A recent report issued by the New Jersey Division of Taxation includes a suggestion that state lawmakers consider a cloud computing tax. The report titled, “Studying the Impact of the Digital Economy” recommends adopting a sales and use tax model that differentiates between physical good and services and digital goods and services. The report notes that New Jersey law does not specifically address cloud computing services and thus sales tax does not apply to software as a service (SaaS) or platform as a service (PaaS). The report suggests that a review of tax policy regarding cloud computing services should be undertaken as the volume of transactions increases, but adds that “[t]o effectively tax cloud computing services, nexus and sourcing issues will also have to be addressed.”

New Jersey Division of Taxation, “Studying the Impact of the Digital Economy.” (2023)