Detailed Arkansas Development
The Arkansas Department of Finance and Administration recently addressed the taxability of a company’s cloud-based networking service. The company was selling a cloud-based software application networking service that allowed customers to optimize their internet usage. The software’s features included monitoring and reporting on a customer’s internet service provider’s performance, applying the customer’s unique service preferences, and directing customer internet traffic based on real-time usage and diagnostics. While customers were provided with hardware, ownership of the hardware was maintained by the taxpayer and the temporary transfer was treated as a rental subject to sales and use tax. With regard to the company’s cloud-based networking service, the Department first determined that the company’s customers were not receiving software in a tangible form and were merely operating the software online. Under Arkansas law, providing access to, and use of, software over the internet is not a specifically enumerated taxable service. Therefore, Arkansas sales and use tax did not apply to the company’s software application. For more information on Opinion No. 202000903 please contact Michael Andruchek.
This Week's Developments