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Report: property taxes exceed sales tax for biz.

Property taxes represent almost as much of companies' total state and local tax burden as corporate income taxes, according to a survey by Coopers & Lybrand of 348 companies across the country.

Senior executives in a broad spectrum of industries, the majority of whom represent companies with annual revenues more than $100 million, report, that corporate income taxes imposed by states and localities constitute 38 percent of their total tax burden, and real and personal property taxes together embody 37 percent.

Asked about the composition of their total state tax burden. companies said income taxes comprise 38 percent; real property represents 22 percent; personal property, 15 percent; sales and use taxes, 16 percent; and capital-based franchise tax, 9 percent.

Many companies may not realize that the combined total of real and personal property taxes, 37 percent, is comparable to their state income tax obligation, explains Dennis Neilson, director of property tax services for Coopers & Lybrand, the international tax, accounting and consulting firm.

"Moreover, companies may inadvertently understate property tax costs," he added. "Because property taxes are often administered and paid locally, and are usually not under centralized management control, they can be much more difficult to fully determine."

Neilson also cautions that companies may minimize their personal property tax costs by considering only "real" property, or real estate, Neilson said. Businesses such as manufacturers may find that personal property, which includes equipment and inventory, is a much higher percentage of property tax costs than real property, he explains.

Neilson adds, "It is also possible that companies are focusing on corporate income taxes because historically they have devoted most of their time and effort to minimizing this liability. But the cumulative impact of real and personal property taxes represents an equally onerous burden on businesses."

To compound the situation, companies may also view property taxes as fixed, rather than negotiable, costs. "Because property taxes are a difficult area to manage centrally, companies may be missing many opportunities to reduce these taxes," Neilson said. "Only by looking at their property taxes in a comprehensive way will they be able to control these costs."
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Title Annotation:Coopers and Lybrand report
Publication:Real Estate Weekly
Date:Sep 9, 1992
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