Financed bySupported byImplemented in cooperation with Financed bySupported byImplemented in cooperation with Taxation Advanced

Financed bySupported byImplemented in cooperation with Use Tax Imposed on the retail sale of tangible personalty or services within the taxing jurisdiction Imposed on the possession, use, storage, or consumption of tangible personal or services within the taxing jurisdiction Sales Tax Types of Sales Tax Retail Sales Tax Seller Privilege Tax Gross Receipts Tax

Financed bySupported byImplemented in cooperation with Retail Sales Tax Sale must take place within the territorial boundaries of the taxing jurisdiction Sale must be of tangible personal property Intangibles, real property and services generally excluded A planning issue for mixed activities (property & services) Imposed only once during the entire chain of events starting from the point where the goods are manufactured and culminating with their eventual sale to the retail customer.

Financed bySupported byImplemented in cooperation with Selling price—Total cost to the consumer exclusive of discounts allowed and credited, but including freight and transportation charges from retailer to customer” Gross Receipts—Total selling price or the amount received as defined in this act, in money, credits, property or other consideration valued in money from sales at retail within this state. Gross Receipts do not include: Cash discounts Returns and allowances Transportation charges—separately stated Trade-ins Finance and service charges Bad debts

Financed bySupported byImplemented in cooperation with Property Taxes The Property Tax Base Real property taxes Imposed on land, buildings, and improvements on the land. Value determined the county assessor based on one of three methods Market value Percentage of market value Classified assessment level Value remains constant unless there are changes in market value, modifications in size or quality, or there is a general revaluation

Financed bySupported byImplemented in cooperation with Tangible Personal Property Valued annually as of a specific assessment date Taxpayers file annual property tax reports which show by class of property, the original cost of the asset by year of acquisition. Base value determined by comparables, adjusted to arrive at final value Property is classified as real or personal based on the definitions provided by state statute. Process of differentiation is called cost segregation. Taxpayers can challenge the assessment based on whether: Property is properly classified Property is not specifically exempt from the tax base Property is correctly valued

Financed bySupported byImplemented in cooperation with Common Exemptions Agricultural land Government property Education and library property Health care property Religious property Cemeteries Property of widows, widowers, veterans, homeowners, the elderly and disabled Various other not for profit organizations Tangible Personal Property Major Classifications Machinery & Equipment including supplies, consigned goods and goods in transit. Inventories—stock in trade + accrued costs Leasehold improvements—walls, ceilings, carpeting and lighting (may be real property in many jurisdictions)

Financed bySupported byImplemented in cooperation with Assessor’s Identification of Property Self declaration or rendition prepared by the business Review of government filings Income tax returns Business license lists Airport & marina lists Charters and permits Property Taxes—Valuation Cost Income Market Methods parallel those used for real estate

Financed bySupported byImplemented in cooperation with Property Taxes-Situs Stationary property taxed where located Moveable property generally requires a permanent situs from which it operates in order to be taxed In transit property moved by common carrier or private conveyance is excluded from taxation when not at the business premises.

Financed bySupported byImplemented in cooperation with Realty Valuation—The Income Method Frequently used for apartments, hotels, shopping centers, and strip malls Yield capitalization approach Used when cash flow is unstable Income = Σ (Projected Future Cash Flows X Discount Rate) Rate based on trends in sales, investment & industry sources

Financed bySupported byImplemented in cooperation with Real & Personal Property Valuation—The Income Approach Direct capitalization approach Used when the property’s cash flow is stable Value = Net Income/Capitalization Rate Net Income From Property Equals Total Estimated Income from Property Less Vacancy and Collection Loss Add Other Income from Property Less Operating Expenses

Financed bySupported byImplemented in cooperation with Real and Personal Property Valuation—The Cost Method Approach Attempts to find the value or cost to replace an improvement with a new improvement Includes only those costs that actually increase the property’s economic value Consider replacement cost, reproduction cost and either physical functional or economic depreciation Cost Value = Cost of improvements + Land (valued as vacant) Less Depreciation/Obsolescence

Financed bySupported byImplemented in cooperation with Real and Personal Property Valuation—The Cost Method Approach Cost of Improvements include: Direct costs Indirect costs Reasonable Profit Depreciation Straight reduction for wear and tear Obsolescence Physical Functional External

Financed bySupported byImplemented in cooperation with Real and Personal Property Valuation The Market Method Approach Valued using “comparable sales”—recent sales of similar property Market value is the most probable price that a property would bring in a competitive and open market, in which the price is not affected by undue circumstances.

Financed bySupported byImplemented in cooperation with Real and Personal Property Valuation—Issues with General Application Contribution—the value of a particular component measured in terms of its contribution to the value of the whole, or as the amount that its absence would detract from the whole. Highest and Best Use—Physically possible and financially feasible Substitution—prudent purchaser will pay no more than the cost of acquiring an equally desirable substitute on the open market.

Financed bySupported byImplemented in cooperation with Intangibles Tax Primarily assessed on the fair market value of stocks and bonds or deposits

Financed bySupported byImplemented in cooperation with Special Tax Incentives Area Specific Incentives - Enterprise Zones - Areas with higher than normal unemployment, Tax credits and benefits Sales and use tax credits for machinery purchases Hiring credit Expensing depreciable property Lender income deductions to zone businesses Preference points on state contracts Local and non tax incentives also important Foreign Free Trade Zone Employee-Related Incentives - Use in areas of high unemployment, often as part of enterprise zone incentives. Equipment Incentives - Investment Credits (enterprise zone) Research and Development Credit Building Restoration Incentives - Restoration of old structures Resource Related Credits - Environment related Privately Negotiated Incentives - To encourage substantial investment in a new location Employee-Related Incentives.

Financed bySupported byImplemented in cooperation with Business tax specific situations: In a tax clawback agreement, a company or organization agrees to repay government benefits via higher taxes at a later date. Tax clawbacks are a way for a government to reclaim funds that it feels have been abused in the private sector. They may accompany a variety of situations.

Financed bySupported byImplemented in cooperation with The tax differential view of dividend policy is the idea that capital gains are better than dividends because the tax rate on capital gains is lower than the tax rate on dividends. The larger the difference between the tax rates, the larger the incentive to trade one policy for the other.

Financed bySupported byImplemented in cooperation with Tax accounting focuses on the preparation, analysis and presentation of tax returns and tax payments For example, Company XYZ might use one accounting method for calculating depreciation when it reports financial results to investors, but tax laws may require it to use a different method for tax accounting purposes. As a result, Company XYZ might have one net income number on the financial statement filed with the SEC and a different net income number filed with the IRS. difference between "book and tax"

Financed bySupported byImplemented in cooperation with Profit before tax measures a company's operating and non-operating profits before taxes are considered. It is the same as earnings before taxes. Net operating profit after tax (NOPAT) is a measure of profit that excludes the costs and tax benefits of debt financing. Put another way, NOPAT is earnings before interest and taxes (EBIT) adjusted for the impact of taxes. NOPAT is also referred to as net operating profit less adjusted taxes (NOPLAT):net operating profit less adjusted taxes (NOPLAT) NOPAT = operating income x (1- Tax Rate) NOPAT is also used to calculateEconomic Value Added (EVA)Economic Value Added (EVA)

Financed bySupported byImplemented in cooperation with Profit margin usually refers to the percentage of revenue remaining after all costs, depreciation, interest, taxes, and other expenses have been deducted. The formula is: (Total Sales - Total Expenses)/Total Sales = Profit Margin Note that preferred stock dividens are typically included in the calculation, but common stock dividends are not.

Financed bySupported byImplemented in cooperation with A tax loss carryforward is a "negative profit" for tax purposes. It usually occurs when a company's expenses exceed revenues, making the company unprofitable. Tax loss carryfowards reduce future tax payments. Tax loss carryfowards reduce future tax payments. A tax umbrella is a negative profit that reduces a company's tax liability. It usually occurs when a company's tax deductions exceed its taxable income (often because expenses exceeded revenues, making the company unprofitable).

Financed bySupported byImplemented in cooperation with A tax-free spinoff occurs when a company divests a portion of its business in a manner that qualifies as a tax- free transaction and thus does not require the company to pay capital gains tax on the divestiture.