Cloud Computing: Revenue Departments' Cloudy Minds Lead to Inappropriate Assessments

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

In what is the first of a three-part series discussing the approach of state revenue departments toward the classification of cloud computing for sales and use tax purposes, authors Arthur Rosen, Leah Robinson and Hayes Holderness, of McDermott Will & Emery LLP, take direct aim at agency disregard of the relevant statutory authorities. Starting with Arizona, Colorado, Indiana and Massachusetts, the authors examine the taxability of transactions that provide traditional and newly developed services to customers through the Internet. In Parts II and III, the authors complete their survey of the states and discuss New York sourcing rules plus positive developments in New Jersey and Idaho.