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Pennsylvania’s long-standing policy on electronically delivered software held incorrect by Commonwealth Court. In a decision published on September 15, 2005, the Commonwealth Court of Pennsylvania in Graham Packaging, LP held that electronically delivered software is subject to Pennsylvania sales and use tax. This decision contravenes the Pennsylvania Department of Revenue’s long-standing policy that canned software delivered in electronic form is exempt from sales and use tax. The Commonwealth Court stated that the Department was incorrect in its policy, which relied upon the method or medium of delivery of the software in making a tax determination. In response to this decision, the Pennsylvania Department of Revenue has issued Sales Tax Bulletin 2005-04, which provides that effective November 1, 2005 canned software will be considered taxable, regardless of the form in which it is delivered. There is some speculation that Pennsylvania many enact a statutory exemption for electronically delivered software at some point in the future to restore its long standing policy.
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