Pennsylvania – Taxability of Remote Software Access

SALT Report 1554 – The Pennsylvania Department of Revenue issued a Letter Ruling regarding the taxability of canned software that is located on remote servers, also known as cloud computing.  The Department determined the taxability as follows:

  • Computer software is tangible personal property; therefore, any charges for electronically accessing taxable software are also taxable.  By accessing the taxable software the user is exercising a license to use the software, as well as maintaining control or power over the software, at the user’s location
  • Charges for the use of canned computer software that is hosted on a server and accessed electronically are subject to Pennsylvania sales and use tax if the user is located in Pennsylvania
  • Taxpayers are required to collect tax from a customer if the customer is located in Pennsylvania
  • Software used by employees is subject to use tax if the employees are located in Pennsylvania
  • Charges for remote software access are not subject to tax if the user is located outside Pennsylvania, even if the server that hosts the software is located in the state
Finally, taxpayers may claim a resale exemption on the purchase of software that is to be located in the state if tax is collected on the use of the software in Pennsylvania.
For Further Information: