RETAIL
Retail operations, in the context of property tax, include a wide variety of users - fast food restaurants, funeral homes, auto-repairs shops, grocery stores, malls, gas stations, big-box stores, and many other operations which derive income from the selling of products and services within the structure. Most retail operations include substantial furniture, such as racks and cases, equipment, supplies, and inventory. These personal property items are sometimes tracked in a fixed asset listing, making them easier to present to an assessor. Inventory balances, usually being of great value and tracked accurately, are effected by spoilage, average balance calculations, shrinkage, and other value adjustments. The real estate, which can sometimes be highly customized for specific retail operations, may or may not accommodate other retail users from other industries.
CONCERNS FOR RETAIL
Property Tax Services, Done Right, Go Far Beyond Return Filing
Property taxes divert valuable staff away from more important projects and regular finance operations during the busiest accounting months of the year, January through April. The diversion of staff, not to mention the costs of missed opportunities, are too expensive not to call in a quality consultant.
ASSET REVIEW
Retail personal property assets usually include computers, office equipment, furniture, specialized equipment, and other short-lived tangible and intangible assets. Retail operations may also have considerable tenant improvements, particularly in high-end stores or brand conscious retail establishments (such as franchise restaurants). Many companies operate their fixed asset lists and record keeping around two functions - inventory allocations and income tax depreciation. Neither of these focuses align with the interests of property tax assessments. Testudo reviews your assets in the manner that matters to assessors. Our method includes verifying the physical presence of assets, componentizing costs (particularly tenant improvements), reviewing asset condition, reviewing inventory cycles, and numerous other considerations. Due to capitalization thresholds, fixed asset lists rarely list all the assets on site. Simultaneously, it is easy to over estimate the value of the assets when a maintained asset list isn't used. The goal is to identify exposures and opportunities.
EXEMPTIONS
Numerous jurisdictions offer, sometimes locally and other times statewide, partial or complete exemptions for certain assets, businesses, geographic areas, or uses. Examples relevant to retail operations can include pollution control exemptions, freeport exemptions, intangible exemptions, development zone incentives, and industry specific exemptions. Such exemptions may be written in the state constitution or be buried in local code. Many require extensive documentation and an application process to one or many governing authorities for a single exemption.
INDUSTRY REVIEW
For clients with specialized, industry specific assets, such as high tech medical equipment, satellite relay equipment, computer mainframes, high-end printers, and small labs, require a review of the market for the client's products and services, prices, competition, technology, customer base, trajectory, and the numerous other facets that are relevant to determining a just taxable value and identifying potential exemptions from taxation.
ASSET CLASSIFICATION
Testudo will review the current and best alternative classification of every asset for your property. Rather than just assuming the perfection of the tables provided by the local assessing authority, the accuracy of the description of the fixed asset listing, or ignoring the prospect of a costly audit, Testudo reviews the actual assets in place, their actual economic life, and their real use. With this information, Testudo can classify assets in a defensible and reasonable way, to result in the least amount of taxes possible, without the need for appeal.
REAL ESTATE
Retail, in a real estate sphere, can include a wide variety of operations. Retail includes bowling alleys, auto dealerships, funeral homes, gas stations, and banks, along with the more typically considered retail operations - big box retail, malls, and grocery stores. Consequently, retail can span a fantastic range of cost and specialization, due to location, finish quality, building layout, and architectural features. Many retail structures can be transferred between owners who intend to use the structure to sell a similar product or service. For Example, a steakhouse can be purchased and used for another restaurant purpose without stripping the building down to its foundations. However, even within the narrow sphere of restaurants, this is not necessarily the case. Some franchise restaurants have architectural designs that are so singular that even another fast food restaurant with a similar product cannot make use of the property without extensive remodeling. Simultaneously, retail operations are very susceptible to their street appeal. This is why shopping centers and malls invest millions of dollars updating functional, but dated building exteriors.
The value of the real estate is derived from its capacity to house retail operations which can generate profit. Location, access, apparent age, security, robustness of layout, consumer spending, and much else effect the value of real estate. Consequently, market sales and an income analysis are highly relevant to determining the value of these structures. However, the analysis must contemplate the numerous factors which effect those valuation methods.
VALUE ANALYSIS
Ad Valorem Taxes are taxes "to the value" of the subject property. Whether real estate or personal property, that value is subjectively derived (if it is to in any way reflect market value). Consequently, it is in the interest of the owner to know if the value derived by the assessor's calculations are just and reasonable. Even a return, accurately provided to the assessor, may result in a grossly incorrect value. The assessor may not know if some equipment is inoperable, if a building is vacant, if the technology is obsolete, if the inventory figures are adjusted, if there are damages to the structure or personal property, or any number of other influences on the value of your property. The assessor cannot be expected to know all these influences. It is up to the consultant, and expert witnesses (when necessary), to research, identify, and weigh these influences, to scrutinize the justness of the assessor's findings.
AUDIT DEFENSE
Some jurisdictions regularly audit taxpayers above a certain payment threshold. Practically all have the power to audit businesses returns, sometimes going back five or more years. These audits can be time consuming, nerve racking, and costly, if not properly managed. Testudo assists businesses by acting as recipient of the auditors inquiries, providing answers, and minimizing the impact to operations of the business. Additionally, Testudo will work to keep the resulting audit just and not unreasonable in its findings. If an audit is forthcoming, enrolling the services of a tax consultant as early as possible in the process will serve the tax payer more than the audit's conclusion.
COMPLIANCE
Most states require the filing of annual returns and records to be used by assessing authorities, be they local or state officials, to determine the value of your property for property tax purposes. Businesses may also be required to file their financial statements, previously obtained exemption certificates, inventory reports, fixed asset lists, and other documents. Such returns must be timely filed or penalties and the revocation of rights, such as the right to appeal the resultant value, will be enforced against the tax payer. A 10% tax penalty is common for late returns. Another great effect of a professionally produced return is that the taxpayer is much better able to predict the value and tax many months in advance of their issuance. Improperly completed returns, in addition to penalties, do not allow business owners to accurately predict what their tax bill will be that year.