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How do states tax the cloud? There's no consensus...yet.

I just discovered that while I was at an out-of-town conference, the hubby went to a sports car race. On his own

I must admit that I was a little hurt. Sports are a big part of our more than 30 years together.

One of my best birthday presents ever from the hubby was Washington Capitals season tickets. We spent every Sunday during the MLB season at Baltimore Orioles games. Most of our vacations include attendance at some sporting event.

That he went to the Circuit of the Americas without me was sort of a surprise and a little bit of a bummer. That's probably why he "forgot" to tell me.

So how did I discover the hubby's solo sports jaunt? I wasn't spying on him. Honestly! I found out thanks to the cloud.

Cameron Diaz and Jason Segel freaking out because their characters' personal video went up to the cloud.

Busted by the cloud: Basically, I agree with Jason Segel's character in "Sex Tape" that nobody understands the cloud. I'm still a bit confused by it.

I have, however, found it very useful. And not just for spousal tracking.

I have way too many iTunes that would jam up my phone if it weren't for the cloud. I also get lots more PC, laptop and phone back-up and storage space for less money thanks to the cloud.

This mysterious computing component, however, did come in handy in finding out how the hubby spent one of the four days I was at the FinCon14 personal finance bloggers' conference in New Orleans.

He took photos with his phone of the garages, pits and the two races at the Circuit of the Americas track. Those snapshots then were synched from the cloud to the iPad we share.

When I signed onto the tablet this weekend, the hubby was busted by the cloud.

Taxing the nebulous cloud: Of course, the cloud has implications far beyond how couples keep an eye on each other when they're apart.

As more companies and individuals take advantage of cloud computing, states' financial officers also have their heads in the clouds. Specifically, they are trying to figure out how this new type of computing and communication could provide some much needed state tax revenue.

The growing cloud system is an inviting tax target. But it's also very elusive.

Not only are state legislatures and tax offices typically slow in amending their statutes and regulations to address taxation of digital products, but cloud computing poses some new and specific problems.

An analysis by Jennifer Jensen, originally published in the December 2012 issue of the AICPA Tax Advisor and reprinted by the U.S. division of PricewaterhouseCoopers, notes that the global networks upon which cloud computing is predicated are borderless.

That creates major jurisdiction problems for tax collectors, since sales and use tax assessments are based on location. Jensen elaborates:

"If the location of a cloud cannot be pinpointed, which state's laws apply in taxing the cloud? If a state taxes at the point of use, what if services are free at the point of use? If tax is based on the location of the servers or the office of the cloud computing provider, will providers simply move to the lowest-tax jurisdiction? How does a provider or purchaser avoid being taxed in two locations simultaneously when states apply different sourcing rules for sales and use tax purposes?"

Some states say yes, others no: Those were among the questions raised at last month's Institute for Professionals in Taxation's Sales Tax Symposium in Washington, D.C.

Several states have recently published administrative guidance on the taxability of cloud services, reports Tax Analysts. Some have opted for no taxation, but two states -- Ohio and Utah -- have deemed at least some cloud computing services taxable.

It's going to get much messier in the computer cloud and tax offices before this tax sky clears.

"Other states will continue to debate the taxation of cloud computing, but it's not going to be an easy discussion," writes Cara Griffith at the Tax Analysts Blog. "Cloud computing is borderless, so location is irrelevant -- it doesn't matter that a company is in Nevada, a software user in New York, and the servers on which the company runs its application in Texas. Yet sales and use taxation is predicated on location. Expecting the two to play nicely together may be a pipe dream. But until reality sets in, taxpayers must continue to monitor the ways in which states try to shoehorn cloud computing into existing laws."

The bottom line: Enjoy your tax-free cloud computing -- and tracking of your husband or wife! -- while you can. I'm willing to bet that more states than not will at least try to tax the cloud.

Other online tax matters: How technology affects our lives and our state sales tax bills also was a topic I covered last week at my other tax blog.

Bankrate Taxes Blog iconThe issue over at Bankrate Taxes Blog was the taxation of online product purchases. Specifically, how more folks are now facing such bills.

Since Oct. 1, Amazon has been collecting sales tax on purchases in 23 states.

Get ready. That number is going to grow. The Seattle-based e-tailer is putting up more physical locations across the country, providing the legal nexus for states to collect the taxes.

Also over at that personal finance Website, I blogged about the IRS' costly tax collection shortcuts.

Some of the tax agency's employees apparently are closing some delinquent tax cases as uncollectible before completing all required collection process steps.

Not so good.

I usually post my additional tax thoughts at Bankrate Taxes Blog every Tuesday and Thursday. If you don't get a chance to check them out then and there, pop in here over the weekend where you'll usually find highlights and links.

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