PRINTER'S NO. 325
No. 321 Session of 1997
INTRODUCED BY WAGNER, COSTA, AFFLERBACH, WOZNIAK, GERLACH,
ARMSTRONG, MUSTO, BELL, MURPHY, O'PAKE, DELP, ROBBINS,
KASUNIC AND BELAN, JANUARY 31, 1997
REFERRED TO FINANCE, JANUARY 31, 1997
AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2 act relating to tax reform and State taxation by codifying
3 and enumerating certain subjects of taxation and imposing
4 taxes thereon; providing procedures for the payment,
5 collection, administration and enforcement thereof; providing
6 for tax credits in certain cases; conferring powers and
7 imposing duties upon the Department of Revenue, certain
8 employers, fiduciaries, individuals, persons, corporations
9 and other entities; prescribing crimes, offenses and
10 penalties," further providing for the sales and use taxation
11 of computer programming services, computer integrated systems
12 design, computer processing, data preparation and processing
13 services, information retrieval services, computer facilities
14 management services and other computer-related services.
15 The General Assembly of the Commonwealth of Pennsylvania
16 hereby enacts as follows:
17 Section 1. Section 201(b)(3), (f)(5), (k)(8) and (16),
18 (o)(4) and (14), (dd), (ee), (ff), (gg), (hh) and (ii) of the
19 act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
20 of 1971, amended or added August 4, 1991 (P.L.97, No.22) and
21 December 13, 1991 (P.L.373, No.40), are amended to read:
22 Section 201. Definitions.--The following words, terms and
23 phrases when used in this Article II shall have the meaning
1 ascribed to them in this section, except where the context
2 clearly indicates a different meaning:
3 * * *
4 (b) "Maintaining a place of business in this Commonwealth."
5 * * *
6 (3) Regularly or substantially soliciting orders within this
7 Commonwealth in connection with the lease, sale or delivery of
8 tangible personal property to or the performance thereon of
9 services or in connection with the sale or delivery of the
10 services described in subclauses (11) through (15) and (17) and
11 (18) of clause (k) of this section for residents of this
12 Commonwealth by means of catalogues or other advertising,
13 whether such orders are accepted within or without this
14 Commonwealth.
15 * * *
16 (f) "Purchase at retail."
17 * * *
18 (5) The obtaining for a consideration of those services
19 described in subclauses (11) through (15) and (17) and (18) of
20 clause (k) of this section.
21 * * *
22 (k) "Sale at retail."
23 * * *
24 (8) Any retention of possession, custody or a license to use
25 or consume tangible personal property or any further obtaining
26 of services described in subclauses (2), (3) and (4) of this
27 clause pursuant to a rental or service contract or other
28 arrangement (other than as security).
29 The term "sale at retail" shall not include (i) any such
30 transfer of tangible personal property or rendition of services
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1 for the purpose of resale, or (ii) such rendition of services or
2 the transfer of tangible personal property including, but not
3 limited to, machinery and equipment and parts therefor and
4 supplies to be used or consumed by the purchaser directly in the
5 operations of--
6 (A) The manufacture of tangible personal property;
7 (B) Farming, dairying, agriculture, horticulture or
8 floriculture when engaged in as a business enterprise. The term
9 "farming" shall include the propagation and raising of ranch
10 raised fur-bearing animals and the propagation of game birds for
11 commercial purposes by holders of propagation permits issued
12 under 34 Pa.C.S. (relating to game);
13 (C) The producing, delivering or rendering of a public
14 utility service, or in constructing, reconstructing, remodeling,
15 repairing or maintaining the facilities which are directly used
16 in producing, delivering or rendering such service;
17 (D) Processing as defined in clause (d) of this section.
18 The exclusions provided in paragraphs (A), (B), (C) and (D)
19 shall not apply to any vehicle required to be registered under
20 The Vehicle Code, except those vehicles used directly by a
21 public utility engaged in business as a common carrier; to
22 maintenance facilities; or to materials, supplies or equipment
23 to be used or consumed in the construction, reconstruction,
24 remodeling, repair or maintenance of real estate other than
25 directly used machinery, equipment, parts or foundations
26 therefor that may be affixed to such real estate.
27 The exclusions provided in paragraphs (A), (B), (C) and (D)
28 shall not apply to tangible personal property or services to be
29 used or consumed in managerial sales or other nonoperational
30 activities, nor to the purchase or use of tangible personal
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1 property or services by any person other than the person
2 directly using the same in the operations described in
3 paragraphs (A), (B), (C) and (D) herein.
4 The exclusion provided in paragraph (C) shall not apply to
5 (i) construction materials, supplies or equipment used to
6 construct, reconstruct, remodel, repair or maintain facilities
7 not used directly by the purchaser in the production, delivering
8 or rendition of public utility service, (ii) construction
9 materials, supplies or equipment used to construct, reconstruct,
10 remodel, repair or maintain a building, road or similar
11 structure, or (iii) tools and equipment used but not installed
12 in the maintenance of facilities used directly in the
13 production, delivering or rendition of a public utility service.
14 The exclusions provided in paragraphs (A), (B), (C) and (D)
15 shall not apply to the services enumerated in clauses (k)(11)
16 through (15) and (17) and (18) and (w) through (cc) and (jj) and
17 (kk), except that the exclusion provided in this subclause for
18 farming, dairying and agriculture shall apply to the service
19 enumerated in clause (z).
20 * * *
21 [(16) The rendition for a consideration of computer
22 programming services; computer-integrated systems design
23 services; computer processing, data preparation or processing
24 services; information retrieval services; computer facilities
25 management services; or other computer-related services. At a
26 minimum, such services shall not include services that are part
27 of electronic fund transfers, electronic financial transactions
28 or services, banking or trust services, or management or
29 administrative services, including transfer agency, shareholder,
30 custodial and portfolio accounting services, provided directly
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1 to any entity that duly qualifies to be taxed as a regulated
2 investment company or a real estate investment trust under the
3 provisions of the Internal Revenue Code of 1986 (Public Law 99-
4 514, 26 U.S.C. § 1 et seq.) or to an entity that provides such
5 services to an entity so qualifying.]
6 * * *
7 (o) "Use."
8 * * *
9 (4) The obtaining by a purchaser of the service of
10 repairing, altering, mending, pressing, fitting, dyeing,
11 laundering, drycleaning or cleaning tangible personal property
12 other than wearing apparel or shoes or applying or installing
13 tangible personal property as a repair or replacement part of
14 other tangible personal property other than wearing apparel or
15 shoes, whether or not the services are performed directly or by
16 any means other than by means of coin-operated self-service
17 laundry equipment for wearing apparel or household goods, and
18 whether or not any tangible personal property is transferred to
19 the purchaser in conjunction therewith, except such services as
20 are obtained in the construction, reconstruction, remodeling,
21 repair or maintenance of real estate: Provided, however, That
22 this subclause shall not be deemed to impose tax upon such
23 services in the preparation for sale of new items which are
24 excluded from the tax under clause (26) of section 204, or upon
25 diaper service: And provided further, That the term "use" shall
26 not include--
27 (A) Any tangible personal property acquired and kept,
28 retained or over which power is exercised within this
29 Commonwealth on which the taxing of the storage, use or other
30 consumption thereof is expressly prohibited by the Constitution
19970S0321B0325 - 5 -
1 of the United States or which is excluded from tax under other
2 provisions of this article.
3 (B) The use or consumption of tangible personal property,
4 including but not limited to machinery and equipment and parts
5 therefor, and supplies or the obtaining of the services
6 described in subclauses (2), (3) and (4) of this clause directly
7 in the operations of--
8 (i) The manufacture of tangible personal property;
9 (ii) Farming, dairying, agriculture, horticulture or
10 floriculture when engaged in as a business enterprise. The term
11 "farming" shall include the propagation and raising of ranch-
12 raised furbearing animals and the propagation of game birds for
13 commercial purposes by holders of propagation permits issued
14 under 34 Pa.C.S. (relating to game);
15 (iii) The producing, delivering or rendering of a public
16 utility service, or in constructing, reconstructing, remodeling,
17 repairing or maintaining the facilities which are directly used
18 in producing, delivering or rendering such service;
19 (iv) Processing as defined in subclause (d) of this section.
20 The exclusions provided in subparagraphs (i), (ii), (iii) and
21 (iv) shall not apply to any vehicle required to be registered
22 under The Vehicle Code except those vehicles directly used by a
23 public utility engaged in the business as a common carrier; to
24 maintenance facilities; or to materials, supplies or equipment
25 to be used or consumed in the construction, reconstruction,
26 remodeling, repair or maintenance of real estate other than
27 directly used machinery, equipment, parts or foundations
28 therefor that may be affixed to such real estate. The exclusions
29 provided in subparagraphs (i), (ii), (iii) and (iv) shall not
30 apply to tangible personal property or services to be used or
19970S0321B0325 - 6 -
1 consumed in managerial sales or other nonoperational activities,
2 nor to the purchase or use of tangible personal property or
3 services by any person other than the person directly using the
4 same in the operations described in subparagraphs (i), (ii),
5 (iii) and (iv).
6 The exclusion provided in subparagraph (iii) shall not apply
7 to (A) construction materials, supplies or equipment used to
8 construct, reconstruct, remodel, repair or maintain facilities
9 not used directly by the purchaser in the production, delivering
10 or rendition of public utility service or (B) tools and
11 equipment used but not installed in the maintenance of
12 facilities used directly in the production, delivering or
13 rendition of a public utility service.
14 The exclusion provided in subparagraphs (i), (ii), (iii) and
15 (iv) shall not apply to the services enumerated in clauses
16 (o)(9) through (13) and (15) and (16) and (w) through (cc) and
17 (jj) and (kk), except that the exclusion provided in
18 subparagraph (ii) for farming, dairying and agriculture shall
19 apply to the service enumerated in clause (z).
20 * * *
21 [(14) The obtaining by the purchaser of computer programming
22 services; computer-integrated systems design services; computer
23 processing, data preparation or processing services; information
24 retrieval services; computer facilities management services; or
25 other computer-related services. At a minimum, such services
26 shall not include services that are part of electronic fund
27 transfers, electronic financial transactions or services,
28 banking or trust services, or management or administrative
29 services, including transfer agency, shareholder, custodial and
30 portfolio accounting services, provided directly to any entity
19970S0321B0325 - 7 -
1 that duly qualifies to be taxed as a regulated investment
2 company or a real estate investment trust under the provisions
3 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
4 U.S.C. § 1 et seq.) or to an entity that provides such services
5 to an entity so qualifying.]
6 * * *
7 [(dd) "Computer programming services." Providing computer
8 programming or computer software design and analysis. Such
9 services include, but are not limited to, services of the type
10 provided by or through computer programming services, customer
11 computer programming services, computer code authors and free-
12 lance computer software writers, software modification, custom
13 software programming, custom computer programs or system
14 software development, custom computer software systems analysis
15 and design, custom applications software programming, computer
16 code authors or free-lance computer software writers.
17 (ee) "Computer integrated systems design." Developing or
18 modifying computer software and packaging or bundling the
19 software with computer hardware (computers and computer
20 peripheral equipment) to create and market an integrated system
21 for specific application. A business is providing such services
22 under this clause only if it provides each of the following
23 services:
24 (1) the development or modification of the computer
25 software;
26 (2) the marketing of computer hardware; and
27 (3) involvement in all phases of systems development from
28 design through installation.
29 Such services under this clause include, but are not limited to,
30 computer systems integration, computer network systems
19970S0321B0325 - 8 -
1 integration, local area network (LAN) systems integration,
2 office automation, computer systems value-added resellers,
3 computer systems turnkey vendors, computer-aided design (CAD)
4 systems services, computer-aided engineering (CAE) systems
5 services or computer-aided manufacturing (CAM) systems services.
6 (ff) "Computer processing, data preparation or processing
7 services." Such services include, but are not limited to,
8 providing processing and preparation of reports from data
9 supplied by the customer or a specialized service, such as data
10 entry; making data processing equipment available on an hourly,
11 time-sharing or other basis; computer timesharing and leasing or
12 rental of computer time; computer tabulating and calculating
13 services; data entry, processing or verification services;
14 keypunch services; or optical scanning data services.
15 (gg) "Information retrieval services." Providing computer
16 on-line information retrieval services. Such services include,
17 but are not limited to, data base information retrieval
18 services, on-line information retrieval services, on-line data
19 base information retrieval services or remote data base
20 information retrieval services.
21 (hh) "Computer facilities management services." Providing
22 onsite management or controlling the operation of data
23 processing facilities or similar services.
24 (ii) "Other computer-related services." Supplying computer-
25 related services not described elsewhere in clauses (dd) through
26 (hh). Such services include, but are not limited to, computer
27 consulting services; data base development and data processing
28 consulting services; disk, diskette or tape conversion services;
29 disk, diskette or tape recertification services; computer
30 hardware and software requirement analysis services; software
19970S0321B0325 - 9 -
1 documentation services; software installation services; software
2 training services if provided in conjunction with the purchase
3 of software; or reformatting or editing services.]
4 * * *
5 Section 2. This act shall take effect immediately.
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