Selling software to Pennsylvania customers raises one urgent question: do you owe sales tax? Yes. Pennsylvania taxes Software as a Service (SaaS) because the state treats canned software as tangible personal property (TPP) regardless of how it reaches the user. That means you may need to register, collect, and file. The Pennsylvania Department of Revenue guidance on canned computer software and digital goods is the authoritative source.
Is SaaS Taxable in Pennsylvania?
Yes, SaaS is taxable in Pennsylvania. The Pennsylvania Department of Revenue (DOR) treats canned software accessed remotely as taxable tangible personal property, no matter the delivery method. Act 84 of 2016 extended the 6% sales and use tax to software delivered, streamed, or accessed electronically, effective August 1, 2016, per the Pennsylvania DOR guidance.
This covers B2B SaaS sold to Pennsylvania business users. There is no general business-to-business exemption. The dividing line is canned versus custom: prewritten (canned) software is taxable, while truly custom software built for one purchaser is exempt. See the exemption section below for how that distinction works.
What Is the Pennsylvania SaaS Sales Tax Rate in 2026?
Pennsylvania’s SaaS sales tax rate is 6.00% statewide in 2026. Only two local jurisdictions add tax: Allegheny County adds 1% (7% total) and Philadelphia adds 2% (8% total), per the Pennsylvania DOR tax rates page. The average combined rate is 6.34%, according to the Tax Foundation.
| Tax category | Rate | Source |
|---|---|---|
| Statewide base rate | 6.00% | PA Department of Revenue |
| Allegheny County (base + 1%) | 7.00% | PA Department of Revenue |
| Philadelphia (base + 2%) | 8.00% | PA Department of Revenue |
| Average combined rate | 6.34% (ranks 34th) | Tax Foundation (2026) |
This matters for rate determination. Unlike states with hundreds of local rates, Pennsylvania has exactly two local sales tax jurisdictions. Allegheny’s 1% is the Regional Asset District tax under Act 77 of 1993, and Philadelphia’s 2% was set under the 1991 PICA Act and raised in 2009, per the Pennsylvania DOR local sales tax guidance.
Which Types of Software Are Taxable in Pennsylvania?
All prewritten (canned) software is taxable in Pennsylvania regardless of delivery method, while custom software is exempt. The regulation at 61 Pa. Code § 60.19 taxes canned software “regardless of the method of delivery,” including updates and upgrades, and treats custom software as a nontaxable programming service.
| Product type | Taxable? | Source |
|---|---|---|
| SaaS / cloud-based software | Yes | 61 Pa. Code § 60.19; PA DOR |
| Subscription-based software | Yes | PA DOR canned software guidance |
| Electronically delivered prewritten software | Yes | 61 Pa. Code § 60.19 |
| Downloaded prewritten software | Yes | 61 Pa. Code § 60.19 |
| Prewritten software on tangible media (disc) | Yes | 61 Pa. Code § 60.19 |
| Digital goods (e-books, music, movies, streaming, apps) | Yes | Act 84 of 2016 (eff. Aug 1, 2016) |
| Custom software | No, exempt | 61 Pa. Code § 60.19; PA DOR |
| Support/maintenance for canned software | Generally taxable | PA DOR canned software guidance |
| Separately stated consulting/training | Exempt if separately invoiced | 61 Pa. Code § 60.19 |
Support and maintenance bundled with canned software is generally taxable “notwithstanding the function performed, including support,” with an exception only for separately invoiced help desk or call center support, per the Pennsylvania DOR guidance.
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Are Digital Goods Taxable in Pennsylvania?
Yes, digital goods are taxable in Pennsylvania. Act 84 of 2016 extended the 6% sales and use tax to digital products, including e-books, apps, games, music, video, and streaming, effective August 1, 2016, per the Pennsylvania DOR digital products guidance. The state estimated this expansion would raise roughly $46.9 million per year.
Digital goods and SaaS fall under the same statutory logic: both are taxed as tangible personal property when delivered or accessed electronically. SaaS is simply the canned-software application of that rule.
Is Custom Software Exempt from Pennsylvania Sales Tax?
Yes, truly custom software is exempt in Pennsylvania. 61 Pa. Code § 60.19 defines custom software as software designed, created, and developed for and to the specifications of an original purchaser, treated as a nontaxable programming service. Software built from scratch for a single customer qualifies.
Modifications to canned software are a different story. Customizing existing canned software does not convert it into exempt custom software. Charges for those modifications are exempt only if reasonable and separately stated on the invoice, per 61 Pa. Code § 60.19.
When Do You Have Sales Tax Nexus in Pennsylvania?
You have sales tax nexus in Pennsylvania at $100,000 in Pennsylvania sales in the previous 12 months, or with any physical presence. Pennsylvania uses a dollar threshold only, with no transaction-count trigger. Physical presence includes an office, warehouse, inventory, employees, or contractors in the state. For state-by-state thresholds, see the Commenda US nexus guide.
What Is the Difference Between Economic Nexus and Physical Nexus?
Economic nexus is based on sales volume, while physical nexus is based on in-state presence. Economic nexus follows the 2018 South Dakota v. Wayfair Supreme Court decision and triggers at $100,000 in Pennsylvania sales. Physical nexus comes from an office, warehouse, inventory, employees, or contractors in Pennsylvania. Pennsylvania’s earlier Act 43 of 2017 notice-and-report regime for the $10,000 to $100,000 band is now historical.
For US sales tax fundamentals on nexus and rate calculation, see the Commenda sales tax guide. Crossing a nexus threshold and owing tax on a product are two separate determinations, so confirm taxability alongside nexus.
Do You Need to Collect Pennsylvania Sales Tax Without Physical Presence?
Yes. Once you cross $100,000 in Pennsylvania sales in the prior 12 months, you must register and collect sales tax with zero physical footprint in the state. This is the direct consequence of the 2018 Wayfair decision. Remote SaaS sellers meeting the dollar threshold have the same obligations as sellers with a Pennsylvania office.
Do Marketplace Facilitators Collect Pennsylvania Sales Tax for SaaS Sellers?
Yes. Pennsylvania requires marketplace facilitators that cross $100,000 in sales to collect and remit sales tax on behalf of their sellers. This matters for SaaS sold through app marketplaces or resellers, where the facilitator handles the tax on those transactions.
You still remain responsible for your direct-channel sales. Tax on software you sell outside a marketplace is your obligation to register for, collect, and remit.
Which Pennsylvania Sales Tax Exemptions Apply to Software?
Pennsylvania exempts custom software, purchases for resale with a valid resale certificate, and sales to qualifying nonprofits, educational institutions, and government buyers with valid exemption certificates. The resale and exemption certificate in Pennsylvania is form REV-1220. Custom software is exempt under 61 Pa. Code § 60.19.
Collect and retain valid exemption certificates to survive an audit. Without a completed REV-1220 on file, an otherwise exempt sale can be reclassified as taxable, leaving you liable for the uncollected tax.
How Do You Register for a Pennsylvania Sales Tax Permit?
Register for a Pennsylvania sales tax permit through myPATH (my Pennsylvania Tax Hub) at mypath.pa.gov, the system that replaced the retired e-TIDES platform in 2022. The sales tax license is free. Follow these steps:
- Create an account and register at myPATH (mypath.pa.gov).
- Complete the PA-100 Pennsylvania Enterprise Registration Form.
- Provide business information and estimated sales.
- Begin collecting and remitting tax once licensed.
Pennsylvania sales tax licenses are subject to periodic renewal. For a full walkthrough, see the Commenda Pennsylvania sales tax permit page.
When Are Pennsylvania Sales Tax Returns Due?
Pennsylvania sales tax returns are due the 20th day of the month following the reporting period, filed through myPATH. The DOR assigns monthly, quarterly, or semiannual frequency based on your tax volume. If the 20th falls on a weekend or holiday, the deadline shifts to the next business day, per the Pennsylvania DOR filing instructions.
| Filing frequency | Due date | Source |
|---|---|---|
| Monthly | 20th of the following month | PA Department of Revenue |
| Quarterly | 20th after quarter-end (Apr 20, Jul 20, Oct 20, Jan 20) | PA Department of Revenue |
| Semiannual | 20th after each half-year (Aug 20 and Feb 20) | PA Department of Revenue |
Does Pennsylvania Charge Use Tax on Software?
Yes, Pennsylvania charges use tax on software. When a seller does not collect Pennsylvania sales tax on taxable software, the Pennsylvania purchaser owes use tax at the same 6% rate, plus Allegheny or Philadelphia local tax where applicable. The buyer self-assesses and remits it to the DOR. This frequently applies to B2B SaaS buyers who purchase from out-of-state vendors that fail to charge tax.
How We Help With Pennsylvania SaaS Sales Tax Compliance
Pennsylvania’s rules put the burden on you to know when you owe tax, at what rate, and by when. Commenda’s global indirect tax software tracks your physical and economic nexus across every state, calculates the right rate, and handles registration and filing. It connects to your systems through 100+ ERP, API, and custom integrations.
Check your exposure with the Commenda US nexus guide, review the broader rules in the Pennsylvania sales tax compliance guide, and look up current rates with the Commenda sales tax calculator. The calculator returns rates; use the nexus guide to assess where you owe.
Book a demo to get your free Pennsylvania nexus exposure assessment.
About the author
Sam is a seasoned expert in sales tax, leading Commenda's effort to build the worlds most comprehensive database of global tax rules and business regulations. At Silverhaze Partners, he worked in early-stage venture capital, where he saw firsthand how tax complexity and regulatory friction hold back startups from scaling internationally. That experience now powers his work at Commenda-bringing clarity, precision, and real-world insight to one of the most frustrating parts of doing business globally.
Disclaimer: Commenda and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
