Online Card Processing Fees Do Not Qualify for Section 199 Deduction

[...]the IRS concluded that the merchant-acquiring services "are a form ofbanking services and the provision of such services online constitutes the provision ofonline banking services'" that are described in Reg. 1.199-3(i)(6)(ii).[...]the IRS concluded that Taxpayer had incorrectly...

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Bibliographic Details
Published in:Journal of Taxation 2018-01, Vol.128 (1), p.38-39
Main Authors: st, David L, Geils, Edwin, Grais, Susan M, Hodges, Charles E
Format: Article
Language:English
Subjects:
Banking
Credit card processing
Customer services
Electronic banking
Fees & charges
Internet
Software
Taxpayers
Technical advice memoranda
Third party
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Summary:[...]the IRS concluded that the merchant-acquiring services "are a form ofbanking services and the provision of such services online constitutes the provision ofonline banking services'" that are described in Reg. 1.199-3(i)(6)(ii).[...]the IRS concluded that Taxpayer had incorrectly interpreted and applied the third-party comparable exception by failing to first establish that it had gross receipts from a deemed disposition of the Platform (i.e., gross receipts from customers' access and direct use of the Platform while connected to the Internet).[...]the IRS concluded, even assuming that Taxpayer derived the merchant discount fees from providing merchants with access to the Platform for the merchants' direct use, the fees would still not come within the thirdparty comparable exception since, according to the IRS, the comparable software proffered by Taxpayer was not substantially identical software because the software did not have the same functional result from the customers' perspective.
ISSN:0022-4863