There’s no doubt that the Internet of Things (IoT) is changing the way businesses run today, and it’s doing so in a way that will cause societal shifts as big as Internet itself. The predictions for IoT growth and revenue expectation by 2020 are staggering – more than 50 billion connected devices, $8.9 trillion in annual sales, and $14.4 trillion in revenue when paired with big data.
The combination of cloud computing, mobile, and big data is causing the growing need for IoT, resulting in the acceleration and innovation in how businesses package and sell new and existing products and services. It’s not about one-time purchases anymore. The increased use of sensors and implementation of IoT requires new recurring payment types (usage, metered, threshold, etc.) and how you tax these recurring services is a new challenge.
As consumers increasingly immerse themselves into the world of IoT, businesses must ask themselves: How do we tax these new products and services while continuing to grow and scale across industry and global boundaries?
Innovation is leading, compliance is lagging
History tends to repeat itself, especially when it comes to innovation and technology. Traditionally, the government lags behind and plays catch up with tech’s changing business models, creating challenges for companies looking to revolutionize a market. As companies break into unchartered territories with new recurring revenue models, they need to understand the tax compliance implications of these modifications and changes.
For example, it’s critical to charge the correct tax based on where you’re selling, what you’re selling, and the amount you’re selling at. IoT is revolutionizing how companies go to market and with all these high volume transaction environments, the government will eventually catch up and want a piece of that pie. And when it does, you have to be prepared.
Offer tax compliance today, be prepared for tax compliance in five years
Building a business that’s primed for success today and prepared for the future requires an understanding of tax compliance implications, including: increased nexus (state, jurisdiction, country); additional tax collection and remittance; and new product or service taxability requirements. This is not an easy task and companies seek a level of transparency to determine what’s needed to be compliant today and securing support for future changes as businesses grow and scale.
Successfully taking advantage of the IoT opportunity means overcoming daunting billing and finance challenges where any misstep could mean disaster, erasing company revenue with millions of dollars in fines.
Check out Aria and Avalara’s joint webinar to learn more about billing and taxation in an IoT world.