislature may make the issue moot with a clear imposition of the sales tax on all computer support services.

ORIGINAL (2/17/2017): On Feb. 9, 2017, the Pennsylvania Department of Revenue released sales and use tax Letter Ruling No. SUT-17-001, providing guidance on the taxability of support services to canned computer software pursuant to Act 84 of 2016. Act 84 expanded the definition of ‘tangible personal property’ (72 P.S. section 7201(m)) for sales tax purposes to include certain digital goods, whether electronically downloaded or streamed. The digital goods referenced in the statute include traditional digital goods, such as video, photographs, books and music. In addition, ‘canned software’ was inserted into the statute, which merely codifies the judicial and administrative precedent that canned software no matter how delivered is taxable tangible property. The legislature also included the language “any other otherwise taxable tangible personal property electronically or digitally delivered, streamed or accessed.”  

In addition to specifically defining canned software and digital goods as tangible personal property, Act 84 added the phrase “including maintenance, updates and support…” The department stated its intent in Letter Ruling No. SUT-17-001 to read this language very broadly and capture many computer services that have not been subject to sales tax since 1997.

In 1997, legislation repealed several definitions of different computer services such as programming, data processing, systems integration (including installation), processing, information retrieval, facility management and ‘other computer-related services.’ The department’s interpretation of the recent amendment to section 7201(m) appears to indicate that any of the formerly nontaxable computer services are now subject to tax if they are provided in relation to canned software.  

The ruling defines support as “any and all support services to canned computer software.” The ruling provides several nonexclusive examples of taxable support:

  1. A vendor provides support via a remote desktop where they access and alter the software directly
  2. A vendor provides telephone support where they troubleshoot/discuss the issue with the customer and subsequently provide a patch or module to fix the issue
  3. A vendor distributes upgrades, patches and/or modules to its customers
  4. A customer sends a copy of the software program to a vendor who accesses, uses or alters and then returns the corrected version of the software
  5. A vendor provides telephone support in the form of a call-in, help-desk providing direction as to the use, correction or manipulation of the software
  6. A vendor provides training with respect to the use, correction or manipulation of the software

Finally, the department clarifies that ‘support’ includes any and all support services to canned computer software, including technical support, consulting, training and support sold via tangible media – services which were previously exempt.


The ruling clarifies the legislative changes to the definition of taxable tangible personal property that both affirms previous department policy regarding ‘maintenance’ and reverses two decades of department policy exempting support services. While maintenance, updates and similar services were previously considered taxable, computer services such as technical support, consulting, help-desk support and training have been exempt under Pennsylvania Sales and Use Tax Pronouncement 60.19. The department appears to take a very broad interpretation of what qualifies as support—an issue likely to be challenged in the future. Noteworthy, Pennsylvania Gov. Wolf’s 2017-18 budget proposals include extending the state sales and use tax to computer services generally. To read more about those proposals, please see our blog, Pennsylvania proposes budget changes.

Taxpayers should review their current software support agreements that may have been exempt before Act 84 became effective (Aug. 1, 2016), but may not be taxable in light of the amendments to section 7201 and the department’s interpretation thereof. Vendors of computer services may take a practical and conservative approach by assessing, collecting and remitting tax on any services connected to canned software. Purchasers of these services may need to evaluate whether the services are taxable.


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