The Vermont Tax Department is getting ready to issue refund checks to businesses that have paid the "cloud computing" tax over the past few years.
One of the big tax issues of the 2012 session involved the imposition of the state sales tax on services that businesses receive online from remote servers.
The Tax Department determined that these services fall under the jurisdiction of the sales tax and it sent tax bills to a number of companies. But lawmakers disagreed with this policy and they instructed the Tax Department to issue full refunds.
The Legislature also called for a special study of this issue and it placed a one-year moratorium on the tax.
Tax Commissioner Mary Peterson says her department doesn’t know the names of all the affected businesses so it’s asking companies that paid the tax to request a refund.
"They’ll be able to file for a refund request which is an ordinary procedure that we have and it will just be a matter of documenting that it was indeed a cloud purchase and not a purchase of software that was downloaded on their computer or on a disc."
Peterson says it’s critical to study this issue because she thinks it represents the technology of the future:
"So definitely we’re moving more to that type of model and that’s one of the things that the Legislature and the two studies that they set up really want to take a look at."
Trevor Crist is the president of Inntopia. It’s a Stowe-based business that provides online reservation services for the travel industry. He has 15 employees.
His company received a $96,000 sales tax bill from the state. Inntopia appealed and isn’t eligible for a refund because the company didn’t make a payment while the case was under appeal. Crist doesn’t think that this is an issue necessarily of new technologies.
"The problem isn’t so much that we’re trying to tax things that were taxed previously and are now moving to the cloud," said Crist. "The problem is it opens a big can of worms for a lot of services that have never been taxed before."
Crist says he’ll definitely urge the 2013 Legislature to extend the moratorium.
"This is an opportunity for Vermont to have a competitive advantage in attracting tech businesses." Crist added, "It does impact tech businesses more so than others and anything that we can do to attract technology jobs is a good thing for our economy."
Governor Peter Shumlin agrees with Crist and says he’ll ask the Legislature next year to totally eliminate the tax if he’s re-elected.