State House of Reps votes down software tax

Today the state House of Representatives voted in a sweeping majority to exclude the “cloud computing services” from being charged a sales tax.

In a 65-2 vote, HB 243 will now head to the Senate floor for discussion.

“Cloud computing” refers to services provided over a computer network, most commonly the Internet, where those services are owned in another facility but used and operated on a personal computer.

For example, these services can include: G-mail, online tax help services, or anything else used to store online data.

Currently, a law in Idaho prevents taxing services, but the question of whether or not certain cloud computing services should be taxed has been on the table. That’s because in 1993, the Idaho Tax Commission defined computer software as personal property, making it taxable.

However, some groups, such as companies who use cloud computing software, software developers, and the Greater Pocatello Chamber of Commerce, believe intangible services shouldn’t be taxed.

“Software as a service, you never hold the product,” Pocatello Chamber of Commerce President Matt Hunter said in a phone interview. “The product never even exists on your computer. It’s out there in the cloud, you log into it, you use their product, and you are paying them a service fee to use it.”

Hunter also said this sort of cloud software is a growing industry and taxing this can have a snowball effect, which might hurt businesses. He called into question more than just what has been proposed on the bill, but where the line is drawn asking: What is and isn’t a service and what Idaho is going to tax and not tax from now on.

Idaho Tax Policy Specialist Mclean Russell estimates the exemption could cost the state nearly $700,000 before this figure rises over time.

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