Case Study: Server Warehousing

Abstract

Classification of technological services is crucial to the regulation of VAT implications of technological services. VAT implications pertinent to each type of hosting are dictated by the particularities of the hosting arrangement. In shared hosting the client ‘rents’ pure virtual storage space shared by multiple users. The client may not change the core technologies, but may store any form of data and may download or install software provided that such installation conforms with the storage restrictions applicable to the ‘shared hosting’ server. The dedicated server is a form of virtual ‘safety deposit box’ in respect of which the physical server equipment is merely a device which facilitates the provision of secure virtual storage. Colocation is merely the ‘parking lot’ for fully owned servers. The prime focus of this Case Study is to discuss in detail the distinguishing features of the diverse types of ‘server hosting’ and the relative VAT implications which are contingent upon the defining features of each classification. Furthermore, this Case Study makes clear the practicality and effectiveness of VAT application in eCommerce. In every circumstance discussed in this Case Study VAT/GST was levied at a standard rate in only a single jurisdiction and the raison d’étre for no levy in any jurisdiction was that the supply was specifically exempt or excluded from the VAT/GST net for administrative purposes, and not because of inability to effectively apply VAT/GST provisions.