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.

The Taxable Difference Between Supplies & Inventory

taxable difference

NC is one of the few states in the Southeastern US to offer a tax exemption on BPP inventory; and to taxpayers, there is often a thin and confusing line between what counts towards inventory versus supplies, and which types of businesses can benefit from this exemption.

Even more confusing, what is seen as supplies for one business, can count as inventory for another.

Why does the difference matter? It matters because while inventory is exempt from the tax base, supplies most certainly are not. Business supplies are required by NC General Statutes to be listed and taxed annually.

Supplies that are mistakenly viewed by taxpayers (and their accountants) as inventory go unreported and are left off the tax rolls. That’s yearly revenue lost for your tax office – and more time that will be spent on discoveries down the road.

Save time and resources by educating business owners! See below for a summarized refresher on the NCGS definitions of “supplies” versus “inventory” and the business types this distinction applies to.


Which businesses are exempt?

Manufacturers, retailers, wholesalers, & construction contractors are exempt while in the regular course of business.

Inventory: Items in stock, which are held for sale during the regular course of business, and any packaging materials that go with, and become a part of the goods sold.

Examples include: 

  • Manufacturers  – Raw materials, goods in process, finish goods, or other materials that accompany and become a part of the sale of the property being sold
  • Construction Contractors – Goods held to be furnished in the course of building, installing, repairing, or improving real property
  • Crops, livestock, poultry, feed used in the production of livestock and poultry, orr other agricultural or horticultural products held for sale.
  • Cars, trucks, tires, etc. sold in the automobile industry
  • TVs, computers, mobile phones, etc.  sold in the electronics

Supplies: Items used to help conduct and maintain a business, but are not the direct source of the income – and are not held for sale by the business.

For example, purchasing coffee and popcorn to have on-hand daily for customers at a car dealership may contribute to the business and play a part in retaining customers, but those items are not held for sale and are therefore categorized as supply verses inventory.

Additional examples include:

  • Cleaning/Janitorial items
  • Office items (paper clips, note pads)
  • Maintenance items (oils & lubricants)
  • Fuels (consumed in vehicles owned or leased by the business)
  • Medical/Dental/Doctor/Veterinarian items (syringes, molds, crutches, cat litter)
  • Barber/Beauty items (shaving cream, hair coloring, make-up)
  • Restaurant/Hotel items: (dishware, trashcans, glasses, linens)
  • Snacks & Drinks that are on hand & free for employees or customers
  • Rental items & replacement parts

For tips on how to prepare and educate your taxpayers for annual listing, check out this article on ways to Prepare Taxpayers for the Supply vs. Inventory Distinction.

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.

North Carolina General Statutes, Chapter 105 (2013).

NC Counties Topping the Collection Rate Charts

The higher percentage of all taxable property that your county collects, the more revenue your tax office is generating.

We’ve got the latest list of NC counties leading the property tax collection rate category (excluding motor vehicles). Since even a slight change in the percentage you’re collecting can mean a big difference in your county’s revenue, it’s important to know where you stand and set appropriate benchmarks.

collection rate chart

For the Fiscal Year ended June 30, 2013, the percentage of taxes that were collected by each county ranged from 91.71% to 99.81%.

The average state-wide percent collected for NC counties varied by the following population groups:

  • 100,000 or Above: 98.64%
  • 50,000 to 99,999: 97.42%
  • 25,000 to 49,000: 96.52%
  • Below 25,000: 96.17%

Click here now to view the full NC County Tax Collection Report and know where your county stands. This report lists all 100 counties, ranked by the percent collected for all property, excluding motor vehicles, in each jurisdiction.

National Trends in County Government

trending topics

The National Association of Counties (NACo) surveyed a portion of their members to gain perspectives on the latest trends in county government – ranging in topics from social media to the impact of natural disasters.

There are 3,068 county governments in the U.S. Discover if your viewpoints closely align with what others in local government offices are thinking – or, if they are way off base.

Read on to discover key findings and stats from the frame of reference of county officials nationwide!

Survey Says…

19% meet with their Congressional delegations in person or by phone more than 10 times per year.

20% served on a local tourism board to promote economic development.

24% believe a better trained workforce would improve their local economy.

25% think Tax Reform is the top issue facing congress.

34% do not categorize their county as urban, suburban, or rural. They describe it as a “strong mix of all”.

40% are anticipating a local revenue shortfall in the current fiscal year, which may result in reducing services to the people in their communities.

48% operated a county jail at or above capacity, placing additional burdens on the county justice system.

51% selected “economic growth” as their public service passion.

52% said state policies and programs have had a positive impact on their county – but amidst other policy challenges, reductions in state funding are the most common source of counties’ current revenue shortfalls.

63% want to keep the federal tax deduction for local property taxes.

66% are using Facebook and Twitter.

70% were in counties that received a Major Disaster Declaration over the last 5 years, appearing that the “new normal” of natural disasters is having widespread impact – reinforcing the importance of disaster aid for response and recovery.

72% support increasing the federal gas tax to boost the Highway Trust Fund and give high priority to new local investments in infrastructure, business development and workforce development.

73% authorized county funding for economic development.

78% support maintaining the tax-exempt status of municipal bonds, a key federal-state-local partnership.

81% support early voting measures in the election system.

Source: 2013 NACo Outlook and Opinion: National Trends through the County Lenshttp://www.naco.org/newsroom/pubs/Documents/Surveys/2013%20NACo%20Outlook%20and%20Opinion.pdf

5 Simple Steps to Annual Billing Bliss!

5 simple steps

As the start of the fiscal year now approaches, the quick and hectic turnaround time to mail out tax notices appears more and more imminent. So what can be done in the months leading up to the annual billing cycle?

We spoke with the Randolph County Tax staff – who has this process down to a science – to put together this 5-step list of best practices to help you prepare for a smooth success in the months leading up to the big day.

Step 1: Set Annual Billing Process Deadlines

  • Each year, by the end of May or first of June, hold a combined meeting between your Tax, Finance, and IT staff members to set deadlines for all processes related to annual billing. In this meeting, outline any outstanding issues and prioritize any issues directly related to Billing that may need to be resolved.

Step 2: Verify Your Billing Data

  • Using your current Billing & Collections system, use queries to determine the validity of your data. For example, try running a query to ensure that all abstracts contain their proper taxing jurisdictions.
  • Keep a list of any billing errors that have been made in the past and track these issues from year-to-year to ensure that the same mistakes are not made twice.

Step 3: Sync Current Data to Test Servers

  • By early June, enlist key IT staff members to ensure that your test servers for Trial Billing are imported and updated with your current, verified billing data.
  • Compare the real estate values between your B&C system and your Computer Aided Mass Appraisal (CAMA) system. For example, check the totals from CAMA for parcel count, land value, real building, deferred value, historical deferred value, and total real property values.

Step 4: Trial Billing

  • After your CAMA & B&C data is synced with your test servers, begin your initial testing for the annual billing process.Trial billing consists of running through the annual billing cycle on your test servers to ensure the data is validated.
  • If issues in trial billing are located, clean up the data causing the issues before taking the next steps in the process.
  • Repeat the trial billing cycle to ensure that the revised data being entered during testing is not flawed. It is suggested to repeat this cycle weekly until your annual billing day arrives.

Step 5: Set Cutoff Date for Data Entry

  • By mid-June set a data entry cutoff date in your county tax office for all CAMA and Assessment staff. No data can be entered or changed after this date for the current billing year. If applicable, have IT staff set the Assessment staff user access rights to “ready only”.
  • The purpose of the cutoff date is to prevent your Billing numbers from continuously changing – if your numbers continue to change it is like you are chasing a moving target.
  • Any changes that occur after your cutoff date will be made after you perform the annual billing process.

So, as you start to make your plans for the upcoming billing process, just remember to refer to this 5-step list to annual billing bliss!