Yes, SaaS is taxable in Pennsylvania. Since Act 84 of 2016 took effect on August 1, 2016, Pennsylvania has taxed canned (prewritten) computer software whether it is downloaded, streamed, or accessed remotely, and whether it is sold singly or by subscription. The state rate is 6%, with an additional 1% local tax in Allegheny County and 2% in Philadelphia.
This guide covers how Pennsylvania classifies SaaS, how tax is sourced when users are spread across states, and what triggers a collection obligation. It is educational information, not tax advice. For other states, see our SaaS sales tax by state guide.
Pennsylvania SaaS sales tax at a glance
| Question | Answer |
|---|---|
| Is SaaS taxable? | Yes, as canned computer software |
| Key authority | 72 P.S. § 7201 (as amended by Act 84 of 2016); Sales and Use Tax Bulletin 2016-01; DOR canned software guidance |
| Rate | 6% state; 7% in Allegheny County; 8% in Philadelphia |
| B2B vs B2C | Both taxable |
| Sourcing | Where the user is located |
| Custom software | Not taxable |
| Nexus threshold | More than $100,000 in Pennsylvania gross sales |
How Pennsylvania taxes SaaS
Pennsylvania treats canned software as tangible personal property. Sales and Use Tax Bulletin 2016-01 explains that Act 84 extended the tax to canned software and other digital products delivered electronically or by streaming, whether they are "accessed and purchased singly, or by subscription or in any other manner."
The Department of Revenue's canned software guidance applies this directly to remote access: remotely accessed tangible personal property, including canned software, is subject to tax when the user is located in Pennsylvania. Tax applies regardless of the billing method, including per-license, metered or consumption-based, and tiered or feature-based pricing.
What else is taxable, and what isn't
- Maintenance, updates, and support for canned software are taxable.
- Separately stated help-desk support where the vendor does not access the software is not taxable.
- Custom software and related services are not subject to sales tax. Software designed and developed to one customer's specifications is not canned software.
Mixed transactions that combine custom development with canned software, or that combine software access with services, should be itemized. Whether a particular product is canned software or a nontaxable service (for example, where software use is incidental to a service the vendor performs) is a fact-specific question.
B2B vs B2C
Pennsylvania taxes SaaS sold to businesses and consumers alike. There is no general business-use exemption. Standard exemptions still apply, such as sales for resale and sales to qualifying exempt organizations with a valid exemption certificate.
Sourcing and multi-state users
The Department sources remotely accessed software to where the user is located:
- If the billing address is in Pennsylvania, all users are presumed to be located in Pennsylvania.
- An employer does not owe Pennsylvania tax on licenses for employees who use the software exclusively outside Pennsylvania.
- That allocation applies to the purchaser's own employees. If the users are contractors, customers, or another company's employees, the purchaser is treated as the end user.
Local tax follows the same logic. Charges sourced to Allegheny County carry the additional 1% local tax, and charges sourced to Philadelphia carry 2%.
Nexus and registration
Remote sellers with more than $100,000 in Pennsylvania gross sales must register, collect, and remit. Pennsylvania counts total gross sales through all channels, including nontaxable sales, when measuring the threshold.
Register for a Sales, Use and Hotel Occupancy Tax License through myPATH. Remote sellers that use a certified service provider may be able to rely on that provider instead of obtaining their own license. For rates, filing frequencies, and registration steps, see our Pennsylvania sales tax guide.
What to do next
- Confirm each product is canned software rather than custom development or a nontaxable service.
- Capture the customer's billing address and apply Allegheny County and Philadelphia local tax where it applies.
- Set up a process for business customers that want to allocate licenses used exclusively outside Pennsylvania.
- Separately state help-desk support and custom work on invoices.
- Track Pennsylvania gross sales against the $100,000 threshold.
Kintsugi applies Pennsylvania's state and local rates to SaaS at the customer's address and files your returns. See Kintsugi for SaaS.
Frequently asked questions
Is SaaS taxable in Pennsylvania?
Yes. Pennsylvania taxes canned software accessed remotely, by download, or by streaming, whether sold singly or by subscription.
What is the Pennsylvania sales tax rate on SaaS?
6% statewide, 7% in Allegheny County, and 8% in Philadelphia.
Is B2B SaaS taxable in Pennsylvania?
Yes. Pennsylvania has no general business-use exemption for SaaS. Resale and exempt-organization exemptions still apply with proper documentation.
How do I handle a customer with employees in several states?
Users are presumed to be in Pennsylvania when the billing address is in Pennsylvania, but an employer does not owe Pennsylvania tax on licenses for employees who use the software exclusively outside the state.
Is custom software taxable in Pennsylvania?
No. The sale of custom software and services related to custom software is not subject to sales tax.
Sources
- Pennsylvania Department of Revenue, Canned computer software and digital goods
- Pennsylvania Department of Revenue, Sales and Use Tax Bulletin 2016-01
- Pennsylvania Department of Revenue, Sales, use and hotel occupancy tax
- Pennsylvania Department of Revenue, Online retailers
Look up the exact rate for any address with our US sales tax calculator.
