Lawmakers Enter Vermont’s Cloud Tax Debate

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Lawmakers are weighing in on the debate about whether Vermont should continue to charge a sales tax on products sold remotely via the Internet, or the cloud.

Some lawmakers say that if the state drops that tax, it could stand to lose much-needed future revenue.

VPR’s Kirk Carapezza reports.

(Carapezza) Two years ago, Vermont began imposing its six percent sales tax on transactions conducted "in the cloud." That’s the newest way of describing transactions that are actually conducted on servers that might be located thousands of miles away.

Business leaders say the tax was improperly imposed administratively and they want it rescinded. So, lawmakers are debating whether the state should exempt cloud computing from the sales tax – and refund $2 million that’s already been paid.

(Ancel) "I think we’re probably inclined toward wiping the slate clean."

(Carapezza) Janet Ancel is chair of the House Ways and Means Committee, which is considering the issue. She says the state could offer a refund for anyone who’s paid the tax, but her committee hasn’t yet heard a compelling argument for exempting cloud computing from the sales tax. She says this is a fluid area of tax law.

(Ancel) "There are very few states that have legislatively decided either to tax it or exempt it. And several of them – Massachusetts and New York, for example, which are our neighbors – have decided to subject it the sales tax."

(Carapezza) If the sales tax were waived for these transactions, the Ways and Means Committee estimates it could cost the state at least $1.7 million each year.

At the heart of this issue, though, is the definition of tangible personal property. Under current law, personal property includes, for example, your personal library, both on your bookshelf and on your Kindle.

Business leaders like Frank Cioffi say the tax on the cloud prevents the state’s tech-sector from growing.

(Cioffi) "We’re very concerned that this is really regressive, broad-based tax that will affect employment in some of the fastest growing businesses in the state."

(Carapezza) Cioffi is president of the Greater Burlington Industrial Corporation, and he says the bill before the Ways and Means Committee marks an opportunity for the Legislature and the Shumlin administration to correct an outstanding error.

(Cioffi) "And focus on attracting and growing really, really good technology-based jobs in the state of Vermont. We should be flipping the coin here and looking at what the opportunity is for the state to continue to grow clean, knowledge based jobs in Vermont."

(Carapezza) Lawmakers say they’re not convinced that the sales tax on products sold via the cloud has put the state at a disadvantage, and they say Vermont already provides enough incentives through economic development programs and tax credits.

For VPR News, I’m Kirk Carapezza

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