FOR IMMEDIATE RELEASE
January 30, 2006
Contact:  Erin K. Kelly
(717) 846-2828
ekelly@pasen.gov
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Jubelirer and Waugh to introduce legislation addressing court decision against graham packing company

Ruling reverses Dept. of Revenue policy on taxing prewritten computer software

HARRISBURG – Senator Robert C. Jubelirer (R-Blair), President Pro Tempore of the Senate, and Sen. Mike Waugh (R-York) plan to introduce legislation in response to a recent Commonwealth Court decision, which overturned a long-standing Department of Revenue policy regarding prewritten computer software. 

In 1997 the sales and use tax on computer services was repealed, and this laid the groundwork for the Department's policy, which held that canned computer software transferred to a purchaser by electronic means (e.g. Internet) is not subject to sales and use tax. 

Jubelirer and Waugh's legislation is intended to reverse the Court's ruling in Graham Packaging Company, L.P. v. Commonwealth.  Graham Packaging, based in York, PA, is a worldwide manufacturer of customized blow-molded plastic containers used for food, beverages and household products.  The company was denied a refund of over $22,000 in sales and use tax paid on its renewal of licenses to use various computer software programs that it had purchased previously. 

The proposed legislation will amend the Tax Reform Code of 1971 by codifying definitions related to computer software and its delivery. It will create an exclusion from tax for prewritten software and digital products that are delivered electronically, along with an exclusion from tax for the renewal of licenses to use computer software. 

The Department of Revenue has indicated that this unexpected tax burden on Pennsylvania's businesses, and perhaps individuals as well, will cost taxpayers $55 million for fiscal year 2006-07, increasing to $72.1 million by fiscal year 2009-2010.