As the saying goes, taxes are one of life’s few certainties — but just how certainly will they be applied in an information-driven economy? If the state of Vermont’s back-and-forth on a “cloud computing tax” is any indication, it seems the jury may still be out on the matter.

Like many states across the country, Vermont is struggling to reconcile its desperate need for revenue with a political climate that’s hostile to new taxes. Earlier this year, however, the state’s Tax Department implemented a so-called cloud computing sales tax after deciding that “there was little difference between downloading a program and using the cloud, and it sent retroactive tax bills with penalties to a number of businesses,” according to Vermont Public Radio.

The tax, which reportedly brought $2 million into the state’s coffers, put a huge dent in businesses’ finances and sparked a public outcry from business owners. After several weeks of debate, state lawmakers recently stepped in to denounce the policy, told the Tax Department to issue full refunds to companies that had previously paid the tax and put a year-long moratorium on the measure. Vermont Gov. Peter Shumlin told VPR that he is begrudgingly agreeing to the moratorium because it’s in a bill that contains other tax credits he wants passes; he would prefer to eliminate the controversial tax altogether and vowed to do so if re-elected.

Because this tax was responsible for cloud providers’ Vermont-based customers receiving retroactive sales tax bills as high as $96,000, the news of a refund and Vermont’s next steps are surely being watched by other cash-strapped states. That means cloud providers everywhere may want to keep an eye on this issue.

Cloud providers don’t want disgruntled customers driven away by outlandish tax bills, so the refund will be welcome news for them — but at what cost?

Although it’s undeniable that customers and providers will be happy about the refund, Vermont is losing out on valuable revenue needed to support its services. This grey area concerning whether remotely-delivered, information-driven products are taxable entities will undoubtedly continue to spark debate as the market continues to advance and the state is blocked from receiving its growing “cut.”

On the other hand, after the Vermont Legislature called for a special study of this issue, a one-year moratorium of the tax was also implemented. This moratorium created a competitive opportunity for the state of Vermont by offering a tax-free location for cloud services customers.

Is it possible losing out on a “cloud computing tax” could benefit the state by attracting an influx of technology businesses and technology?

That’s what Trevor Crist believes, according to VPR. Crist is president of Inntopia, which provides online reservation services for the travel industry. He hosts Inntopia’s services in a cloud provider’s Montreal data center, according to Stowe Today, and he received a $96,000 tax bill from the state for using those cloud services.

Crist told VPR that he hopes the moratorium gives Vermont an upper hand in attracting tech businesses and jobs. Even if Vermont loses out on the sales tax revenue, it still has a chance to enhance the state’s economy.

With refunds on the horizon, nonetheless, it is important for providers with Vermont-based customers to be aware of and assist customers through the refund process. Cloud providers already face a lot of barriers to adoption. Depending on what happens here, the taxman may become another one.

When we talk about compliance issues for cloud providers, there’s one hypothetical use case that comes up so often it’s almost cliché: A cloud provider takes on a business customer that, for regulatory compliance reasons, must ensure all of its data is kept inside the same country where it chiefly operates.

But cloud providers — in this case, U.S.-based ones — may face an entirely different roadblock regarding where they house customer data.

The Netherlands’ minister of security and justice said earlier this month that American cloud providers may not be welcome to sell cloud services to the Dutch government, due to concerns that “the vendors could be compelled to share data with U.S. authorities under the provisions of the Patriot Act,” according to this IDG News Service article. “Similar concerns are being raised in the European Parliament,” and experts are advising private businesses to avoid U.S. cloud providers for the same reasons, according to the report.

IDG reports:

‘Excluding U.S. cloud providers is not official policy yet. However, Vincent van Steen, spokesperson for the ministry of the interior, confirmed that the Dutch government is considering a ban on U.S. cloud providers like Microsoft and Google. “The minister is considering this,” he said in an email. “This means that it could be a requirement for tenders and the awarding of contracts.”

Nigel Murray, managing director of the consultancy firm Huron Legal, confirmed the Patriot Act could override European data and privacy legislation in a report by Dutch IDG news site Webwereld on Wednesday. “If data is transferred to the United States under the Safe Harbor protocol or an American injunction, U.S. Regulators can retrieve the data using the Patriot Act. This usually happens without the person concerned knowing anything about it,” Murray told Webwereld.’

Thankfully, one of Microsoft’s lawyers has since told us all not to freak out about the Patriot Act, according to CSO Magazine.

‘Microsoft’s Australasian legal chief says there is nothing to fear from the Patriot Act when considering a move to cloud-based services, because the US government can access your data regardless.

[...]

“In fact,” he adds, “US courts have long held that a company with a presence in the US is obligated to respond to a valid demand by the US government for information — regardless of the physical location of the information — so long as the company retains custody or control over the data.”‘

Phew. That’s a relie–oh, wait. Never mind.

If there’s any good news here, it’s that larger and more established cloud providers already working with multinational customers — as telcos or managed hosting providers — know how to navigate these waters. Also, European cloud providers have a business opportunity here if fellow members of the EU follow suit.

But depending on how this plays out (and how many other governments and businesses follow the Netherlands’ lead), younger U.S.-based cloud providers and managed service providers (MSPs) will want to keep an eye on this issue. Their core customers may be smaller U.S.-based companies, but there’s a good chance those companies will have a few satellite offices overseas — potentially in a country where compliance with the Patriot Act is a deal breaker.