Changes in U.S. tax laws also impact various cross-border U.S. taxpayers, and although it is easy to keep track of federal tax laws, state tax laws are often not given similar importance. However, state tax laws are equally important for U.S. resident taxpayers and cross-border taxpayers, especially if they are carrying out business activities in a particular U.S. state.
State Sales Tax Ruling on Cloud Computing
In a letter ruling issued May 31, 2012 (SUT 12-001), the Pennsylvania Department of Revenue appears to have changed its position regarding the taxability of receipts from software accessed remotely. In prior guidance, the Department of Revenue took the position that software accessed solely through the internet (cloud computing) would not be considered taxable in Pennsylvania if the server where the software was stored did not reside in Pennsylvania.
New Sales Tax Guidance
In the recent letter ruling, the State offers only two alternative definitions of cloud computing. Those are where a taxpayer pays for software made available at no charge in the cloud to its employees and where a taxpayer installs software on its servers that can be accessed by its customers on either a subscription or pay per use fee.
In reality, there are several iterations of the methods used to configure access to software, processing and storage capacity within the cloud, as well as how those services are charged. The intent of the Department appears to cover how taxable canned software charges will be sourced for sales tax purposes. Under the new rules, if the physical location of, or the billing address of, the user is in the State; the presumption is that the charges for the use of the software will be taxable in Pennsylvania.
AG TAX LLP Can Help
If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
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