Cloud storage companies facing taxation in more states

By Sonian
In Channel
September 20, 2013
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Sonian Marketing / Sonian

The threat of taxation has been hovering over cloud storage companies throughout the country lately, and recent reports are not likely to assuage the fears of this forward-thinking sector. Within the last few months, more states have been considering rewriting service tax laws to extract revenue from cloud companies, according to Tax Analysts, a nonprofit organization.  

The difficulty many states face, however, lies in the wording of such laws. Varying bills have labeled cloud computing as both a ‘good’ and a ‘service,’ leaving businesses, consumers, and lawmakers confused as to how to legally approach taxation in the industry. Tax Analysts quoted Dylan Waits of the Washington Department of Revenue, who recommended that consumers “pay attention to Cloud Service Agreements (CSAs) which outline exactly what you are buying and how that fits into a state’s tax structure.” 

Meanwhile, tech companies that focus on cloud computing have vehemently resisted laws proposing taxation of their services. A September article from Crain’s Detroit Business reveals that if such a bill were passed, the locally-based Covisint Corp. would probably leave Michigan for a cloud tax-free state. Paul Davis, CEO of Boston’s Intelligent Integration Systems Inc., said in a WBUR radio interview that a sales tax on his company’s services would be “untenable.” Considering that the future of technology will probably rely more heavily on cloud computing companies, perhaps it’s time lawmakers started taking these threats seriously. 

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