Cloud Computing Tax Rules Need Changes, Industry Groups Say

An IRS proposal to change how companies source cloud computing transactions is ambiguous and burdensome, industry groups said.

Proposed regulations (REG-130700-14) under tax code Section 861 update existing rules on classifying transactions under Section 861-18, which were introduced in 1998 and updated in July. The regulations also introduce Section 861-19, which guides companies in determining whether to classify their cloud transactions and digital content access as a provision of services or a lease of property.

Cloud computing allows buyers to use a network of remote servers hosted on the internet to store, manage, and process data. The proposed ...