With a name as nebulous as ‘The Cloud,’ it isn’t any wonder that applying multiple complex tax schemes to cloud services can quickly expand into a storm of issues for any business. Huge global opportunities lie in the cloud, as discussed in our earlier publications. But too often the potential tax repercussions of a cloud infrastructure strategy are overlooked or not sufficiently considered until it’s too late. A company can be blindsided by unintended tax assessments.
The amorphous term ‘cloud’ is truly appropriate. Electronic services and applications provided on the cloud are drawn from providers everywhere; data is kept on remote servers located in distant locales; and end products can be consumed anywhere — one of the fundamental strengths of the entire system. However, it is exactly this strength that creates the complexity around taxing it. So how do we apply tax rules to something that is difficult to define and even locate in today’s digital environment? Where do we start?