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Tax Regulations

Tax Regulations

The software and gaming industry presents a unique area in which the processes associated with taxation are quite different. In preparing a tax memo for the software that BigA opts to launch in its business practices, some of the most important factors to consider includes intellectual property rights and licenses, consumer protection policies, law associated with age, classification and ratings, gambling legislation, data protection, and privacy, and more essentially, responsibilities concerning staff and employment practices.

In preparing the case, BigA should begin by reflecting on the fundamental monetary aspects involved with the software transactions. These aspects may include copyright laws. As Schmid (2018) notes, copyright law has been influential in shaping the Software Regulations (1998) characterizing software for most U.S. tax purposes. Policies associated with transferring money from different places across the world should also be effectively reviewed to avoid legal prosecution. BigA should also consider using the Organization for Economic Cooperation and Development (OECD) as a tool of reference when drafting its tax memo. OECD fosters profound Software Regulations commentary that can be applied to identify the facet involved with international tax analysis. OECD also reflects on complex issues of software revenue characterization that are particularly essential for the interpretation of international taxation rules and, more essentially, how they relate to U.S. tax laws and regulations.


Schmid, P. F. (2018). The Tax Regulations Making Process—Then and Now. The Tax Lawyer, 541-549.


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Discussion Question #2: Tax Regulations

BigA, Inc., is an auto parts wholesaler selling parts to companies like AutoZone, O’Reilly, and PepBoys. As you are aware, this industry is highly competitive. Three years ago, BigA decided to develop a new software program that maintains customer history files, creates paperless billing, has automatic order generation based on register data from local stores, and monitors inventory balances at each local store.

Tax Regulations

Tax Regulations

BigA estimates it has spent $5 million on the development and testing of the new software and believes the software is ready to be used. BigA also believes the new software is so good that it will be able to sell the use of the software to other wholesalers. BigA wants to know what possible credits are available as it completes its 2011 tax return and if there are any reasons to delay the marketing of this software.

For discussion: Critically examine the tax code, regulations, and case law needed to prepare a tax memo. Drawing from your research, how you would approach application of tools to prepare your case?

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