House panel considers cloud computing tax issue

AP for VCStar.com writes: The Idaho House Revenue and Taxation Committee has agreed to introduce legislation to clarify that cloud computing services delivered over the Internet aren't tangible goods subject to sales tax.

The Spokesman-Review reports (http://bit.ly/VXhBd9) that high-tech businesses in Idaho requested such legislation after an Idaho Tax Commission memo in October interpreted a 1993 state law as saying software is taxable property no matter how it is delivered.

Jay Larson, CEO of an industry organization called the Idaho Technology Council, told the panel that cloud computing involves people using the Internet to rent computing power, electronic storage space and other services. He said the state Tax Commission in recent months told some high-tech firms they have to pay large amounts in back sales taxes.

"This tax has caused a lot of people to consider moving their operations out of the state so they would not have to pay that tax," Larsen said. "It says if your servers are in the state of Idaho, you pay 6 percent more than if your server is in the state of Oregon."

He said lawmakers should keep Idaho competitive in attracting and keeping high-tech companies, including the nearly 200 businesses that are part of the Idaho Technology Council.

"This legislation will help set the foundation to continue to show that we have the right infrastructure from a public policy standpoint to support tech companies and software companies as they grow and develop," Larsen said.

Panel members worked to understand the nature of cloud computing.

"You're not an owner of this property, because you can't dispense it, you can't modify it, you can't change it," said Rep. Dell Raybould, R-Rexburg, a farmer from eastern Idaho. "So actually, what you're doing is just renting it. You're renting it from the provider. . Is that correct?"

Larson said that was correct.

Rep. JoAn Wood, R-Rigby, moved to introduce a bill and her motion passed.

"I can see in this committee there's a considerable amount of interest in what you've brought to us, so I think probably we ought to explore it further," she said.