Can Increased State Taxation Hinder Cloud Computing? – Part 1

Can Increased State Taxation Hinder Cloud Computing? – Part 1

The best things in life are free, but sooner or later the government will find a way to tax them.”  – Anonymous.

Tax officials are usually the most hated representatives of the government, often without reason. However, some recent developments may well provide a valid reason to cloud component proponents to direct their ire towards state tax departments. Here’s a brief background before the specific facts.

Will Vivek Kundra’s Departure Affect Government’s Flight to the Clouds?). The US military, normally the first in line to make use of new advances in technology, have been trying to get its house in order as regards cloud computing and has approached the private sector for assistance (See: US Military Asks for Private Sector’s Help to Understand Cloud Computing).

Now, when a new technology emerges, it is expected that people would be wary of it. That is the reason why, in spite of clearly defined advantages of cloud computing over traditional IT infrastructure (See: Which Cloud Computing Quality Works for you? ), there have been people who have resisted its advance. It is true that there have been some failures (See: Should You Be Concerned? A List of Recent Cloud Computing Failures – Intuit goes down , but the advantages of going on the cloud far outweigh the risks. Most people agree, and hence, cloud computing is poised for meteoric growth (See: Where Is Cloud Computing Going? Up, Up And Away! and How BIG Is the Cloud Computing Market?).

IT heavyweights smell a great opportunity with cloud computing and are readying huge investments in the field (See: Is Microsoft Taking A Risk By Putting All Its Eggs In The Cloud Computing Basket?), reversing earlier reticence (See: Oracle – The latest Big Boy to join the Cloud Computing game) and even abandoning traditional revenue streams to target this new opportunity (See: Hewlett-Packard May Spin Off PC Business To Focus On Cloud Computing). And they are not doing this for chump change; they believe that cloud computing will earn them billions in the near future (IBM expects to generate $7 billion in cloud computing revenues by 2015: CEO).

All this enthusiasm has made cloud computing a stock market darling and led to enormous gains in participant companies’ stocks (See: Breakout Quarter for Cloud Computing Stocks ), with specific instruments being developed for investment in this field (See: Packaging Cloud Computing as an Investment – First Cloud Computing ETF Launched). In other words, there’s a lot of money in cloud computing, and obviously, this has attracted the attention of the tax collector.

In the second and concluding part of this article, I will explore the recent developments in how cloud computing is being treated with the tax authorities, and their implications.

By Sourya Biswas

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