intellectual property, tax, taxation, tax policy, internet, domain names, generic domain names, cyberlaw, cyberassets, patents, trade secrets, trademarks, trade names, computer software, software, property right, government licenses, service contracts, intangible property, goodwill

Document Type



Current, albeit arbitrary, rules exist governing the tax treatment of traditional forms of intellectual property, such as patents, trade secrets, copyrights, trademarks, and trade names. While tax principles exist for these traditional intellectual property and intangible rights, specific tax rules do not exist for new intellectual property rights, such as domain names, that are emerging with the arrival of global electronic commerce transactions on the Internet. This article explores the proper tax treatment of domain name registration and acquisition costs, addressing these parallel questions? Are domain names merely variations of traditional forms of intellectual property and other intangible rights to which the existing tax regime can be applied? Or are domain names new intangible rights that need their own set of tax laws?

The article explains the rise of valuable domain names as a new intellectual property right having uncertain tax consequences. It analyzes the historical and current tax rules governing traditional intellectual property and other intangible rights. It then examines the legal nature of domain names to determine whether they can readily fit within the current tax regime for intangible rights. The article also explores whether domain names should be treated for tax purposes as governmental licenses, service contracts, or intangible property; and, if treated as property, whether domain names can be classified within a category of intangible property covered by existing tax principles, specifically goodwill and trademarks.

The article concludes that domain names that function as source identifiers should be treated under the current tax regime applicable to trademarks, so that costs of acquiring such domain names should be recovered ratably over fifteen years. Generic domain names, in contrast, possess “inherent” goodwill not dealt with by the existing intangible tax regime. The disparate treatment between domain names functioning as source identifiers and generic domain names illustrates the inadequacies of tax law in dealing with the expansion of intellectual property rights for existing intangible assets as well as the emergence of new intellectual property rights. The article criticizes the ad hoc response by administrative tax agencies in dealing with cyber-assets, and calls for Congress to revisit the current tax regime for intangibles. With the increase of global, electronic commerce transactions on the Internet, the nature of cyberspace will undoubtedly require new tax rules.



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