Retail companies face a unique property tax compliance landscape due to complexities associated with personal property and inventory across many jurisdictions. This creates a compliance requirement with many filings, various deadlines, and a large volume of notices and tax bills to review.

For many retail companies, successfully navigating personal property tax compliance requires a significant time and resource investment which can overburden in-house financial teams. Outsourcing personal property tax compliance processes to experienced professionals not only relieves your in-house team of this burden, but can also prevent costly fines, penalties, and other noncompliance issues that impede forward progress.

Gain a deeper understand of how personal property tax compliance impacts retails companies and how outsourcing can help your company overcome the challenges it presents.

Overview of Personal Property Tax Compliance

How personal property tax compliance is structured targets many retail organizations operating processes. For example:

• Business personal property is taxable in 38 states and Washington DC
• Retail inventory is taxable in 10 states and Tennessee assesses raw materials
• Personal property taxes are usually administered by local tax assessors and at the county level
• Taxpayers who own taxable personal property or inventory on the lien date are required to self-report such property to the county assessor
• For retailers, reporting of property is on a location-by-location basis.
• Once returns have been filed, property tax assessors generally release Notices of Value for the taxpayers to review for accuracy and correctness.
• Taxpayers are given a finite window of time to dispute Notices of Value. If no appeal is filed the assessment will be enrolled as-is.
• Once assessments are finalized, tax bills will be sent to the taxpayers.

Personal Property Tax Pitfalls

Personal property tax compliance pitfalls can be costly for retail organizations. These costs are frequently due to the improper administration of the compliance process which can cause the taxpayer to:

• Incorrectly report fixed assets to wrong asset categories, leading to artificially and incorrect assessments
• Over-report assets, including intangible and non-taxable assets, resulting in overassessment
• Be unaware of and not file for available exemptions and abatements
• Incur costly penalties and interest due to missed filing due dates and tax bill payment deadlines

Common Personal Property Tax Compliance Issues

Failure to comply with the personal property tax reporting process and file the annual returns on a timely basis is one of the more common challenges for retail companies and can result in costly penalties and interest.

Additionally, workload and resource timing issues can quickly become problematic as personal property tax work is seasonal and can overlap multiple other tax deadlines.

Navigating the personal property tax compliance landscape successfully requires:

• A knowledge of various filing and appeal deadlines—which can change—and reporting requirements across multiple jurisdictions
• Reviewing the large volume of Notices of Value for accuracy is time consuming process.
• Tracking a potentially large volume of tax bills to be paid in a timely manner can lead to missed payments and increased costs.

Benefits of Outsourcing Personal Property Tax Compliance

Outsourcing personal property tax compliance processes and reporting can provide significant time and cost saving benefits, such as:

• Reduce Risks. Outsourcing personal property compliance tasks to tax professionals gives you access to compliance requirement expertise that can help identify potential property tax issues early and prevent missed deadlines and penalties.
• Return Time to Employees. Return time to your teams and allow them to focus on high value work by removing rendition filing, notice of value (NOV) review, and bill tracking from their workload.
• Stay Current. Outsource professionals can keep you apprised of new developments in property tax, and help you interpret and apply new laws.
• Save Taxes. Working with outsourcing professionals can help uncover tax saving opportunities, including value reduction and exemption applications and keep you remaining abreast of changes in property tax legislation

How to Evaluate Primary Property Tax Compliance Approaches

Maintaining compliance with personal property tax relies on effective compliance and reporting workflows and processes. Evaluate your existing approach by asking the following questions.

Are NOVs Reviewed to Uncover Opportunities?

Reviewing NOVs in a timely manner allows for proper review of assessments for potential valuation overassessments.

Appeal opportunities need to be formulated to meet strict appeal deadlines and assessment errors caused by the assessor to be caught and remedied. Accounting accrual budgets can be reviewed and finalized based on the receipt of finalized assessment information.

Are All Available Tax Exemptions Being Leveraged?

In the states that assess inventory, if a distribution center ships product out of state, the organization could be entitled to a Freeport Exemption or other inventory tax breaks. Depending on taxpayer fact patterns, there are other possible exclusions for:

• Renewable energy;
• Pollution control
• Fire-safety equipment.

Are Submission and Appeal Deadlines Known?

There are thousands of local tax assessing jurisdictions with ever-changing filing due dates that can lead to late filing renditions and incurring penalties. When reviewing NOVs, special attention should be given to appeal deadlines, as missing these can lead to an incorrect assessment being assessed.

Are Opportunities to Reduce Taxes Being Identified?

A well organized and cohesive personal property tax compliance process will allow for:

• Personal property tax renditions to be filed accurately and on time
• Exemptions and abatements to be filed for
• Assessments to be reviewed for errors or valuation discrepancies
• Tax bills to be tracked, received and paid before penalty and interest is incurred

We’re Here to Help

For more information on personal property tax compliance impacts retail organizations and how outsourcing these processes can benefit your business, contact your firm professional.

Additional Resources

• Property Tax Services
• State & Local Tax Services