Will Cloud Computing Start Being Taxed by Government?

Grazed from Midsize Insider. Author: Chrissie Klinger.

A lot of businesses are using cloud services in an effort to save money. Some businesses, though, are starting to realize how much money cloud computing could cost them if the government started taxing everything they were doing in the cloud. WBUR reported that Massachusetts’ top tax official, Amy Pitter, stated the ‘cloud’ is an "evolving area of the law." A recent public letter signed by Pitter described the state’s policies on which cloud services are taxable and which are not. Fortunately for businesses, storing data in the cloud on services like iCloud and Google Docs, is currently not considered taxable in Massachusetts, but what about other states?

Last year at this time only a handful of states were even looking at taxing any cloud related product or service, now more than half of the 50 U.S. states are exploring how to tax cloud services, including SaaS. At this time, the U.S. government expects cloud services to fall under current tax laws, allowing each state to determine tax implications and guidelines. Unfortunately, as states start to develop guidelines they are beginning to realize this might lead to new federal laws and regulations due to the complexity of cloud computing…

The land of the free isn’t the only one questioning whether the government should be making money from the cloud. China, Mexico, Canada, and a handful of countries in Europe also are trying to determine if the current tax laws are sufficient or if new, more specific laws are needed for cloud services. For businesses that operate in various locations and are moving more and more of their business to the cloud, this is definitely something they will need to take into consideration.

As for midsize IT professionals, it will likely become their responsibility to determine which cloud services are most cost-effective to use in the state where their company operates. As ITs help their companies choose cloud products and services for cost-saving measures, they will also need to consider future tax implications and costs as well. Hopefully, since so many states and countries are struggling with how to tax the cloud, there will be help for businesses and IT professionals in the next few years from the government concerning this issue. The reality is that many smart businesses will think about what Benjamin Franklin once said, "Nothing is certain except death and taxes." They will make a plan that involves cloud services being taxed, and, in the long run, they will likely be the ones to escape death a little longer.