https://www.iotworldtoday.com/wp-content/themes/ioti_child/assets/images/logo/footer-logo.png
  • Home
  • News
    • Back
    • IoT World 2020 News
  • Strategy
  • Special Reports
  • Galleries
  • Business Resources
    • Back
    • Webinars
    • White Papers
    • Industry Perspectives
    • Featured Vendors
  • Other Content
    • Back
    • IoT World 2020 News
    • Q&As
    • Case Studies
    • Features
    • How-to
    • Opinion
    • Video / Podcasts
  • More
    • Back
    • About Us
    • Contact
    • Advertise
    • Strategic Partners
  • IOT World Events
    • Back
    • Internet of Things World: San Jose
    • IoT World 2020 News
Iot World Today
  • NEWSLETTER
  • Home
  • News
    • Back
    • IoT World 2020 News
  • Strategy
  • Special Reports
  • Galleries
  • Business Resources
    • Back
    • Webinars
    • White Papers
    • Industry Perspectives
    • Featured Vendors
  • Other Content
    • Back
    • IoT World 2020 News
    • Q&As
    • Case Studies
    • Features
    • How-to
    • Opinion
    • Video / Podcasts
  • More
    • Back
    • About Us
    • Contact
    • Advertise
    • Strategic Partners
  • IOT World Events
    • Back
    • Internet of Things World: San Jose
    • IoT World 2020 News
  • newsletter
  • IIoT
  • Cities
  • Energy
  • Homes/Buildings
  • Transportation/Logistics
  • Connected Health Care
  • Retail
  • AI
  • Architecture
  • Engineering/Development
  • Security
ioti.com

Embedded Computing


Getty Images

5G Wireless Networks Could Transform IoT and Taxes

5G wireless networks are coming. A telecom tax expert says companies eyeing the technology should be aware of the tax ramifications.
  • Written by Brian Buntz
  • 19th November 2018

The next two or three years will likely go down as one of the most pivotal time periods in the history of the telecommunications industry, believes Tony Susak, general manager of  Avalara Communications’ tax business. Having worked in the telecom industry for more than three decades, he sees 5G enabling incredible product offerings for both consumer and business applications across industries, while also helping to supercharge Internet of Things adoption.

And though there has been considerable speculation about the types of data-intensive applications 5G wireless networks will enable, one topic receiving less scrutiny is how much the technology will cost subscribers and how applications leveraging 5G will be taxed. Accenture estimates that telcos have invested a combined $275 billion on 5G-related technology, while McKinsey notes overall network costs for telcos could double. It is likely the cost for 5G service could be significant.

Another factor driving cost is the fact that the telecommunications sector is the most heavily-taxed service in the United States. “For any telecommunication-related service, you could easily have several associated taxes applied to it — local sales tax, state tax, federal tax, E911 tax for emergency services, utility user tax, gross receipts tax, business and occupation tax, and so forth,” Susak said. “Taken together, those taxes can, in many cases, [yield] a combined tax rate of 20 percent or more.”

This topic is important for companies planning on leveraging 5G wireless networks to create new business offerings or services. “When any company comes along and breaks what I call the ‘telecommunications bubble’ and begins offering a product offering with, say, the ability to track assets, gauge asset performance, enable phone calls, they should be aware of the potential tax ramifications,” Susak said.

Let’s say a company is developing a 5G-enabled service for autonomous cars monitoring traffic and road conditions and is considering using it to communicate with people in the car by voice. The managers at such a company could roll out such a product through a subscription. If this firm gets audited, the auditor might discover that the service provider has only been collecting sales tax for it. If the sum total of telecommunications-based taxes was 20 percent, and the company only collected 7 percent tax, they aren’t able to ask their customers for the difference after the fact. And if the firm increases the tax on its customer’s next billing cycle, it can expect to get irate calls from customers asking why their bills increased significantly. “The tax matter could be the difference between a successful and a non-successful product launch,” Susak noted.

Telecommunications taxes could apply to 5G-based services across disciplines, whether it is in health care, manufacturing, smart cities and smart buildings, agriculture or other fields.

[IoT World is the event that takes IIoT from inspiration to implementation, supercharging business and operations. Get your ticket now.]

As for the question of how to know if telecommunication taxes apply to a specific 5G-enabled product or service, the answer is, unfortunately, the consultant’s classic stock answer: “It depends.”

The fact of the matter is, there is not even a single agreed-upon definition for telecommunications. “The FCC has one definition of the term. In addition, there are 50 some public utility commissions with their definition and then you have state department of revenues with their definition,” Susak said.

Complicating matters is the fact that tax guidance does not keep pace with changing technology.

In addition, some cities such as Los Angeles, Chicago and New York have especially complex telecommunication taxes.

In any case, it is often difficult to determine how a new product or service that enters the telecommunications bubble might be taxed. “I saw this firsthand while working on GM’s OnStar product line from 2006 to 2012. It wasn’t clear in the beginning whether OnStar was a telecommunications service or an information service,” Susak recalled. A decade ago, telematics was new. “We could diagnose your car, check your tire pressure and engine lights and remotely stop your car. We could help you recover it if it was stolen,” he said. “It was an unprecedented service — similar to Voice over IP and streaming video, which also raised telecom tax questions when they debuted.”

The golden rule for companies potentially entering into the telecommunications space, no matter the industry, is that they need to become educated on the complexities of telecom taxes. There are often no definitive answers because technology moves incredibly fast and tax laws do not. There will be gray areas where tough decisions will have to be made that can have enormous bottom line impact.

So how does a company planning to leverage 5G wireless networks best prepare for potential telecom taxation? Susak shared the following list of considerations:

  • Understand what types of products currently require telecommunications tax. How do you make that determination?
  • If yours does require a telecommunications tax, what steps do you need to take before a product launch?
  • It’s expensive to fight tax authorities. If you lose in one state, it could have a domino effect for compliance.
  • To help ensure everyone is taxing gray areas in a similar way, form a coalition with like companies.
  • Be aware of marketing ramifications – if you describe a product or service as something that requires telecommunications tax it will likely then be taxable that way.
  • Note your supply chain. How is the product or service delivered? Is it being resold? If so, with which entity does the tax liability lie?
  • When in doubt, always get advice from a large accounting firm in complex cases.
  • Ensure that your financial systems are prepared to handle the nuances of telecom taxation.

The bottom line is that 5G, like many groundbreaking technologies, is moving at a substantially faster clip than tax and regulatory bodies. “They eventually will catch up, but until then compliance will remain incredibly complex,” Susak said. “Understanding potential telecom tax impacts, and preparing for calculation and filing requirements, are critical to a successful new product launch.”

Tags: Embedded Computing IIoT/Manufacturing Features

Related


  • Image shows welding robotics and a digital manufacturing operation.
    IoT Supply Chain Vulnerability Poses Threat to IIoT Security
    The supply chain provides building blocks for IoT but also vulnerabilities. IT pros need to ward against malicious attacks that exploit supply chain security gaps.
  • Supply Chain Analytics and IoT Loom Large in Wake of 2020 Disruption
    The COVID-19 crisis has made disruptive events par for the course. Supply chain analytics, digital twins and other tools have become key to understanding and predicting disruption.
  • IoT App Development Gets Agility Boost From Container Technologies
    IoT app development has clamored for greater agility, productivity and security. Container technologies can realize those benefits.
  • Image shows a big data and artificial intelligence concept.
    AI Data Processing at the Edge Reduces Costs, Data Latency
    As the number of edge devices increases exponentially, sending high volumes of data to the cloud could swiftly overwhelm budgets and broadband capabilities. Deep learning, a subset of machine learning, reduces cost and connectivity burdens.

Leave a comment Cancel reply

-or-

Log in with your IoT World Today account

Alternatively, post a comment by completing the form below:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Content

  • COVID-19 Poised to Build a Robotic Ecosystem
  • Connected Farming Harvests Data and Gives Agriculture a Jolt
  • AI, Edge Computing Architecture Drive Embedded IoT Development
  • How Rolls-Royce Exploits Internet of Things Data

News

View all

Webex Collaboration Banks on Hybrid Workplace Model at Cisco Live 2021

2nd April 2021

Cisco Enlists Networking Automation, CX Cloud in COVID-19 Response

31st March 2021

White Papers

View all

Telehealth and COVID Infographic

30th March 2021

Medical Supply Chain Management with Smart Devices and Sensors

30th March 2021

Special Reports

View all

Cybersecurity Protection Increasingly Depends on Machine Learning

28th October 2020

Webinars

View all

Real-Time Analysis of Driver Behavior Using Machine Learning

13th May 2021

Weber’s Journey: How a Top Grill Maker Serves Up Connected Cooking

25th February 2021

Galleries

View all

Top IoT Trends to Watch in 2020

26th January 2020

Five of the Most Promising Digital Health Technologies

14th January 2020

Industry Perspectives

View all

IoT Spending Holds Firm — Tempered by Dose of ‘IoT Pragmatism’

1st December 2020

The Great IoT Connectivity Lockdown

11th May 2020

Events

View all

Embedded IoT World 2021

28th April 2021 - 29th April 2021

The Virtual Industrial AI Summit

29th June 2021 - 30th June 2021

IoT World 2021

2nd November 2021 - 4th November 2021

Twitter

IoTWorldToday, IoTWorldSeries

How Smart Environments Will Take Shape Post-COVID-19 dlvr.it/RxfPG2 https://t.co/Y6DMWxZf9S

14th April 2021
IoTWorldToday, IoTWorldSeries

IoT Enterprise Deployments Continue Apace, Despite COVID-19 dlvr.it/RxWwsS https://t.co/BSkxdf17vs

12th April 2021
IoTWorldToday, IoTWorldSeries

🥳Happy #IoTDay! How are you celebrating? We're giving $50 off All Access Passes to join our upcoming virtual event,… twitter.com/i/web/status/1…

9th April 2021
IoTWorldToday, IoTWorldSeries

🎉 Announcing #EIOTWORLD sponsor, @InnoPhaseinc — a fabless wireless semiconductor platform company specializing in… twitter.com/i/web/status/1…

8th April 2021

Newsletter

Sign up for IoT World Today newsletters: vertical industry coverage on Tuesdays and horizontal tech coverage on Thursdays.

Special Reports

Our Special Reports take an in-depth look at key topics within the IoT space. Download our latest reports.

Business Resources

Find the latest white papers and other resources from selected vendors.

Media Kit and Advertising

Want to reach our audience? Access our media kit.

DISCOVER MORE FROM INFORMA TECH

  • IoT World Series
  • Channel Futures
  • RISC-V
  • Dark Reading
  • ITPro Today
  • Web Hosting Talk

WORKING WITH US

  • Contact
  • About Us
  • Advertise
  • Login/Register

FOLLOW IoT World Today ON SOCIAL

  • Privacy
  • CCPA: “Do Not Sell My Data”
  • Cookies Policy
  • Terms
Copyright © 2021 Informa PLC. Informa PLC is registered in England and Wales with company number 8860726 whose registered and Head office is 5 Howick Place, London, SW1P 1WG.
This website uses cookies, including third party ones, to allow for analysis of how people use our website in order to improve your experience and our services. By continuing to use our website, you agree to the use of such cookies. Click here for more information on our Cookie Policy and Privacy Policy.
X