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8/3/2019 SST Governing Board Meeting, Cloud Computing for Streamline (Oct. 6, 2011)
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Washington Tax Law and Cloud
Computing
Caleb Allen (WA DOR)
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Cloud Computing Issues
WA law addressing cloud computing issues.
Three important issues around cloud computing:
Taxability
How WA law addresses cloud computing and other digital
products transactions.
Sourcing
How WA law addresses sourcing of digital products
transactions including some cloud computing services. Nexus
How WA law addresses two specific nexus scenarios related to
cloud computing.
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Taxability
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Washington Law
Digital products law addresses items
transferred electronically:
Digital goods
Digital codes
Digital automated services (DAS)
Remote access software (RAS)
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Digital Goods
Digital goods
SSUTA: digital books, music, and video.
Washington: sounds, images, data, facts or
information or any combination thereof
E.g. digital picture, lawn mower engine diagram etc.
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Digital Codes
Provides 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.
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Remote Access Software
Washington taxes prewritten software
Delivered on tangible media
Digitally delivered
Remotely accessed.
Remotely accessed software (RAS):
Charges for the right to access and use prewritten
software where possession is maintained by seller
Regardless of whether the charges for the service is per
user, use, license, subscription or other basis.
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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 models
Rapid change in and technology
Rapid change could make digital good and remote access software
categories obsolete.
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Evolution: Software into Services
T1-Gaming software purchased on a CD in a store TPP = RST
T2-Gaming software accessed online:
Remote access software = RST T3 Gaming software accessed online PLUS other
services: Real time multiplayer functionality
Chat rooms World wide tournaments, etc
DAS = RST
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Example 2: Digital Good into Services
T1-Music purchased on CD in store
TPP = RST
T2-Music accessed/streaming online:
Digital good = RST
T3-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 usingsoftware tools.
DAS = RST
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Digital Automated Services Defined
Definition:
any service transferred electronically that uses oneor more software applications
Definition encompasses many services includingsome cloud services:
E.g. Computers remotely accessed, controlled,configured etc by software layer.
Also includes other services provided in thecloud:
E.g. Online searchable database.
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Sample Exclusions from DAS
Broad imposition makes exclusions from DASimportant.
Protect WA business models (e.g. server farms)
Hosting, storage and back up. Preserve existing industry tax treatment
Data processing.
Telecommunications & internet access.
Tax neutrality for online and offline activities Primarily human effort (e.g. electronic contract sent via
email)
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How it Fits Together
Digital Automated
Services
Remote Access
Software Digital Goods
Books,
music,
video,
data, facts,
information
Software Service that use software
The Cloud
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Sourcing
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Sourcing
SSUTA general rule in WA applied to DAS/RAS/DG Business location
Store location (not generally relevant for DAS/RAS/DG?)
Place of receipt
E.g. physical shipping address (available for DAS/RAS/DG?) Address in business records
E.g. accounts receivable address, address in contract.
Address from sale E.g. Credit card billing address usually available and generally
works blind form of payment (e.g. PayPal) no address?
Origin sourcing Server location may be unknown or movable.
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Nexus & Summary
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Nexus Safe Harbors
These 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 sellers behalf:
display of advertising, order taking or
payment processing.
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Summary
Taxability: 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.