Vermont Tax Panel Votes Against Taxing Cloud Services

A Vermont tax study committee comprised of state tax officials, lawmakers, and members of the business community has voted against the taxation of cloud computing services.

The panel was split on the matter, voting 4-3 on December 17 to exempt cloud computing from state taxes. Those in favor of taxation pointed to the lost revenue, which could total $2 million in the first year alone.

Forbes recently ranked Vermont near the bottom of its "Best States for Business" list, at number 44. It has the smallest economy in the nation and weak job prospects.  Members of the tax panel against taxation argued that "the economic benefits of an exemption would outweigh lost tax revenue, by keeping businesses, jobs, and especially software companies in the state." (vtdigger.org).

Furthermore, there is a lack of clarity around cloud computing. Vermont Tax Commissioner Mary Peterson noted that committee members could not agree on "whether cloud computing is a service or a good... ." She and others "prefer to wait for consensus from national organizations."

A moratorium on the taxation of cloud computing services, broadly defined as "computing services accessed off site," is set to expire in July, 2013. The Vermont Legislature "must decide this year whether to let the moratorium expire or make the cloud computing exemption permanent." If the lawmakers approve the committee recommendation, the moratorium would essentially become permanent. (VPR).

The panel was also tasked with deciding whether or not services should be subject to the state sales and use tax. It unanimously recommended not taxing services.