Presentation on theme: "Washington Tax Law and Cloud Computing"— Presentation transcript:
1 Washington Tax Law and Cloud Computing Caleb Allen (WA DOR)
2 Cloud Computing Issues WA law addressing cloud computing issues.Three important issues around cloud computing:TaxabilityHow WA law addresses cloud computing and other digital products transactions.SourcingHow WA law addresses sourcing of digital products transactions including some cloud computing services.NexusHow WA law addresses two specific nexus scenarios related to cloud computing.
4 Washington LawDigital products law addresses items transferred electronically:Digital goodsDigital codesDigital automated services (DAS)Remote access software (RAS)
5 Digital Goods Digital goods SSUTA: digital books, music, and video. Washington: sounds, images, data, facts or information or any combination thereofE.g. digital picture, lawn mower engine diagram etc.
6 Digital CodesProvides purchaser the right to obtain a digital good or DAS.Example: digital code inside bottle cap allows the purchaser the right to obtain an MP3 file.
7 Remote Access Software Washington taxes prewritten softwareDelivered on tangible mediaDigitally deliveredRemotely accessed.Remotely accessed software (RAS):Charges for the right to access and use prewritten software where possession is maintained by sellerRegardless of whether the charges for the service is per user, use, license, subscription or other basis.
8 Digital Automated Services Introduction:Unique and broad tax category addressing digital service transactions including some cloud computing.Digital automated service (DAS) :“….any service transferred electronically that uses one or more software applications…”WA anticipated:Rapid change in business modelsRapid change in and technologyRapid change could make digital good and remote access software categories obsolete.
9 Evolution: Software into Services T1-Gaming software purchased on a CD in a storeTPP = RSTT2-Gaming software accessed online:Remote access software = RSTT3 Gaming software accessed online PLUS other services:Real time multiplayer functionalityChat roomsWorld wide tournaments, etcDAS = RST
10 Example 2: Digital Good into Services T1-Music purchased on CD in storeTPP = RSTT2-Music accessed/streaming online:Digital good = RSTT3-Music access PLUS other service:Ability search information on music group or song.Ability to chat with other fans.Ability to compose songs and create digital files using software tools.DAS = RST
11 Digital Automated Services Defined Definition:“…any service transferred electronically that uses one or more software applications…”Definition encompasses many services including some cloud services:E.g. Computers remotely accessed, controlled, configured etc by software layer.Also includes other services “provided in the cloud:”E.g. Online searchable database.
12 Sample Exclusions from DAS Broad imposition makes exclusions from DAS important.Protect WA business models (e.g. server farms)Hosting, storage and back up.Preserve existing industry tax treatmentData processing.Telecommunications & internet access.Tax neutrality for online and offline activitiesPrimarily human effort (e.g. electronic contract sent via )
13 How it Fits Together Remote Access Software Digital Automated Services Digital GoodsSoftwareService that use softwareBooks,music,video,data, facts,informationThe Cloud
15 Sourcing SSUTA general rule in WA applied to DAS/RAS/DG Business locationStore location (not generally relevant for DAS/RAS/DG?)Place of receiptE.g. physical shipping address (available for DAS/RAS/DG?)Address in business recordsE.g. accounts receivable address, address in contract.Address from saleE.g. Credit card billing address usually available and generally works“blind form of payment” (e.g. PayPal) no address?Origin sourcingServer location may be unknown or movable.
17 Nexus Safe HarborsThese activities do not create nexus in WA for out of state seller:Ownership of software or digital good located on server in WA.Third party activities (e.g. marketplace services) conducted on seller’s behalf:display of advertising,order taking orpayment processing.
18 SummaryTaxability: WA has basic framework and definitions to address cloud computing and other digital product transactions.Sourcing: SSUTA rule generally works but may create challenges for some digital transactions where information is lacking.Nexus: two nexus issues resolved.