Clarification on Sales and Use Tax for Financial Institutions and Information Services
April 2, 2019 02:20 PM to All Senate Members
Circulated By
Senator Scott Hutchinson
R Senate District 21
Memo
Please join me in co-sponsoring legislation that would clarify the Sales and Use Tax (SUT) regarding canned and customized software, financial institution security equipment, services fees on financial institutions and information retrieval services.
The Pa. Dept. of Revenue (DoR) has started to issue audit reports assessing the SUT on financial institutions for the purchase of any computer service or data processing contract that utilizes “canned software,” even if the predominant purpose of a contract is to obtain non-taxable services. This is happening when banks are purchasing core processing services – functions that are essential to the bank - including:
Since the 1980’s, Pa. has taxed “canned software” via DoR bulletins and court rulings. Until these recent audits, DoR had not taken the position that bank core processor services should be taxed nor that they were the purchase of “canned software” and related support services.
Additionally, the DoR has also started to impose the SUT not only on the actual cost of any financial institution security equipment purchased by contractors, but on the total amount paid by financial institutions to contractors for the installation, repair and maintenance of the security equipment. This is a significant change in their interpretation of existing SUT law from 1978 and creates inconsistency and uncertainty.
This legislation would also clarify that fees on financial services provided by financial institutions are not subject to the SUT. I seek to preserve the long-standing policies that have reasonably applied to the SUT.
Please join me in supporting this important legislation. If you have any questions regarding this legislation, please contact Nathan Akers in my office at 787-9684 or nakers@pasen.gov.
The Pa. Dept. of Revenue (DoR) has started to issue audit reports assessing the SUT on financial institutions for the purchase of any computer service or data processing contract that utilizes “canned software,” even if the predominant purpose of a contract is to obtain non-taxable services. This is happening when banks are purchasing core processing services – functions that are essential to the bank - including:
- Creating a customer database that is accessible to bank personnel;
- Processing banking transactions for customers;
- Generating monthly statements;
- Making electronic and mobile banking available to customers;
- Monitoring accounts for fraud;
- Providing access to ACH and credit card networks; and,
- Conducting securities purchase and sale transactions.
Since the 1980’s, Pa. has taxed “canned software” via DoR bulletins and court rulings. Until these recent audits, DoR had not taken the position that bank core processor services should be taxed nor that they were the purchase of “canned software” and related support services.
Additionally, the DoR has also started to impose the SUT not only on the actual cost of any financial institution security equipment purchased by contractors, but on the total amount paid by financial institutions to contractors for the installation, repair and maintenance of the security equipment. This is a significant change in their interpretation of existing SUT law from 1978 and creates inconsistency and uncertainty.
This legislation would also clarify that fees on financial services provided by financial institutions are not subject to the SUT. I seek to preserve the long-standing policies that have reasonably applied to the SUT.
Please join me in supporting this important legislation. If you have any questions regarding this legislation, please contact Nathan Akers in my office at 787-9684 or nakers@pasen.gov.
Legislation
Document - Introduced as SB 568
Last updated on April 17, 2019 12:21 PM
Clarification on Sales and Use Tax for Financial Institutions and Information Services
April 2, 2019 02:20 PM to All Senate Members
Circulated By
HUTCHINSON
Memo
Please join me in co-sponsoring legislation that would clarify the Sales and Use Tax (SUT) regarding canned and customized software, financial institution security equipment, services fees on financial institutions and information retrieval services.
The Pa. Dept. of Revenue (DoR) has started to issue audit reports assessing the SUT on financial institutions for the purchase of any computer service or data processing contract that utilizes “canned software,” even if the predominant purpose of a contract is to obtain non-taxable services. This is happening when banks are purchasing core processing services – functions that are essential to the bank - including:
Since the 1980’s, Pa. has taxed “canned software” via DoR bulletins and court rulings. Until these recent audits, DoR had not taken the position that bank core processor services should be taxed nor that they were the purchase of “canned software” and related support services.
Additionally, the DoR has also started to impose the SUT not only on the actual cost of any financial institution security equipment purchased by contractors, but on the total amount paid by financial institutions to contractors for the installation, repair and maintenance of the security equipment. This is a significant change in their interpretation of existing SUT law from 1978 and creates inconsistency and uncertainty.
This legislation would also clarify that fees on financial services provided by financial institutions are not subject to the SUT. I seek to preserve the long-standing policies that have reasonably applied to the SUT.
Please join me in supporting this important legislation. If you have any questions regarding this legislation, please contact Nathan Akers in my office at 787-9684 or nakers@pasen.gov.
The Pa. Dept. of Revenue (DoR) has started to issue audit reports assessing the SUT on financial institutions for the purchase of any computer service or data processing contract that utilizes “canned software,” even if the predominant purpose of a contract is to obtain non-taxable services. This is happening when banks are purchasing core processing services – functions that are essential to the bank - including:
- Creating a customer database that is accessible to bank personnel;
- Processing banking transactions for customers;
- Generating monthly statements;
- Making electronic and mobile banking available to customers;
- Monitoring accounts for fraud;
- Providing access to ACH and credit card networks; and,
- Conducting securities purchase and sale transactions.
Since the 1980’s, Pa. has taxed “canned software” via DoR bulletins and court rulings. Until these recent audits, DoR had not taken the position that bank core processor services should be taxed nor that they were the purchase of “canned software” and related support services.
Additionally, the DoR has also started to impose the SUT not only on the actual cost of any financial institution security equipment purchased by contractors, but on the total amount paid by financial institutions to contractors for the installation, repair and maintenance of the security equipment. This is a significant change in their interpretation of existing SUT law from 1978 and creates inconsistency and uncertainty.
This legislation would also clarify that fees on financial services provided by financial institutions are not subject to the SUT. I seek to preserve the long-standing policies that have reasonably applied to the SUT.
Please join me in supporting this important legislation. If you have any questions regarding this legislation, please contact Nathan Akers in my office at 787-9684 or nakers@pasen.gov.
Document
Introduced as SB 568
Last Updated
April 17, 2019 12:21 PM
Generated 03/24/2025 01:32 PM