Taxing the Cloud

66 Pages Posted: 3 Apr 2014 Last revised: 13 Feb 2019

See all articles by Orly Mazur

Orly Mazur

Southern Methodist University - Dedman School of Law

Date Written: April 2, 2014

Abstract

Transacting business in the “cloud” has quickly gained popularity worldwide as the new method of providing information technology resources. Instead of purchasing or downloading software, we can now use the Internet to access software and other fundamental computing resources located on remote computer networks operated by third parties. These transactions offer companies lower operating costs, increased scalability and improved reliability, but also give rise to a host of international tax issues. Despite the rapid growth and prevalent use of cloud computing, U.S. taxation of international cloud computing transactions has yet to receive significant scholarly attention. This Article seeks to fill that void by analyzing the U.S. tax implications of operating in the cloud from a doctrinal and policy perspective. Such an analysis shows that the technological advances associated with the cloud put pressure on traditional U.S. federal income tax principles, which creates uncertainty, compliance burdens and liability risks for companies and a potential loss of revenue for the government. Applying the current law to cloud computing transactions also results in tax consequences that run counter to sound tax policy and may result in double taxation or complete non-taxation of cloud income. In light of these problems, federal attention is warranted to clarify how U.S. federal income tax principles apply to businesses operating in the cloud. Thus, this Article proposes that Treasury issue guidance that clearly addresses the U.S. tax implications of international cloud computing services and suggests that, ultimately, the United States must collaborate with other countries to achieve international consensus on these issues. Together these changes will ensure that the United States appropriately taxes the cloud and does so in a manner that minimizes double taxation and promotes efficiency, equity and administrative simplicity.

Keywords: tax, international, cloud computing, technology

Suggested Citation

Mazur, Orly, Taxing the Cloud (April 2, 2014). SMU Dedman School of Law Legal Studies Research Paper No. 135, California Law Review, Vol. 103, No. 1, 2015, Available at SSRN: https://ssrn.com/abstract=2419644 or http://dx.doi.org/10.2139/ssrn.2419644

Orly Mazur (Contact Author)

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

HOME PAGE: https://www.smu.edu/Law/Faculty/Profiles/Mazur-Orly

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