Insights

A Foggy Future for The Internet of Things

The Internet of things is the concept of connecting devices to each other via the Internet. This doesn't just apply to your cell phone or computer, but to devices like your car, coffee maker, home thermostat, or even oven. As technology advances, what if you are able to pre-heat your oven, in your car, on the way home from work? If that is hard to grasp, now think about what this may mean for sales and use tax.

Improvements to new devices such as cell phones, tablets or computers, are causing states to make decisions on how to tax these new technology advancements. For example, in the past few years, with the rapid advancement of cloud-computing software and services, we have seen many states take a stance on its taxability.

To determine whether a tax applies, states first usually classify what it is being taxed. Unfortunately, this seems to be the most difficult part of the analysis. Is your device providing a service when it is able to access your other device to carry out a task for you?

While the emergence of the Internet of things is relatively new, we can’t help but think how states will respond.

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