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MONTPELIER — A bill proposing to extend the state’s 6 percent sales tax to cloud computing services is scheduled to be considered by the Vermont House of Representatives on Thursday, and proponents say the resulting revenue will in turn pay for a corporate tax code overhaul that will benefit businesses in the long run.

The bill, which passed out of the House Ways & Means Committee Tuesday, also shifts corporate tax liability to gross receipts rather than property and payroll, said state Rep. Emilie Kornheiser, D-Windham 2-1, the committee’s vice chair.

According to a Legislative Joint Fiscal Office preliminary estimate, adding cloud computing to the sales tax, which would take effect June 1, 2022, would net $10.9 million in revenue in fiscal 2023, $12.3 million in fiscal 2024 and $13.9 in fiscal 2025.

“We’re moving away from a system that apportioned taxes based on the amount of property and payroll and to a system that calculates corporate tax liability based on sales,” Kornheiser explained. “As part of this shift we’re also shifting to combined reporting, lowering our corporate minimum tax for the lowest bracket and significantly raising it for the highest bracket. We’re continuing to build tax policy where everyone pays their fair share, and we support a Vermont that invests in people and places,” she said.

The Joint Fiscal Office estimates that change would cost the state about $5 million in revenue in fiscal 2022, and about $20 million in each of the next three fiscal years.

“It benefits those businesses that have significant payroll or property,” Kornheiser said. “Those businesses will likely see a decrease in their corporate income tax obligation.”

Vermont “C” corporations with gross receipts of $100,000 or less would pay based on gross receipts or a minimum of $250, whichever is larger. Those with gross receipts up to $1 million would face a minimum of $2,000. And firms with gross receipts of $300 million would pay a minimum of at least $100,000.

The proposal would also apply a “combined reporting” standard, making it harder for corporations to move assets between subsidiaries as a means of reducing their tax obligation.

“A very difficult part of doing good tax policy is the larger the company, or the wealthier the property owner ,the easier to use those resources to avoid paying that fair share. This is a step to closing that gap,” Kornheiser said.

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The bill, which originated in the Senate as a bill exempting feminine hygiene products from the state sales tax, also includes an exemption on the first $10,000 of federally taxable U.S. military retirement pay. Gov. Phil Scott has sought that exemption since taking office.

The House Ways & Means Committee voted 8-3 in favor of the additions to the bill, with Kornheiser and Rep. David Durfee, D-Bennington 3, voting yes. Opposed were three of the panel’s Republican members, Reps. William Canfield, Patrick Brennan and Christopher Mattos.

Many vendors of commonly used software now offer their products via cloud computing, providing data and software updates online. It’s commonly called “software as a service,” and it’s how many publishers and service providers sell and update their products.

The bill, S. 53, would overturn a sales tax exemption on online software that the Legislature passed and then-Gov. Peter Shumlin signed into law in 2015.

Kornheiser and Durfee said the change will prove an overall benefit for the state.

“The [software] industry has now evolved to the point where it can stand on its own, so the exemption can be repealed,” Durfee said. “It’s worth mentioning that any exemption to the sales tax shifts more of the education tax burden onto property owners, so removing this exemption should have the effect of lowering property tax rates.”

Kornheiser noted that at least 21 other states tax cloud computing services.

“In any conversation I’ve had with businesses, they’ve shared that their struggles are about finding good personnel, quality infrastructure, the cost of benefits, childcare, and regulatory challenges,” she said. “Taxes pay for solutions to these systemic challenges.”

Greg Sukiennik covers Vermont government and politics for New England Newspapers. Reach him at gsukiennik@reformer.com.

Greg Sukiennik has worked at all three Vermont News & Media newspapers and was their managing editor from 2017-19. He previously worked for ESPN.com, for the AP in Boston, and at The Berkshire Eagle in Pittsfield, Mass.