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Pennsylvania House of Representatives
11/17/2024 04:37 PM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?SPick=20190&chamber=H&cosponId=28961
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House of Representatives
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted: March 22, 2019 09:40 AM
From: Representative Tommy Sankey
To: All House members
Subject: LEGISLATION: CLARIFICATION ON SALES & USE TAX(SUT) FOR FINANCIAL INSTITUTIONS & INFORMATION SERVICES
 
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:
  • 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.

Thank you for your consideration.


Introduced as HB1163