As the cloud services community continues to grow, more and more questions about the business side of the technology are popping up. One big question that the Michigan state house is examining is whether or not cloud services should actually be taxable. The Michigan House Tax Policy Committee is taking up a couple of different bills that would amend the sales and use tax acts so that cloud services would no longer be taxable.
What the committee and then the House ultimately decide on these bills could determine at least a portion of the financial future of the technology. Compuware (News - Alert) Corp. and its subsidiary, Covisint, are making claims that the firms might have to leave the state of Michigan if the bills don’t pass. The firms say that taxing these kinds of services are simply too expensive and that they will start looking to set up shop in more tax-friendly states.
The pressure that Compuware is putting on the state of Michigan is nothing new when it comes to the business world. Companies always want to get tax havens carved out for them, in exchange for keeping their jobs in the region. The difference here is that these bills could have a wide-ranging effect on other states that find cloud services a taxable commodity. In the grander scheme, cloud services are still a relatively young technology that is having to grow up rather quickly.
Michael Lax, vice president of taxes for Compuware, talked about how important this question is moving forward in a recent statement. "We view it, and our shareholders view cloud computing, as one of the significant growth engines of the company on a going-forward basis," Lax said.
Michigan has dealt with this issue before, and has waffled on the subject. In 2007, the state said that cloud services were not taxable. In 2009, that decision was reversed and has been taxed ever since. The problem is that should the state house decide to make the cloud non-taxable again, it has to weigh the loss of more than $12 million in tax revenue against the loss of jobs that could occur should Compuware move out.
Edited by Rory J. Thompson