It’s an interesting issue as typically cloud services cost more than traditional licensing, but they ultimately reduce total cost by reducing the amount of labor they require to implement and maintain, as well as reducing hardware costs. Labor, of course, isn’t subject to use tax, whereas the software licensing these service displace is. Maybe a middle ground would be to implement a 50% tax credit off the current use tax rates for these services.

This sounds just like the unfair playing field of Amazon.com versus your local downtown bookstore. Why is the governor picking winners and losers within the software products / services industry?

http://vtdigger.org/2011/02/07/tax-reform-part-3-why-the-%E2%80%9Camazon-tax%E2%80%9D-is-a-no-brainer/

Right now, if I buy a software package via download and install it on my computer, I am supposed to pay a USE TAX.

But if I instead use a web-based software service (my data is stored in the “cloud” instead of my PC), then I would not have to pay any tax or fee. Actually, right now, it doesn’t appear that there is any tax or fee, since cloud-based services are sort of new (actually, the name is new, but not the concept), and the Legislature has not dealt with this yet.

And, if the cloud-based service company puts there servers in the Cayman Islands, they won’t have to pay any taxes either!!!

Either drop the USE tax for downloadable software or don’t give any exemption to cloud-based services.

As an IT worker for 30 years, there is no such thing as a “cloud”. It’s just a remote server or data center with file storage space, databases and applications (just like mainframe data centers decades ago). Yet another techno buzzword … there is really nothing new under the sun, and that includes IT!

Amazon.com is an online retailer, but it is also like a cloud based service: they have databases on books (and other items for sale) and they also have your purchase data, contact data, credit card data on file. They provide a software service that allows you to find and purchase books.

If Vermont wanted to tax Amazon.com, then why give an exemption to the other online services.

Indeed, the subsidy seems to encourage VT businesses with IT expenses to send that money out of state.

I will check the VT Digger archives for some dirt on last year’s “extensive testimony,” I am definitely interested in learning more about the logic and politics behind this.