In overturning the Commonwealth Court, the Pennsylvania Supreme Court recently held that royalty fees for certain intellectual property were not subject to Pennsylvania sales tax. See Downs Racing LP v. Commonwealth of Pennsylvania, Dkt. No. 70 MAP 2017 and 71 MAP 2017 (Pa. Oct. 25, 2018). The royalties at issue were payments between third parties for IP used in the operation of gaming machines (“Gaming IP”). The Commonwealth argued the Gaming IP was canned software, and thus taxable in Pennsylvania. The Commonwealth also argued, in the alternative, that sales tax was due on the full price paid for the gaming machines along with any ancillary items, such as the Gaming IP. In siding with the taxpayer, the court found the Gaming IP was not subject to sales tax because it did not constitute, nor was it ancillary to, tangible personal property.