Will Microsoft Tax Dispute Change Cloud Computing?

By Lawrence Walsh  |  Print this article Print

Microsoft may change the Azure host site becuase Washington state says data centers do not qualify for manufacturing tax breaks. Will this dispute influence the development of cloud computing?

Microsoft may be doing a forklift move of its new 470,000-square-foot data center in Quincy, Washington after state regulators declared the facility is not qualified for tax exemptions intended for manufacturing facilities.

Data Center Knowledge reports that Microsoft is threatening to move the facility designated to host the Azure cloud-based operating system and application services to a facility in San Antonio, Texas, where it will enjoy lower cost electricity and taxes.

The reported data center exodus is the latest move in a nearly two-year battle between Microsoft and its home state. In December 2007, Washington regulators determined that a data center is not a manufacturing facility in the same sense as a factory since it does not produce goods that are sold to other customers. The ruling made the data center and its services subject to a 7.9 percent services tax. Washington lawmakers reportedly tried passing legislation to correct the tax definitions, but it stalled as critics called it a tax break for rich high-tech companies.

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Lawrence Walsh Lawrence Walsh is editor of Baseline magazine, overseeing print and online editorial content and the strategic direction of the publication. He is also a regular columnist for Ziff Davis Enterprise's Channel Insider. Mr. Walsh is well versed in IT technology and issues, and he is an expert in IT security technologies and policies, managed services, business intelligence software and IT reseller channels. An award-winning journalist, Mr. Walsh has served as editor of CMP Technology's VARBusiness and GovernmentVAR magazines, and TechTarget's Information Security magazine. He has written hundreds of articles, analyses and commentaries on the development of reseller businesses, the IT marketplace and managed services, as well as information security policy, strategy and technology. Prior to his magazine career, Mr. Walsh was a newspaper editor and reporter, having held editorial positions at the Boston Globe, MetroWest Daily News, Brockton Enterprise and Community Newspaper Company.

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