There have been many an article touting the benefits of cloud computing, both in speed, efficiency and cost. However there is one aspect of cost that has maybe been overlooked? Bloomberg Tax brought this interesting news to our attention in their article, “Companies Could See Higher Taxes Under Cloud Computing Rules.”

There are some proposed Internal Revenue Service (IRS) rules on how tech companies should characterize their cloud computing transactions that could subject them to vastly different tax rates—from as high as 30% to little or no tax at all.

The tax rate would depend on how the IRS characterizes cloud computing transactions—those that allow buyers to use a network of remote servers hosted on the internet to store, manage, and process data.

Cloud computing involves taking assets that the company currently owns and leasing it from someone else. What was once a capital expense becomes an operating expense. This is one of the chief cost drivers behind the move to cloud, but it may also come with some baggage.

Melody K. Smith

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