Policy Documents

No Improved Visibility For Cloud Computing Taxation

Kendall L. Houghton and Maryann H. Luongo –
July 4, 2011

In the past year or so, there have been several articles written on the topic of cloud computing and the potential tax consequences of various types of‘‘cloud’’ transactions.1 Nevertheless, only about seven publications (in four states) of particular note in 2010 and 2011 are directed at cloud computing fact patterns, and those range from providing clear guidance on very discrete questions to refusing to address the question posed in the request for ruling.As the dearth of published guidance from the states makes clear, taxpayers must continue to rely on their ‘‘instruments’’ (that is, generally understood tax principles and benchmarks) to guide flight in the clouds. Still, we think many taxpayers prefer to rely on their instruments than the states’ existing, but in some respects deficient, ‘‘flight plans’’ for cloud transactions and service arrangements.