How ICT Affects Your Site Decision
Think speed, capacity - and taxes - when considering information and communications technology issues in the location process.
Gary Yates, Director of Site Selection, Jones Lang LaSalle (Apr/May 08)
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Taxation of ICT Services
business carefully considers its tax situation and the possible taxes
associated with a new location or new equipment. ICT equipment,
services, and users are all affected by the unique taxation of ICT. Two
primary taxes impact ICT: property tax and sales tax. The high cost of
ICT investment has made both property and sales taxes a big capital hit
for corporations seeking technology improvements.
there's a hidden tax that can be even more crucial for review: tax on
IT services. Take for example a typical financial trade completed over
a computer network. In some jurisdictions, the point of taxation is the
location of the data server. Thus, if there is a trading firm in New
York City, a client in Dallas, and a server farm in Arizona, Arizona
collects tax on the trade just because the technology resides in that
state. These taxes on ICT services are gaining interest throughout the
an effort to spur investment and offset the slowing economy, The
Economic Stimulus Act of 2008 provides the opportunity for small
businesses to increase the amount of capital expenses they can deduct
under Section 179 of the tax code to $250,000 and also allows bonus
depreciation on qualifying tangible property. In order to initiate
investment this year, qualifying property can be depreciated 50 percent
of purchase cost in the first year rather than over several years.
unintended consequence of the federal depreciation bonus is that most
states have a policy of "rolling conformity" with the federal tax code.
The Center on Budget has identified 22 states that could face revenue
loss from the bonus. In addition, 16 other states are expected to face
shortfalls in FY2009. Why does this matter for ICT and site selection?
As states continue to experience revenue shortfalls in conjunction with
rising budgets, many will have no choice but to look toward new methods
of taxation, which may ultimately deter infrastructure development in
Economic incentives abound to offset taxes and
capital investment. These incentives can take the form of an exemption,
rebate, forgivable loan, grant, accelerated depreciation, or
infrastructure improvements. Two key points to remember when talking
about incentives on ICT equipment: (1) ICT equipment and software is
replaced frequently, and incentives should be structured to cover
replacement every 3-5 years; and (2) school taxes (when part of
personal property tax) are not frequently included in any tax exemption
As the global economy has shifted from the production
of physical goods (the Industrial Age) to the manipulation of
information (Information Age), there has been an increasing emphasis on
ICT services. ICT services were often taken for granted in business
development, but this can no longer be the case. As technological
advances have taken place and the business economy has shifted to the
global stage, ICT issues have become important criteria in the site
selection process and decision.