Talk to your Legislator about the Cloud Tax
Legislators need to hear from you! Think about any expense you have related to something connected to the internet. It could be your cash register or point of sale system, could be an app you use to keep your team organized, or your website. Now that you have that cost in your mind, take 6% of that (7% in some areas of the state), and that is what you’re going to pay if the House passes their Cloud Tax. Please take a moment to reach out to your legislators as well as those on the Senate Committee on Finance and the House Committee on Ways and Means.
- Senate Committee on Finance: thank them for preventing this proposal in past years and urge them to reject it again this year.
- House Committee on Ways and Means: urge them to reconsider this tax, which they have passed many times, as new revenue is unnecessary in a year with historic surpluses and the largest budget in history.
- Your Legislators: explain to them the impact this tax will have on you and your operations. Many legislators are under the impression that what the House passed removed a tax on prewritten software accessed remotely (SaaS), which was characterized as “only what used to come in a box and now is accessed over the internet. The language passed by the House goes much further, taxing SaaS and Platform as a Service and Infrastructure as a Service; the three service types together with makeup 100% of the services you buy on the internet.
If you have more questions or would like assistance in reaching out, please contact our team at [email protected]
More information that might be helpful for your outreach:
- “Isn’t this just a tax on what used to come in a box and was taxed?”
- No, that is a common misconception. To make it simpler to tax, the House Ways and Means Committee decided to expand the definition of prewritten software accessed remotely to include not just software as a service – it also includes platform as a service and infrastructure as a service that never was “in a box” and never taxed.
- “What’s wrong with just taxing what used to come in a box?”
- It’s not just taxing what used to come in a box due to the most recent expanded definitions; however, even if it was restricted to that type of software, in this day and age, prewritten software is increasingly becoming more service-based as it requires more frequent updates, subscriptions, and services.
- “Doesn’t the state need the revenue?”
- This year’s budget is the largest we’ve seen, and the education fund has over $95 million in surplus revenue, with years of surplus revenue becoming the norm.
- “Other states tax this type of service.”
- This is never a good reason to do something. Let’s take, for example, a prominent state that taxes internet services: Washington. Washington State doesn’t have an income tax, so their tax mix looks very different from Vermont’s. Tax mix is an important part of any conversation, and when people compare our state to other states, it is also important to know what those other states are not taxing. Washington State is also the headquarters of some of the largest and most established companies globally; their economy looks very different from Vermont’s.
- “Isn’t this necessary to adapt to a new world?”
- That is not what this is, and if it was, it’s being done in an imprudent way. The Tax Structure Commission did look at and recommend expanding the sales tax to services; however, they cautioned against cherry-picking certain taxes in favor of a comprehensive, holistic change to the tax structure of the state in which all services are taxed and the statewide sales tax is cut in half.
If you have more questions or would like assistance in reaching out, please contact our team at [email protected]