Is SaaS Taxable in Pennsylvania? 2025 Guide
Already Got a PA Tax Notice?
Pennsylvania's low threshold catches a lot of growing SaaS companies. Here's what to do:
- 1.Don't respond immediately. Review the notice carefully. Is it an inquiry, assessment, or registration demand?
- 2.Check your threshold timing. When did you first exceed $100K in PA sales? Your liability only starts from that point.
- 3.Gather your exemption certificates. Do you have REV-1220 forms from B2B customers? These reduce your taxable sales.
- 4.Separate Philadelphia sales. Philly has a higher rate (8%), but only for customers located there.
VDA Option: Pennsylvania participates in multistate VDA programs. If you haven't been contacted yet, voluntary disclosure can waive penalties.
Yes, Pennsylvania taxes SaaS. Pennsylvania broadly taxes "canned computer software" regardless of how it's delivered. The state rate is 6%, with Philadelphia adding another 2% for an 8% combined rate.
Quick Reference
Low Threshold Warning
Watch the threshold: Pennsylvania's $100,000 threshold is lower than Texas, California, and New York (all $500,000). You can trigger Pennsylvania nexus with relatively modest sales. Monitor your PA revenue carefully.
Why Pennsylvania Taxes SaaS
Pennsylvania defines "canned computer software" broadly to include software accessed remotely. The PA DOR has consistently applied sales tax to SaaS subscriptions, cloud software access, and web-based applications.
What Triggers Pennsylvania Nexus?
Economic Nexus
If your Pennsylvania sales exceed $100,000 in the previous 12 months, you have economic nexus. No transaction count threshold.
Physical Presence
- Employees: Any employee in PA creates nexus
- Contractors: Agents and representatives may create nexus
- Property: Inventory or equipment in PA creates nexus
- Affiliates: PA has affiliate nexus provisions
B2B Exemptions
Pennsylvania offers exemptions for resale and certain business uses, but you must collect a valid exemption certificate (REV-1220). Without documentation, you must collect tax.
What's Taxable vs Exempt
Taxable
- Canned computer software (any delivery method)
- SaaS subscriptions
- Cloud-based software
- Prewritten software accessed remotely
Exempt
- Custom software (designed for single purchaser)
- Help desk / technical support (separately stated)
- Training services (separately stated)
- Software modification services
Check If You Have Pennsylvania Nexus
With the $100K threshold, many growing SaaS companies trigger PA nexus. Find out if you're over.
Start Free AnalysisHow to Register
- Authority: Pennsylvania Department of Revenue
- Timeline: 2-4 weeks
- Filing: Monthly, quarterly, or semi-annually based on tax collected. Monthly if >$300/month, quarterly if $75-300/month, semi-annual if <$75/month.
Sources
- Statute: 72 P.S. §7201(m), 72 P.S. §7202
- Official Guidance: PA DOR Computer Software Guide
- REV-717 (Computer Software Guidelines)
- PA Sales Tax Bulletin 2019-01 (Economic Nexus)
- Ruling SUT-12-002 (SaaS taxability)
- Last Verified: 2025-12-21