Cloud Tax Update

Cloud Tax Update

September 18

With an upcoming presidential election, our minds are on any number of topics from health care, to human rights, to the oldest and probably most common topic, taxes.

In a previous post, I began to examine the possibilities and potential threats of cloud tax in the world of cloud computing. While there is little new information regarding hard and fast laws, there are many opinions about how best to approach taxes in the cloud computing landscape.

According to a recent article on Infoworld, there are varying opinions when it comes to the government’s authority to tax the cloud at all, but at this point, there are no firm laws, regulations, or court precedents to provide any definite answers about whether cloud computing can be taxed, how it could be taxed, or for how much.

While the answer to whether to taxes will be put in place or not is up in the air, the fact is that businesses saving money with cloud migration and cloud services could suffer losses should taxes wipe these initial savings out.

The Infoworld article mentions that in the early nineties, online ecommerce was not taxed, though the Federal Government had intentions to do so in the future. The moratorium the government placed on ecommerce taxing allowed for the industry to grow and expand without government interference. The same might be true of cloud computing.

According to a recent episode of Bloomberg Government’s Capital Impact, internet taxes in general are quite confusing. While sales tax is added to purchases of CD or downloaded versions of software, online versions are not currently taxed. While this falls under the category of Software as a Service (SaaS), it’s not currently being taxed as a service (something that falls on individual states to decide).

Currently, Congress has a bill in circulation regarding downloaded goods that says online taxing cannot be multiple or discriminatory, meaning that a CD you buy at the store will be taxed the same as its digital counterpart online, but congress has done very little if anything with regard to taxing the cloud.

For now, there is no firm cloud tax protocol in place, so cloud computing can continue to grow and proliferate without interference from Big Brother.  Cloud businesses (at least for now) have the opportunity to grow and build a firm foundation, develop more benefits, and more cost-effective options before the government steps in to share in the profits.