4 ms·

so just property tax then, like an empty warehouse holds the same tax burden as one filled to capacity with inventory? I thought someone was suggesting more tha

so just property tax then, like an empty warehouse holds the same tax burden as one filled to capacity with inventory? I thought someone was suggesting more than property tax.

R0b0t1 5y ago
What is in the warehouse is property also
nickff 5y ago
Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate. This taxation is why corporations often prefer to lease rather than own, and why they often pay out dividends rather than using the money to collect assets.
- jxramos 5y ago
  wow, I never knew that. I always perceived inventories as risks companies took assuming they'd be able to sell it all or at the least would be able to liquidate it at cost if it came to it. Sounds like the books are already negative just taking on inventory from the get go above production and shipping and whatever else.
  - nickff 5y ago
    If you sell the inventory at a loss, you can 'write off' the 'lost value', which reduces your profits on paper in that fiscal year (and the corresponding taxes), but you did already pay taxes on holding that inventory. These taxes reduce the amount of money you can spend on capital equipment, inventories, and facilities, which reduces your maximum rate of growth. All of these are the reasons that software businesses are so heavily advantaged by the tax code. They don't have to pay taxes on (much) capital equipment or inventories, and the smaller facilities are also beneficial from a tax perspective.
    - OldTimeCoffee 5y ago
      >These taxes reduce the amount of money you can spend on capital equipment, inventories, and facilities, which reduces your maximum rate of growth. I mean, yes, but not really. They're not a meaningful portion of their revenues. Typically it's around 1% of the acquisition cost of the item inclusive of any fees required to get it in your inventory. This is akin to complaining about paying BWC taxes which are about 1% of your payroll. If they're a real hardship to your business, your business has more problems than holding excess inventory.
      - nickff 5y ago
        I’m not sure where you’re getting your “1%” from, but corporations are liable for full income tax (21% in the USA), on the (depreciated) increase in the value of their assets.
        OldTimeCoffee 5y ago
        The original start of this thread by jxramos was referring to how inventory was taxed. "curious, who's taxing for inventory?" You responded: >Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate. and >you did already pay taxes on holding that inventory. Inventories are taxed as property which is, in general, about 1% of the cost (to the company) of the item. You're conflating income and property taxes. What your describing in your previous posts is an income tax, which is the tax paid on the net income associated with an asset. However, you have to dispose of the asset to pay that tax. Until then the asset is property and it's only subject to property tax. Normal accounting disclaimer applies. Definitely get an accountant and don't take accounting advice from the internet.
        nickff 5y ago
        >"Inventories are taxed as property which is, in general, about 1% of the cost (to the company) of the item." Most jurisdictions don't have the asset taxes you're describing. Some do, in which case inventories cost extra to hold each and every year. >"You're conflating income and property taxes. What your describing in your previous posts is an income tax, which is the tax paid on the net income associated with an asset. However, you have to dispose of the asset to pay that tax. Until then the asset is property and it's only subject to property tax." No, when a company uses its revenues to buy stuff and hold onto it, the government counts the value of that stuff as profits, and taxes are paid on that 'income' in the fiscal year of acquisition. The assets are then gradually depreciated (with the depreciation treated as a loss). If the assets are sold off, income taxes are assessed against sales in excess of the depreciated value, and losses are assessed (along with corresponding write-offs) against sale values below the depreciated value of the asset. >"Normal accounting disclaimer applies. Definitely get an accountant and don't take accounting advice from the internet. " I completely agree with this, especially since tax law varies widely, even between Canada and the USA.

so just property tax then, like an empty warehouse holds the same tax burden as one filled to capacity with inventory? I thought someone was suggesting more than property tax.

R0b0t1 5y ago

What is in the warehouse is property also

nickff 5y ago

Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate. This taxation is why corporations often prefer to lease rather than own, and why they often pay out dividends rather than using the money to collect assets.

jxramos 5y ago
wow, I never knew that. I always perceived inventories as risks companies took assuming they'd be able to sell it all or at the least would be able to liquidate it at cost if it came to it. Sounds like the books are already negative just taking on inventory from the get go above production and shipping and whatever else.
- nickff 5y ago
  If you sell the inventory at a loss, you can 'write off' the 'lost value', which reduces your profits on paper in that fiscal year (and the corresponding taxes), but you did already pay taxes on holding that inventory. These taxes reduce the amount of money you can spend on capital equipment, inventories, and facilities, which reduces your maximum rate of growth. All of these are the reasons that software businesses are so heavily advantaged by the tax code. They don't have to pay taxes on (much) capital equipment or inventories, and the smaller facilities are also beneficial from a tax perspective.
  - OldTimeCoffee 5y ago
    >These taxes reduce the amount of money you can spend on capital equipment, inventories, and facilities, which reduces your maximum rate of growth. I mean, yes, but not really. They're not a meaningful portion of their revenues. Typically it's around 1% of the acquisition cost of the item inclusive of any fees required to get it in your inventory. This is akin to complaining about paying BWC taxes which are about 1% of your payroll. If they're a real hardship to your business, your business has more problems than holding excess inventory.
    - nickff 5y ago
      I’m not sure where you’re getting your “1%” from, but corporations are liable for full income tax (21% in the USA), on the (depreciated) increase in the value of their assets.
      - OldTimeCoffee 5y ago
        The original start of this thread by jxramos was referring to how inventory was taxed. "curious, who's taxing for inventory?" You responded: >Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate. and >you did already pay taxes on holding that inventory. Inventories are taxed as property which is, in general, about 1% of the cost (to the company) of the item. You're conflating income and property taxes. What your describing in your previous posts is an income tax, which is the tax paid on the net income associated with an asset. However, you have to dispose of the asset to pay that tax. Until then the asset is property and it's only subject to property tax. Normal accounting disclaimer applies. Definitely get an accountant and don't take accounting advice from the internet.
        nickff 5y ago
        >"Inventories are taxed as property which is, in general, about 1% of the cost (to the company) of the item." Most jurisdictions don't have the asset taxes you're describing. Some do, in which case inventories cost extra to hold each and every year. >"You're conflating income and property taxes. What your describing in your previous posts is an income tax, which is the tax paid on the net income associated with an asset. However, you have to dispose of the asset to pay that tax. Until then the asset is property and it's only subject to property tax." No, when a company uses its revenues to buy stuff and hold onto it, the government counts the value of that stuff as profits, and taxes are paid on that 'income' in the fiscal year of acquisition. The assets are then gradually depreciated (with the depreciation treated as a loss). If the assets are sold off, income taxes are assessed against sales in excess of the depreciated value, and losses are assessed (along with corresponding write-offs) against sale values below the depreciated value of the asset. >"Normal accounting disclaimer applies. Definitely get an accountant and don't take accounting advice from the internet. " I completely agree with this, especially since tax law varies widely, even between Canada and the USA.