Prepare Taxpayers for the Supply vs. Inventory Distinction

suppy v inventory

As we gear up towards the end of yet another calendar year, put plans in place now to give a little PR time to the taxable, yet confusing, differences between Business Personal Property “supplies” and “inventory” for manufacturers, wholesalers, retailers, and contractors.

Why advertise this distinction?
While we may know and understand the ins and outs of the NC tax statutes, not all taxpaying citizens share in our enthusiasm for a thorough-read of the Machinery Act.

With NC on a 10 year population gain streak, it’s more important than ever to clearly advertise on the key differences in our state BPP laws versus some of the surrounding states in our southeast region. Virginia, West Virginia, Kentucky, Tennessee, Mississippi, and Georgia – all DO include business inventory in their tax base – where NC has chosen to keep it exempt.

Sounds straightforward enough, right?

Unfortunately, problems arise when what is defined as “inventory” from the taxpayer’s perspective differs from the legal definition of inventory for taxing purposes – especially those taxpayer’s who are new NC, and therefore new to making that distinction.

According to the NCDOR, the following are commonly reported issues county appraisers have with business owners concerning supplies & inventory:

  • Taxpayers call supply items their inventory!
  • Taxpayers don’t know how to list their supplies
  • Taxpayers don’t keep up with the amounts that are on hand
  • Taxpayers wants to exclude certain items when their business is not manufacturing, retail, wholesale, or contractor related

Year after year, as NC continues to draw in new business, you receive the same questions and spend more time and resources on discoveries for those taxpayers who fail to list their taxable business property “supplies” by confusing them for exempt “inventory.”

Save yourself time and increase your revenue pool: Don’t leave room for interpretation. 

Making the plans to highlight on these key differences now will save you time in the future. So cut down on unnecessary office calls and questions by hosting and highlighting the information on your website and in your office.

Online: Make links readily available on your county homepage, again on your tax department page, and again alongside any information related to BPP tax listings/payments.

In office: Place the information in convenient, easy-to-access locations around your office. Hang signs and offer brochures.

Don’t make business taxpayers hunt for information you want them to find. Make use of bold lettering and larger fonts to draw attention to details that need to stand out. And don’t leave room for interpretation – try offering examples that typically fall under each category and keep your taxpayers from guessing come listing period.

Need a refresher yourself on the differences between BPP “supplies” and “inventory”? Read The Taxable Difference Between Supplies & Inventory for a quick summary.

Sources:

Duty, David. “Cross Section of Business Personal Property Issues.” 2013 Advanced Personal Property Seminar. Sheraton Four Seasons Hotel, Greensboro, NC. 23 September 2013. PowerPoint Presentation.

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