Taxing The Cloud Brings Practical Challenges

Grazed from InformationWeek. Author: Joe Donovan.

Tax laws are always a few beats behind technology. Interstate telephone calls were taxed based on the billing address of the phone customer and the location at the end of some copper wire of sending and receiving equipment. Now one end of a call may be on a subway line, the other in an airplane traveling from Boston to Paris. Who gets to tax it?

The latest conundrum: Both business-to-business and business-to-consumer transactions are moving to the cloud, and some startups are putting all of their IT infrastructure in provider sites. How, in an integrated 50-state economy, are tax concepts supposed to deal with this in a way that’s practical and doesn’t become an unfair burden for any entity? Of course, all computing takes place on servers that are physically located somewhere. Maybe you hire a cloud provider to store company records. You may not know where those records are at any given moment…

The storage vendor may not know either, because it maintains server farms in multiple states or countries. People thinking about how to tax cloud computing generally break it down into paradigms that roughly track the standard SaaS/IaaS/PaaS model. However, that’s where standardization ends…

Read more from the source @ http://www.informationweek.com/global-cio/interviews/taxing-the-cloud-brings-practical-challe/240160338