Pennsylvania Software Developers May Need to Start Collecting Sales Tax

February 8, 2017

This information was posted and is current as of February 8, 2017 – as always, if you have questions about the current obligations of your business with respect to Sales and Use Tax or any other legal issue, please check with your attorney.

Attention software developers, graphic designers and data processing companies: as reported by the Central Pennsylvania Business Journal, Pennsylvania Governor Tom Wolf’s proposed 2017-2018 budget may significantly impact your business. While the proposal doesn’t raise broad taxes such as property tax and income tax, Governor Wolf proposed the elimination of a number of sales tax exemptions, including those on custom computer programming, design and data processing.

Under current Pennsylvania law, Sales and Use Tax applies to “sale at retail or use of computer hardware and canned software, as well as services thereto.” According to the same law, computer programming, computer integrated systems design, computer processing, data preparation or processing, information retrieval, computer facilities management and other computer-related services are not subject to Pennsylvania Sales and Use Tax. Many of those terms are defined in the Pennsylvania Code section linked at the beginning of this paragraph.

As you may recall from past years, Pennsylvania has a rich history of budget impasses, so we’ll see what happens this year. Currently, Governor Wolf’s proposal is just that – a proposal. Whether or not you like this change, there is still time to contact your elected officials to have your voice heard.

Interested in learning more about the budget process in Pennsylvania? You’re in luck – the Pennsylvania Office of the Budget has published this handy report outlining the budget process in detail from start to finish. Stay up to date on this issue, and the rest of the budget, by following it on Twitter using the hashtag #pabudget or on Central Penn Business Journal.

Matt Landis is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University School of Law and advises clients on issues of Information Technology & Internet LawIntellectual Property Law and Business Law.