VTax is the derogatory nickname the general public gave to a licensing change for VMware vSphere 5.0.
In 2011, VMware documentation stated that “vSphere 5.0 will be licensed on a per processor basis with a vRAM entitlement. Each vSphere 5.0 CPU license will entitle the purchaser to a specific amount of vRAM, or memory configured to virtual machines.” Prior to this licensing change, vSphere customers paid for licenses based on physical CPUs and physical RAM per server. After the licensing change, if the number of powered-on virtual machines (VMs) in a pool of ESX/ESXi hosts consumed more vRAM than the host licenses allowed, the user would have to buy more licenses to add to the vRAM pool.
In 2012, VMware ended the vRAM entitlement licensing model with the release of vSphere 5.1 and returned to physical CPU-based licensing. Participants in the VMware Service Provider Program (VSPP), however, continue to be charged on the amount of memory allocated per VM.