4 Tax Savings Accurate Data Can Provide for Inside Plant Asset Owners
Having up-to-date asset inventory data is important for many reasons. Current, accurate data can be used to document ownership, verify your inventory is in working order, and ensure the reliability of your service. Having current inventory data readily available also aids in your business not paying more than your fair share of taxes.
While it differs area to area, telecommunications assets are generally considered to be taxable real estate, and telecoms are thus required to pay certain taxes for each of their plug-in assets – such as an ad valorem taxes. The following points outline how asset owners may be able to save some money when it comes to taxes by maintaining an accurate inventory.
1. Ad Valorem Tax Savings
An ad valorem tax is typically imposed on each asset, and it can be levied on an annual basis. By maintaining an accurate inventory of the assets a company actually owns, companies can ensure that they are not paying taxes on assets that have since been removed but have not be “retired” and are still listed as in-service in the asset record.
2. Ad Valorem Tax Savings Part 2 - Depreciation
Certain taxes are measured in proportion to the monetary value of what is being taxed. Spare equipment can fluctuate in value and depreciates over the equipment lifetime. By tracking when plug-ins were put in service and what category to which they belong, as well as when assets were purchased, you can track depreciation and reduce the book value of these items, thus reducing the amount of taxes owed.
3. Capital Deferments
Telecommunications companies typically have a store of movable assets, or spares, in order to have instant access to the parts needed to replace defective units. In the same vein as tracking in-service assets, by also taking an inventory of spare assets, and ensuring the proper updating of these corporate asset records for depreciation and retirement, companies can maximize tax savings. In addition, by being able to identify excess spares, companies can sell those that are no longer required to fill internal demand.
4. Incremental Tax Jurisdiction Savings
There are distinct tax regulations for different jurisdictions – municipalities, cities, counties and countries. When an asset is purchased, taxes are paid based on the location where they lie. If the asset moves to a higher tax jurisdiction, the incremental amount should be paid. If a company is not tracking these moves, they may be paying the full rate each move, even if that move was to a lower tax jurisdiction. It is also important to ensure that assets are not mistakenly recorded in the wrong location, resulting in higher tax rates.
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