Governor Phil Murphy did a George H. W. Bush impression and went on record pledging ‘no new taxes ‘ in a recent Bloomberg interview, Save Jerseyans.
It was always a misleading pledge, but now it appears Murphy is poised to abandon any pretense of abstaining from new taxes. On Tuesday, Republicans on the Senate Budget & Appropriations Committee fumed over a brand new report from the New Jersey Division of Taxation (click here) recommending the taxation of both cloud computing and software subscription services.
The offending passage of the “Studying the Impact of Digital Economy” zeroes in on taxing services which “allow a customer to access and use the software of a service provider through the internet.”
“The market activity of cloud service transactions continues to increase and it may be beneficial to review the tax policy concerning cloud services,” the report’s authors explain. “To effectively tax cloud computing services, nexus and sourcing issues will also have to be addressed.”
“The latest report from Taxation makes it clear that the Murphy administration is looking at new taxes on many Internet-based services,” said Senator Declan O’Scanlon (R-13) who serves as the Republican Budget Officer. “So much for Governor Murphy’s recent statements that there would be ‘no new taxes.’ That certainly didn’t last long.”
“Popular cloud services that many people use to back up their phones and computers could end up being taxed,” added state Senator Michael Testa (R-1) of South Jersey. “If you pay for extra storage through services like iCloud, Google One, OneDrive, or Dropbox, get ready to pay more if Murphy’s proposed cloud tax is enacted.”
Elsewhere in the report, Division of Taxation officials proposes targeting Software as a Service (SaaS) “in the context of contemporary software practices and the market growth of SaaS.”
A ‘Software as a Service’ tax could prove particularly insidious since mostconsumers don’t purchase software in a lump sum but rather through a monthly or annual subscription. They would be taxed each and every time they renew their subscription.
“‘Software as a Service’ is what people are paying for when they subscribe to Office 365, Adobe Create Suite, and other popular software products used on their phones, laptops, and tablets,” said newly-minted Senator Doug Steinhardt (R-23), an attorney and former NJGOP chairman. “Adding new taxes to these increasingly popular software subscriptions is just one more way Governor Murphy will nickel-and-dime New Jerseyans.”
Murphy’s FY 2024 budget speech is planned for February leaving precious little time for clarification.
