Gov. Peter Shumlin says he will sign legislation that imposes the state sales tax on cloud computing software beginning in the summer of 2013, but he says he will try to persuade lawmakers next year to drop this tax before it goes into effect.
If a business buys and downloads a computer software program, they pay the state sales tax, but until recently, if the same company purchased access to the software on a cloud computing network, the sales tax was not imposed.
But the Tax Department decided that there was little difference between downloading a program and using the cloud and it sent retroactive tax bills with penalties to a number of businesses.
When many of the businesses strongly complained about the imposition of the tax and the penalties, lawmakers got involved.
Under the bill, all the businesses that made a payment will get a refund and there will be a moratorium on imposing the tax until July of 2013.
Shumlin wanted lawmakers to totally eliminate the tax.
"Why can’t Vermont for once have a tax advantage, a competitive advantage over other states who are imposing these taxes on the clouds and grow jobs and economic opportunities – be known as the tax free cloud state that is encouraging high tech job growth," Shumlin said on VPR’s Vermont Edition Friday.
Shumlin says he’ll sign bill when it reaches his desk because it contains other important business tax credits, and he made it clear that this is a battle that he’ll fight again next year if he’s re-elected.
"I don’t want to see us pass it at all. I would like to have had a ban on cloud taxing in Vermont," said Shumlin. "The Legislature decided to not charge folks that were previously charged by the tax administration and not to not tax at least for another year. I’ll be pushing next year to extend that."
Both the House and Senate are expected to pass the compromise tax bill by Saturday.