Pennsylvania has revised a legal letter ruling regarding sales and use tax on canned software support services, including guidance regarding support services for digital property. The original ruling issued February 9, 2017 provided that all support services including phone support, consulting and training related to canned computer software was taxable. This ruling was withdrawn in March 2017.
The new ruling which was reissued April 4, 2017 has clarified the department’s position regarding consulting and training services. The state’s definition of “tangible personal property” had previously been amended to expressly include certain specified items including canned software, downloaded digital goods, and “maintenance, updates and support“ of the newly defined electronic or digital tangible personal property. The Department of Revenue considers “support” to mean providing advice or guidance concerning otherwise taxable digital or electronic tangible personal property. This includes identifying the source of problems affecting usability and/or attempting to place the property in or restore the property to a useable state. This includes, but is not limited to, help desk support or call center support. The support may be delivered verbally, online, or through automated means that reside on customer’s device or by human means. The support may be delivered by the property vendor or a third-party support provider who may or may not have remote access to the customer’s device. Providing support is taxable regardless of the method of billing as long as it is to support a taxable product or digital good. Technical support for canned software is considered taxable if it falls within the Department’s definition of “support.”
The reissued ruling has clarified that training is not included in the Department’s definition of “support.” “Support” does not include consulting unless activities described as consulting fall within the Department’s definition of support. The letter ruling states that since consulting may be used to describe various activities, the ruling may not be interpreted as a definitive determination of the taxability of what taxpayers may describe as consulting. Based on this ruling, software providers and customers should clearly describe the services provided and distinguish services that are not related to the maintenance, update and support of taxable computer software. (Legal Letter Ruling No. SUT-17-001, Pennsylvania Department of Revenue, April 4, 2017)