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By Altus Group | April 27, 2020

It’s more than just a number off your Balance Sheet…or is it less?

Inventory valuation is often the driver of personal property tax liability for companies in a variety of industries. The filing instructions are deceptively simple and can lead to taxable values being overstated.
Here are 5 Fact vs. Myths to help ensure you’re not paying more than your fair share of property taxes.

Myth #1

Cost of Inventory on Balance Sheet = Market Value


No, not all costs included as inventory for GAAP / IFRS purposes are reportable and taxable as Business Personal Property. It’s important for companies to understand their inventory process, supply chain, and various costs that make up their General Ledger Inventory Balance. There are often soft costs included in inventory for financial reporting purposes that are non-taxable from a personal property tax perspective.

Myth #2

The only way to quantify a Fair Market Value reduction to inventory is by hiring an appraisal


No, you can utilize your own data and use it to support reductions that can be carried forward for future tax years with minimal incremental effort. An in-depth inventory filing methodology review often generates perpetual personal property tax savings.

Myth #3

Supplies and Inventory are treated the same


No, in many states Supplies are taxable where Inventory is not. This makes the determination of inventory vs. supplies extremely important and it can differ from state to state.

Myth #4

I’m required to report inventory as of calendar year end in every jurisdiction


No, each State / Jurisdiction has specific rules for inventory reporting. While some do require the year-end inventory balance, others require an average for the year or allow the taxpayer to select the date of inventory valuation. Depending on your business, there could be a significant difference.

Myth #5

Shrinkage and Spoilage are the only adjustments available to Taxpayers related to inventory


No, while shrinkage and spoilage are the most well-known, there are often many different cost and/or valuation adjustments that can have an impact on fair market value.
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