Information Retrieval Products Taxable in Pennsylvania

Pennsylvania has determined that a taxpayer’s sales of information retrieval products are subject to sales and use tax as tangible personal property. The taxpayer sells subscriptions to specialized internet-based research services. The information retrieval products are accessed over the internet using an ID and password and are provided on a subscription-fee basis. The products are maintained on servers located outside of Pennsylvania. Pennsylvania’s definition of “tangible personal property” expressly includes certain specified items including video, books, applications, games, music, audio, canned software, and other specified items, whether “electronically or digitally delivered, streamed or accessed” and “whether purchased singly, by subscription or in any other manner.” By using the search function of the product, subscribers are exercising a license to access canned computer software. By entering inputs to obtain a certain desired output, subscribers are exercising power and control over the software. When a subscriber is accessing the content of the information retrieval products, the subscriber is accessing tangible personal property. Additionally, the grant of a conditional license to use tangible personal property is a taxable sale at retail. The taxpayer’s information retrieval products constitute tangible personal property since the transactions are comprised of both a license to electronically access and use canned computer software and the right to electronically access tangible personal property. As a result, sales of the products are subject to Pennsylvania sales and use tax. (Legal Letter Ruling No. SUT-17-002, Pennsylvania Department of Revenue, May 17, 2017, released August 2017)

Posted on May 10, 2018