Reed Smith asks Pa. Supreme Court to reconsider "Dechert LLP v. Commonwealth" software tax ruling
Pittsburgh-based law firm Reed Smith announced last week that it had filed an Application for Reargument with the Pennsylvania Supreme Court asking it to reconsider its July decision in the case of Dechert LLP v. Commonwealth, in which it held that "purchases of licenses to use canned computer software, however delivered (my bold), are subject to sales tax", according to Reed Smith. It upholds the application of the sales tax in this case to "electronically delivered" canned software. Whether this would include software as a service delivered via "the Cloud" is not clear. The best summary of the case that I have seen is this one by Pepper Hamilton.
Reed Smith says that the Department of Revenue's interpretation of the tax code implemented in 1971 has been that canned computer programs delivered on physical media (such as disk) are subject to sales tax and software delivered electronically is not. The firm says the Court is ignoring "long-standing, published interpretations of the tax statute".
Obviously, as the delivery of more and more software shifts towards the Cloud this will become an increasingly contentious issue in many other states as well as Pennsylvania.
Reed Smith was representing Phiily-based law firm Dechert.
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