Do you know what cloud computing is? Cloud computing is the use of hosted comput

Question

Do you know what cloud computing is? Cloud computing is the use of hosted computer facilities through the Internet. Gmail, RIA Checkpoint, and even your iphone are some applications of cloud computing.

a. If HP provides a customized bundle of servers, storage, network and security software, and business application software to a customer in Washington State, how is it taxed?

b. Is HP leasing tangible personal property, which is taxable, or providing a nontaxable service?

c. Is the buyer of HP's product subject to Washington sales and use tax?

d. Is HP subject to Washington's B&O tax?

Explanation / Answer

If you’re buying or selling cloud computing services, it is critical to determine what you’re buying or selling. You may be leasing equipment, making service payments, or paying a license for using software — these distinctions are important and can have an impact on your company’s tax filings. Current tax law does not necessarily reflect the realities of cloud computing. Cloud computing transactions aren’t quite leases and aren’t quite services, but tax law requires them to be classified in one of these two categories. Eventually, tax regulations will be updated and clarified. Now, there isn’t enough consensus.

To deal with these issues, Washington state changed its laws in 2009 to deal with the shift, the report said. The state now requires that Washington residents pay state tax regardless of how their goods are delivered

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