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State Taxes in the Digital Economy: From Digital Services to Blockchain Technologies

Determining When and Where Your Services and Products Trigger Liability

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A

This program is included with the Strafford CPE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
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Thursday, April 18, 2024 (in 5 days)

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

or call 1-800-926-7926

This course will provide guidance to corporate tax professionals, counsel, and advisers for navigating the various and evolving standards of state taxability of digital products and services, including emerging issues regarding taxes on blockchain technologies, to determine what component of a company's offering is taxable and in which jurisdiction(s).

Description

State tax advisers and companies providing various digital services, including AI and data processing services, digital products and services, cloud products and services, and blockchain products, face special challenges in determining how and where their products and services will be taxed. Individual states have numerous approaches regarding taxes on IT and digital services and products. Some individual states have specific statutes and rules aimed at determining what products and services each state taxes; however, these state rules may conflict with other states' practices.

Among the challenges providers face in assessing whether they will be subject to transaction taxes in a particular state is defining what product or service they are providing in that transaction. This is particularly true where the transaction has bundled elements. If the "true object" of the item sold is included in a state's definition of taxable products or services, then the sale likely is subject to transaction tax. In most jurisdictions, including a taxable product or service in a bundle with an otherwise nontaxable service may make the entire transaction taxable.

The U.S. Supreme Court's decision in South Dakota v. Wayfair has given the states more power to tax digital services. That, combined with the advent of employees working from home, presents challenges to the practitioner in determining the states in which an IT company has tax obligations.

Listen as our experienced panel discusses the various challenges of determining the taxability of IT services and products; explains the challenges, problems, and solutions regarding sourcing/nexus/bundled pricing; and reviews best practices for structuring contracts and transactions to segregate taxable from nontaxable services and products.

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Outline

  1. General approach to analysis of IT service contracts in the face of divergent state tax laws, including six questions:
    1. What is the product or service?
    2. Is it a bundled product or service?
    3. To what state(s) is the product sourced?
    4. Does the state tax the product sourced?
    5. Do exemptions or direct pay permits apply?
    6. Does the provider have nexus with the state where the service is sourced?
  2. Approaches regarding digital products and services: taxability and sourcing
    1. The WA law
    2. The SSUTA approach
    3. Texas law
  3. Blockchain:
    1. Are the products subject to sales tax?
    2. Sourcing of products

Benefits

The panel will review these and other key issues:

  • What approaches are states taking to define the nature of IT products or services for purposes of determining taxability for sales and use tax?
  • How do various states address whether installing servers or software would make otherwise nontaxable IT services subject to state sales and use tax?
  • How do the various states treat digital products and services?
  • What are applicable principles regarding blockchain products?

Faculty

Swetnam-Burland, David
David Swetnam-Burland

Partner
Brann & Isaacson

Mr. Swetnam-Burland regularly represents Brann & Isaacson’s business clients, including over a dozen of the...  |  Read More

Szal, Jamie
Jamie E. T. Szal

Partner
Brann & Isaacson

Ms. Szal focuses her practice on assisting businesses in all aspects of state and local tax controversy, from...  |  Read More

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