Recently Virginia issued Public Document Ruling No. 14-42 concerning, in part, the taxability of cloud computing services. A Virginia taxpayer requested that Virginia’s Tax Commissioner clarify the state’s position regarding sales and use taxation of cloud computing services. Taxpayer sells software to various types of businesses.
Virginia provides an exemption from sales and use tax for services not involving an exchange of tangible personal property that include software delivered electronically. Virginia generally treats cloud computing services in the same manner as the electronic transfer of software products. This treatment is supported by the fact that usually is no transfer to customers of cloud computing services. Accordingly, the Tax Commissioner concluded that cloud computing services are an exempt service to Virginia’s sales and use tax. This conclusion is consistent with two other Public Document Rulings (12-191 and 13-182) that expressed Virginia’s position on cloud computing services.