Understanding Business Property Taxes
Typically, property taxes fall into two categories for businesses, personal property, and real estate. As we have noted in a previous post, real estate property tax is generally considered those items that cannot be removed from a building without changing its structural integrity. Personal property taxes may include furniture, office supplies, computers and software, vehicles and fleets, and other equipment.
Manufacturing plants have a disproportional number of items that do not fit neatly into those two categories. Furthermore, there are codes and laws that present challenges for CPAs and managers in understanding and applying unique county and municipal tax codes.
Tips for Avoiding Inflating Your Property Taxes
- Hire a CPA With Expertise in Property Tax: Regardless of what state and county in which your manufacturing company operates, it is difficult to learn, keep up with, and translate property tax code. Business property tax expertise is rare even among CPAs. Lyall CPA is unique in our knowledge and experience of business property tax and often find significant savings for manufacturers.
- Asset Categorization: Make sure your assets are properly categorized as either real estate or personal property, but also sub-categorized when relevant. Manufacturing companies often have assets that do not fit neatly into one of the main categories.
- Avoid Double Taxation: With the complicated nature of business property tax code, manufacturing companies may unknowingly have items categorized twice. Check, doublecheck, and triple check to ensure you are not paying taxes twice.
- Real Estate Appraisal Issues: Counties typically utilize mass appraisal techniques when they evaluate real estate property. If you believe your property has been appraised unfairly, utilize the appeals process to make your case.
- Depreciation: Asset depreciation is not one-size-fits-all. Especially in manufacturing, companies often miss potential savings by not adequately determining each asset’s depreciation.
- Ghost Assets: Many manufacturing companies are paying taxes on items that are no longer in use or even in their facilities any longer. These items plague companies and can inflate property tax bills far beyond what they should be.
- Environmental: Many counties and municipalities offer tax breaks and exemptions for steps taken to reduce environmental impacts from their facilities. Nevertheless, it can be easy to overlook these tax codes and inevitably miss out on potential savings.
Calculating property taxes for manufacturing companies presents a unique and daunting challenge for accountants and managers. Unfortunately, for many companies, the result is that they are paying more than they should. Lyall CPA is here to help. We have experience and expertise in helping manufacturers reduce their tax burden and keep more of their hard-earned dollars. If you would like to know more about how you can reduce your property tax payments, and find out if you qualify for a free consultation, contact Lyall CPA.