[oziman]

This is a new one - my accountant says that having a web server in another state can make us liable for business income tax in that state for income tax (not referring here to sales & use).

I did some preliminary research and:

There's an article on infoworld going back 6 years that talks about Jersey going after someone who had servers in an Exodus data center, and that if he had leased, as opposed to owning the boxes, it wouldn't have been an issue.

Most of the other stuff is about sales and use tax, and since affiliates don't actually sell anything, I'm not so worried.

Anyway, I would love to hear what people have to say about this - if they've had an issue or what not...

[Chuck Hamrick]

I would call the IRS, they have fully staffed toll free numbers for questions like that.

[AffiliateHound]

I would call the IRS, they have fully staffed toll free numbers for questions like that.Many studies have shown that you cannot rely on the IRS to give out correct information. I know there are more recent examples, but all I can find now is this one (http://query.nytimes.com/gst/fullpage.html?res=9402E0DD1730F932A05751C1A9679C8B63&n=Top/Reference/Times%20Topics/Organizations/G/Government%20Accountability%20Office):
About 25 percent of the time, customers asking about tax law were given wrong information. About 12 percent of the time, customers asking about their account were given wrong information.

[Chuck Hamrick]

Its a start, I wouldn't call the tax preparation line. Perhaps the business assistance line: http://www.irs.gov/help/article/0,,id=96730,00.html

[Alan Hamilton]

This is a new one - my accountant says that having a web server in another state can make us liable for business income tax in that state (not referring here to sales & use).

Is your account a licensed / Certified Public Accountant? If so, have him / her provide you with the exact IRS tax info that specifically lays out the guidelines on this. My guess is that this is not necessarily true, but I am not a CPA. Either way, I would not rely on the IRS help desk to provide the best or most applicable / useful answer. These things are best answered by a CPA as they work for YOU and your business interests, not the IRS.