Senator Brock to Tax Department: End retro “Tech Tax” on small businesses

PRESS RELEASE

Randy Brock for Governor

Tax Policy Punishes Companies for Adapting to New Technology

MONTPELIER– Today, Sen. Randy Brock (R-Franklin) called on the Tax Department to immediately end the retroactive collection of the “tech tax” on Vermont small businesses.

“It’s outrageous that the Tax Department has, almost unilaterally, instituted this tax retroactively at the expense of unsuspecting businesses ranging from tourism companies to medical practices to technology-intensive firms like Dealer.com and Inntopia, Brock said. “Once again a state agency has placed yet another burden on the business community at a time they can least afford it,” Brock said.

The issue stems from a 2010 tax department bulletin that changed state policy and applied state sales tax to “prewritten software that is licensed for use and available from a remote server,” or “cloud computing.” In cloud computing, software services may occur on remote servers thousands of miles away, and software is never downloaded to the Vermont user.

During the past year, tax department auditors have sent out retroactive tax bills dating back as far as 2006 to small businesses around the state demanding, in some cases, hundreds of thousands of dollars in back taxes for a tax they had never heard of.

“If we are going to create new jobs it is imperative for state government to embrace, not punish new technology that shrinks the map and makes Vermont more attractive to small businesses. The technology firms that are particularly affected are the types of firms that we should be working to keep in and attract to Vermont,” Brock added.

Many in the business community have called on Governor Shumlin to rescind the tax bulletin, but as of Thursday, the Governor had not acted. Administration officials, instead, have asked the Legislature to intervene.

“As a member of the Senate Finance Committee, I will work to pass an amendment in this session to eliminate this job killing tax policy. I urge my Senate colleagues to join with me and Senator Illuzzi to repeal this tax. We need to send the business community a strong message that Vermont wants your business and we will not add to your tax burden,” Brock said.

“I recognize the importance that technologies like cloud computing have in our rural state and how urgent it is for us to act quickly to solve this problem. A rational tax policy toward these technologies makes Vermont more competitive with our neighbors and will help us retain and attract the next generation workforce. For us to be a leader in the tech sector, we have roll out the welcome mat to these firms, not slam the door in their face,” Brock concluded.