The “Cloud Tax” is Back! (And You Won’t Believe Where….)

For years, legislators on the left have been eager to tax so called “cloud” services, or, as the legal language refers to them, “specified digital products transferred electronically to an end user regardless of whether for permanent use or less than permanent use and regardless of whether or not conditioned upon continued payment from the purchaser; or - … vendor-hosted prewritten computer software and the right to access and use vendor-hosted prewritten computer software to perform data processing services.”

In English, think Spotify, Pandora, TurboTax, Adobe products, Microsoft Office, Netfilx, Hulu, etc. and so on ad infinitum.

All these things, should this pass, will cost Vermonters 6 percent more to use (7 percent in places with a local option tax), amounting to annual overall tax increases of $11, $12, and $14 million over 2023, 2024, and 2025.

This is a first step toward expanding Vermont’s sales tax to all services, as recently recommended by the Vermont Tax Commission.

This is the injury. The insult is where this little tax increase language has been tacked on: S.53 – An act relating to exempting feminine hygiene products from the Vermont Sales and Use Tax.

S.53, as passed by the senate, was a “clean” bill simply removing the sales tax from purchases of feminine hygiene products. Good thing! We favor fewer taxes, and this is no exception. But now the house is loading up this bill with other provisions that will result in a significant overall tax INCREASE on Vermonters. Not just the “cloud” service tax, but also an overhaul of Vermont’s corporate tax structure (overall, bad), and an income tax exemption for the first $10,000 of military pensions (good).

So, what do feminine hygiene products have to do with Netflix, military pensions, and corporate tax rates? Nothing. The issues should be treated either separately or as parts of different bills. Don’t let the politicians use the cover of good tax decreases on feminine products and military pensions to hide the stink of two major tax increases on Vermonters.  

- Rob Roper is president of the Ethan Allen Institute. 


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