Since the issuance of the original -18 Regulations in October 1998, the digital economy has evolved significantly. Floppy disks and downloads of content to our personal computers are no longer the principal means of delivering and accessing digital resources. Cloud computing is mainstream. Now pervasive, cloud computing affects many aspects of our digital experience at work and at home.
Part 1 of this series on the tax classification of digital transactions addressed the classification of transactions involving computer programs and digital content. Under the existing and proposed guidance from the Treasury and Internal Revenue Service (“IRS”), the transfer of digital content is generally classified as a sale, lease, license, or provision of services and know-how for U.S. federal income tax (“FIT”) purposes.
Part 2 of this two-part series discusses the August 2019 Proposed Regulations on the classification of “cloud transactions” and their impact on multinational businesses and investments. Click here to download the material.