Open any state tax publication in the past two years and you will find an article on “cloud computing.”1 Cloud computing”[i]n the simplest terms, …means storing and accessing data and programs over the Internet instead of your computer’s hard drive.”2 Products3 like Google Drive (which gives users access to word processing, spreadsheet, and presentation software in their web browsers), and Salesforce.com (which provides “sales force automation” and customer relationship management tools, among others) continue to proliferate and replace desktop software and locally provided services alike. These products often provide functionality and features unavailable from boxed or downloaded-but-locally installed software.4
State tax authorities have struggled in recent years to determine how to apply their sales tax laws and regulations to cloud computing. For obvious reasons, tax departments do not wish to exempt these products from imposition of sales tax. However, it is often difficult to conclude that cloud computing products fall within the statutory definitions needed to subject them to tax. A recent determination by an administrative law judge (ALJ) of the New York State Division of Tax Appeals, Matter of SunGard Securities Finance LLC,5 illustrates some of the problems faced.
