Dechert LLP v. Pennsylvania, Supreme Court of Pennsylvania - Ruling on Canned Computer Software


By Matthew Dodge

The Supreme Court of Pennsylvania, on July 20, 2010, in the case of Dechert LLP v. Pennsylvania affirmed the Commonwealth Court’s decision stating that canned computer software is tangible personal property and is subject to Pennsylvania sales tax.

In its appeal to the Supreme Court, Dechert argued that the definition of tangible personal property is not expressly defined in the Code to include canned computer software. Dechert further argued that the exclusion of canned computer software in the definition and from examples (“quasi-physical items such as electricity and cable service”) provided in the statute reflected the legislature’s intent to exclude canned computer software from the definition of tangible personal property.

Pennsylvania statute specifies that a license for the use of tangible personal property is taxable as a “sale at retail.” At issue in the case was the definition of tangible personal property and whether or not canned computer software, or the license to use such software, was encompassed in that definition. The Court, in its decision, viewed the issue as one of statutory construction where previous courts have dismissed arguments such as Dechert’s “exclusion” argument. The Court emphasized the language of Section 7201(m), specifically addressing the phrase, “including, but not limited to” as having the intent to enlarge and not limit the definition of tangible personal property. When analyzing the construction of statutory language, the Court generally defers to the interpretation of the administrative agency (the Department of Revenue), which defines canned software as tangible personal property. Relying upon the above and the Commonwealth Court’s decision in the case of Graham Packaging v. Pennsylvania, the Pennsylvania Supreme Court concluded that canned software was included in the definition of tangible personal property and therefore is subject to sales tax.


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