Property Tax Strategies
There’s no reason to pay more than your fair share.
By Mark E. Battersby
It is the rare shooting sports business owner or manager who doesn’t attempt to keep their annual income tax bill to a minimum through tax planning. Why, then, is a bill for a tax that is one of the biggest expenses of many businesses, one that is prepared by the local taxing authorities, often paid without question?
What It Is
Property tax is a local levy based on the market value of privately owned property, examples of which would be land, buildings, and assets (which include so-called “fixtures” that can’t be removed without damage to the property) attached to that of an equipment retailer or manufacturing operation. Businesses that rent (rather than own) space are affected as well; studies have shown that property taxes constitute between 15 to 25 percent of the rent paid by such businesses.
Unlike most other taxes, property taxes are calculated by a government employee who multiplies the property’s value and applies the tax rate to the property’s proportionate value.
Not too surprisingly, there are literally hundreds of variables that can come into play when attempting to determine the value of property. It can be, and often is, a process fraught with error. How can a shooting sports retailer seeking the lowest property taxes possible discover and correct these omissions and errors?
What You Can Do
It’s important to keep in mind that challenging the property tax rate is never going to be successful. Instead, what can be challenged is the assessment made by the municipality’s assessor. Although one error is often enough to warrant an appeal of a property tax assessment, comparing local properties may be the more rewarding strategy. Total square footage, the overall property’s size, and recent improvements are all important factors. Looking for details that the local assessor may have overlooked or misstated is a great starting point for an assessment appeal.
One of the best ways to gather evidence that property tax assessment was inaccurately prepared by the municipality is to look at how similar property has been assessed in the municipality’s public records. If similar property in the operation’s locality is discovered with lower values, it may be a case for an appeal.
Property taxes are an inevitable cost of doing business, but there’s no reason to pay more than your fair share.
Another facet of the property tax in many locales requires the business to provide the value of other business assets, including equipment, vehicles, and in some cases even inventory. In these cases, though local officials figure the final property tax bill, it is based on the value of the shooting sports operation’s business property as reported by the business.
Obviously, understanding the local jurisdiction’s property tax rules can help ensure only the fair share of property taxes are being paid. Correcting the appraised value assessed by the local property tax jurisdiction—or ensuring current values of the operation’s other assets are reported correctly—can open the door to property tax savings for years to come.
Typically, filling out a couple of forms and submitting a letter or petition will kick-start the appeal process. Since the process can vary depending on the municipality’s location, ensuring that the requirements are followed precisely is important.
This is usually a process that can be accomplished by the shooting, hunting, or outdoor dealer or manufacturer without outside help. If successful, the adjusted value becomes the new basis for the property tax for years to come.
On the downside, a Business Personal Property Tax Audit is an increasingly more common occurrence and can result in unexpected tax liabilities, penalties, and interest payments. In fact, some audits can cover periods of up to four years, resulting in a time-consuming information-gathering process.
Although no one knows the business better than its owner or manager, property tax appeals are time-consuming complex affairs that require an understanding of the process that exists in every property tax jurisdiction where the business has property. Thus, the need for professional help.
Hiring outside professional assistance can mean success, with less time consumed along with nominal fees. Fortunately, there are firms that will undertake an appeal on a contingency basis; here, fees are based solely on the amount of a reduced property tax bill over a period of years.
Since the business property tax is computed at the local level, a knowledge of business tax laws and the operation’s assets is a necessity to help ensure the shooting sports operation’s business property tax responsibilities are met at the lowest possible cost. Professional assistance may help.