By Peter N. Calcara, vice president – government relations
The PICPA and the Pennsylvania Department of Revenue (DOR) met Feb. 21, 2020, to discuss DOR’s letter ruling addressing the taxability of professional association membership fees. Sales and Use Tax Letter Ruling 20-001, issued Jan. 31, 2020, provides that a membership fee in a professional association may be subject to Pennsylvania’s sales and use tax, depending on what a member receives in exchange for the membership. The letter ruling was removed from the DOR’s website shortly after it was posted to give the PICPA and other groups an opportunity to internally vet the ruling and give the DOR a chance to work with stakeholders on additional guidance.
According to the letter ruling, if a member does not receive any taxable tangible personal property or taxable services in exchange for the fee, then the fee is not taxable. However, if a member receives taxable tangible personal property or taxable services in exchange for the membership fee, and the tangible personal property or taxable services are not separately disclosed, then the entire membership fee is taxable. Tangible personal property, as defined in the state Tax Reform Code, includes items falling within the categories listed below, whether electronically or digitally delivered, streamed, or accessed, and purchased either singly, by subscription, or in any other manner, including maintenance, updates, and support:
- Any other otherwise taxable printed matter
- Applications (commonly known as apps)
- Any other audio, including satellite radio service
- Canned software, notwithstanding the function performed
- Any other otherwise taxable tangible personal property electronically or digitally delivered, streamed, or accessed
The discussion the PICPA had with DOR representatives provided an opportunity for clarity. It was made clear that the scope of the letter ruling addresses a specific legal question for a specific taxpayer, as opposed to a broader tax advisory notice. Letter rulings are published with the assumption that others in like circumstances may want to see the DOR’s interpretation. Again, letter rulings are specific to a taxpayer and their situation. The DOR was very clear that it was not using this letter ruling to signal a new initiative to broaden audits of nonprofit professional associations, and that the ruling first and foremost pertain to a particular question.
The PICPA now has a clearer understanding of how the DOR might interpret tangible personal property relative to the various programs, products, and services that the PICPA offers its members. Materials downloaded from live CPE programs are not subject to sales tax if they are a summary of the presentation. Regarding PICPA’s on-demand learning programs, the PICPA already collects and remits sales tax pursuant to Act 84 of 2016. Programs happening live (whether attended in person or virtually) are exempt from sales tax as live telecommunications.
The DOR asked the PICPA to compile a list of questions so it could respond in writing and post the responses to its website alongside the letter ruling. A series of FAQs will be linked to the letter ruling once it is reposted. We encourage members and other stakeholders with questions to submit them no later than March 6 to email@example.com or directly to the DOR.
The PICPA thanks the DOR for meeting with us and for its willingness to work with stakeholders to provide additional guidance.
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