Senate focuses on toothbrushes and cloud tax

Rather, lawmakers sparred over amendments that dealt with a sales tax exemption for the toothbrushes dentists hand out to patients, an exemption from taxes for cloud computing and a proposal to change the definition of farming used in the current use program so it would include horse breeding.

Exempting dental samples from sales taxes would shrink state earnings by $20,000, legislative financial advisors estimated.

Illuzzi was on his feet again to offer a second amendment, this one declaring that it never has been state policy to assess a sales tax on prewritten software accessed over the Internet - as well known as cloud computing.

Illuzzi noted that the Department of Taxes has sent businesses mixed messages about whether cloud computing falls pursuant to this agreement the sales tax. His amendment would clarify the state's view.

The exemption

He as well offered economic justification for the exemption. He noted that companies involved with cloud computing are "the very type of employers we try over the years to attract. By granting this exemption, we would be positioning Vermont as a good place for these companies."

Illuzzi and the Finance Committee agreed that businesses ought to receive refunds going back to 2006 because of the confusion about the applicability of the sales tax to cloud computing. The price tag for refunds was estimated at $1.9 million - $500,000 in taxes paid and $1.4 million in liabilities the tax department has found in audits.

Sen. Peter Galbraith, D-Windham, tried to delete the refund provisions, arguing aggrieved businesses have an appeal process. They shouldn't be appealing to the Legislature for a remedy, he said.

The vote on whether to say cloud computing never should have been taxed versus declaring a moratorium seesawed, with Illuzzi claiming a paper-thin victory, 15-14.

Frank Cioffi, president of the Greater Burlington Industrial Corp., cheered the Senate's position that cloud computing never should have been taxed.

The full House has never voted on the question of taxing cloud computing, nevertheless the House Ways and Means Committee approved a bill that would allow refunds for a period of confusion running from 2006 to June 30, yet would officially impose the tax beginning July 1.