CTIA approaches top tax man on continuing issue of cellular sales commissions

Mobile Phone News, Jan 5, 1998 by Stephen Bouvet, Mike Maynard, Ellen B. Mullally

In CTIA's letter, to new IRS Commissioner Charles Rossotti, association President and CEO Tom Wheeler noted that IRS agents "in the past several years have been challenging such deductions and instead requiring the commission expenses to be capitalized over the 'average time' a customer remains a subscriber."

This issue has arisen repeatedly for more than three years, Wheeler said. The CTIA seeks a revenue ruling from the IRS stating definitively that commissions paid on renewable subscription agreements of one year or less are deductible.

"Issuance of such a ruling would provide a rational tax result, would relieve both taxpayers and the government from the costs associated with litigating this issue on a case-by-case basis, and would ensure that cellular telephone companies are not saddled with the unnecessary and unadministrable burden associated with performing yearly estimates of the 'average lives' of its subscribers for each market," Wheeler said. (Tim Ayers, CTIA, 202/736-3203.)