Property Taxes

Of course, you will have to pay real estate taxes on any real estate that you or your business owns. Also, many commercial and industrial leases are written so that the lessee, not the lessor, is responsible for taxes. Sometimes the lessor will pay what is referred to as the “base-year taxes.” This means the lessor pays tax equal to the taxes of the base year—often the year before the lease was signed—set as the base year; then the lessee pays any increase.

For most localities, the tax rate on commercial and industrial property is significantly higher than the rate applied to residential property. Furthermore, many communities assess the value of businesses, particularly those with nonlocal owners, at ridiculously high levels to minimize the tax burden on local voting citizens. This practice is so widespread that there is a whole group of attorneys who specialize in suing towns and cities in an attempt to receive fair tax treatment for their business clients.

These clients are often national chains. If you feel that your tax assessment is too high but the amount owed is not huge, file a request for a new assessment before hiring expensive, specialized legal help. I have had good experience filing requests for tax abatements.

Personal Property Taxes

In addition to taxing real estate, localities impose personal property taxes on just about everything else a business owns, including inventory, equipment, and furniture. The percentage of the estimated value is usually quite small, but the total dollar amount can add up if you own a lot of property.

Inventory and Tangible Property Taxes

Many states place a tax, based on a small percentage of actual value, on tangible property held within their state, including inventory housed on a certain annual date. This date is usually the last day of the year. And, if you have a lot of valuable inventory, such as if you are a car dealer or a manufacturer, your personal property tax bill could be huge. Some inventory-intensive businesses try to work down their inventory around the date that the tax is based on.

Other Taxes

Your business may be subject to additional taxes. Some of these types of taxes are applicable only within certain industries. For example, most localities levy specific taxes on lodging establishments, some on amusement facilities, and others on restaurants.