This article serves as a follow up to a previous article, Cloud Computing: The Answer is 'No' (published in the October 8, 2012 issue of State Tax Notes), by examining the approaches of the Massachusetts and Michigan revenue departments towards determining the taxability of cloud computing services.  Similar to the previously analyzed approaches of Arizona, Colorado, Indiana, New York, Pennsylvania and Utah, these two state revenue departments have administratively determined that fees paid for those services are subject to sales and use taxes.  In these states, control of property must be transferred in order for a transaction to be taxable; however, neither department provides analysis of the control of the underlying software transferred to customers purchasing services from the cloud.  By ignoring the facts and determining transactions for cloud computing services to be subject to tax, the tax authorities have overstepped their bounds.  This article, which headlined the February 25, 2013 issue of State Tax Notes, provides in-depth analysis of the authorities regarding the type of control necessary to effectuate a taxable transfer in Massachusetts and Michigan, providing taxpayers affected by these rulings with the tools to challenge them as invalid applications of state law. 

Click here to read the full article.