Take These 4 Steps Now To Save On Personal Property Taxes

Posted by Anne Sheehan on Oct 28, 2015
If your business wants to reduce its tax burden, don’t overlook personal property taxes as a critical part of the equation. Today, companies with large commercial real estate portfolios often manage, document and report their personal property insufficiently, thereby increasing their tax liability and hurting their bottom lines. But, with planning and due diligence, it’s possible to reduce your personal property tax burden proactively. In this article, you’ll learn four ways to get started. 
  1. Clean Up Your Asset Listing

    If your business’s asset listing is out of date or inaccurate, you run the risk of paying more personal property tax than you should. Purge all “ghost assets” from your records. A ghost asset is one that is no longer located on your property but is still on the books. It happens surprisingly often, especially in the manufacturing industry, where machinery, equipment and spare parts frequently “haunt” the records and drive up taxes. As a best practice, enter all asset information into your records immediately following your purchase. Then, make it a point to update those records at least once a year to flush out the ghosts.

  2. Track Raw Materials, Finished Goods And Shipments For Freeport Inventory Exemption

    Just as it’s important to carefully document your asset listing, it’s also essential to track your inventory. In states that have a Freeport Inventory Exemption, be sure to track your raw materials, packaging and other supplies, as well as work in progress and finished goods. You also need to document your cost of goods sold (COGS) and total sales by state. With this proactive record keeping and proper reporting, you won’t have to pay tax on the inventory that you produce and ship out of state. But, you must file the Freeport Inventory Exemption forms with the supporting documentation on or before the deadline. Many jurisdictions have the right to deny Freeport Inventory Exemptions either in part or in total due to a late filing – even if you have filed on time every year for 20 years.

  3. Consider The Environment

    If your business recently invested in infrastructure or equipment that reduces carbon emissions, lowers pollution or otherwise makes your company “greener,” you might have the opportunity to file for special benefits that result in a lower commercial tax liability. Contact your jurisdiction to see if there are benefits available for your specific property, such as pollution control exemptions. Request the proper forms and ask them to specify what documentation you’ll need to submit with your filing. Finally, confirm what the due date for the filing is and whether or not the filing has a “received by” or “postmarked by” date requirement. Be sure to track your filing with evidence of mailing and receipt. Keep in mind: A full understanding of the law is required to determine whether your equipment qualifies – which means you’re likely to need expert guidance in this area.

  4. Document All Property Damage

    If an unfortunate accident occurs at your commercial property, it’s imperative to document all resulting damage to real and personal property. For instance, if a fire or flood happens at a plant or warehouse, photograph the building and any contents that were damaged. Make a complete list with descriptions to document the extent of the damage and show whether there was a total loss of real and/or personal property. When you file your annual compliance return for your personal property and appeal the assessment of your real property, you will need to have evidence of the event in order to receive an accommodation for your loss. Unless you provide this, most jurisdictions will not know about the damage and will be unable to adjust the assessment accordingly.

Success Requires Due Diligence

Lowering your personal property tax liability isn’t an overnight task. It requires ongoing attention to detail and a firm commitment to record-keeping discipline. Whether you decide to shoulder the task yourself or outsource property tax management to a third-party provider, take steps today to safeguard your financial future.

Learn even more ways to lower your personal property tax. Download Your Free Whitepaper 5 Reasons You Should Challenge Your Current Commercial Property Tax Assessments.

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