Massachusetts Looks to Tax Cloud Computing

Massachusetts legislature is considering a new tax proposal to help boost state spending by $1.9 billion – taxing cloud computing services.

According to Forbes, the fiscal 2014 budget includes a $265 million line item that, if accepted, will see sales taxes expanded to include broadly worded “canned software.” The tax would cover custom-designed software and services hosted on the Internet (Cloud). “Custom” software, Forbes reports, would include the design and custom development of websites – increasing new website creation costs by 4.5 percent.

Recently, the U.S. Senate supported a non-binding vote of approval (75/24) for a law that would allow states to collect taxes from Internet retailers.

However, Massachusetts’ broadly worked proposal could include taxing the Web hosting of a yoga studio’s custom website, as well as any data backed up on the cloud. Music and e-books would not be included.

The tax would not come without its fair share of potential problems, including jurisdictional issues – Cloud services are often available in more than one state or have physical facilities in multiple states.

At least 14 other states tax the cloud explicitly, the article states. Another 14 states have taxes that cover some aspects of cloud-based services, such as the transfer of control or possession of software.

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