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July 26, 2022

Property Tax Comparison by State for Cross-State Business Decision-Making

Many businesses operate on razor-thin margins and even expected expenses like property taxes can be a significant factor in whether a company falls into the red. Moreover, property taxes can get complex when your business operates across state lines.

Business owners have a lot on their plates, but very little is as prominent or critical as financial burdens.  

Many businesses operate on razor-thin margins, and even expected expenses like property taxes can be a significant factor in determining whether a company falls into the red. Moreover, property taxes can get complex when your business operates across state lines. When done properly, however, cross-jurisdiction property taxes management can play a significant role in managing risk, optimizing value, and even expanding your real estate portfolio.

Two Kinds of Property Taxes: Real Property & Personal Property

To make things more complicated, your business may be subject to two kinds of “property” taxes, depending on where your business holds property and operates.

The first type of property tax—and the topic of this article—is the kind many people think of when they think about property, which is real estate property tax. The property your business owns (or, in some cases, leases) is taxed. It’s taxed at the assessed value of the property, not the market value, which can be different. Since assessments change over time, so too will your property tax burden.

The second type is business “personal property” tax. It applies to the value of your business assets and can include anything from company vehicles and manufacturing machinery to staff computers and office fixtures. Most countries, other than the US, and twelve US states do not tax business personal property at all. The US states without business personal property tax are Delaware, Hawaii, Illinois, Iowa, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Ohio, Pennsylvania, and South Dakota.

For the purposes of this article, we will focus on real estate property tax.  

Real Estate Property Tax, Under the Microscope

As if it wasn’t complicated enough to have more than one kind of property tax, property taxes aren’t assessed at the state level but by local jurisdictions and taxing authorities which use various methods to determine property tax rates and the property values to which those rates apply. And, of course, it’s all subject to change.  

Property taxes are vital in funding local programs and infrastructure—in fact, property tax is often the only funding source for many critical community programs. Cities and states must balance their desire to raise property taxes (and revenue) versus their desire to attract businesses by keeping tax rates low. As they work to strike this balance, cities are practically jockeying to be a more attractive versus their neighboring cities in a battle to entice new real estate investments and optimize their property tax revenue.  

With all this complexity, it’s no wonder that most businesses turn to software like itamlink to manage their property tax data for them.

Property Tax Ranking by State

The top ten states for low property taxes are Indiana, New Mexico, Idaho, Delaware, Nevada, Ohio, Utah, Missouri, West Virginia, and North Dakota. Conversely, the five with the highest rates are New Hampshire, New York, Illinois, Vermont, and Connecticut.

These numbers and rankings change as jurisdictions adjust their annual tax rates. Various maps like the one above and resources like this one allow you to see a comparison from state to state over the years.

Forecasting Property Taxes

It’s one thing to see a record of past tax rates. It’s quite another to forecast that information into the future.  

Many influencing factors can confound simple data trends, so the process is much more complex than simply tracking historical data. For the purposes of this article, let’s define forecasting at a high level.

There are two different methods for forecasting tax burdens: 

1. Tax-Based Forecasting

A tax-based forecast relies on the known liability of a prior year’s tax bill and a single unknown variable: the rate of increase/decrease, visible via the trend in your historical data. Though it requires estimating to fill in the unknown rate of increase, completing your forecasts can be accomplished by taking a prior year’s tax, and increase it by a percentage or amount of your choosing to estimate your total tax liability in the upcoming year. To build multi-year forecasts, you simply trend the estimated tax rate increase (or decrease) year over year for multiple years.

2. Assessment-Based Forecasting

An assessment-based forecast is a two-variable forecast where you trend for both property value and tax rate. In this model, you use prior year assessed property values as a base. While there are many components of the value that need to be accounted for, you might look for trends in your historical data to help fill in some gaps. After trending the tax rate and assessed property value according to the respective rates of increase/decrease you might have found in your data, you may estimate your overall tax liability for the year by applying the new estimated tax rate to the new estimated assessed property value.

For both of these forecasting models, one may wish to review historical trends, with advice from third-party experts/consultants where relevant, and always with a view to the nuances of your property (e.g. type) and jurisdiction.

You can read a more in-depth analysis of tax forecasting in our post on the subject here.

Best Practices for Managing Business Property Taxes in Multiple States

When you’re operating across state lines and in multiple different jurisdictions, it’s very easy to be overwhelmed by all of the various deadlines, tax rates, assessment rates, and other tax implications. This is so common that late property tax payment penalties are run-of-the-mill and many businesses even factor penalties into their projected liabilities for future tax forecasts.

We can help you—both with advice and enterprise-grade tools—to do a variety of critical things…

1. Track and stay on top of your tax due dates.

Federal and state taxes are largely on the same quarterly schedule, with everyone’s favorite deadline in April (subject to extensions and other variability as is natural for any major system). However, the same cannot be said of smaller jurisdictions for things like property taxes.

In fact, operating in multiple states can see you managing county-level deadlines, city-level deadlines, and school district deadlines, all of which can be different from one another.   Missing a deadline once is bad enough, but if you’re disorganized, it’s easy to make assumptions and miss many different deadlines in different areas, particularly for a multi-location business.

Building out a calendar of responsibilities is the barest minimum necessity to stay on top of your property tax burden.  

2. Understand assessment rates and depreciation schedules.

In order to understand your assessment rates and appeal opportunities, you first need to be certain that you have all your documents and data. It is easy to misplace a document, and it is easy to end up with errors in your data if your data is transcribed manually from your property tax bills into a spreadsheet, for example.  

If you can be certain of the accuracy of your data, then you can begin to look for patterns and set thresholds for your organization’s tolerance around rate increases. Your tolerance for change may differ by state, by jurisdiction, and by the various factors that are unique to your location or property.

Appealing your property tax assessments is one of the most important ways to control property tax liabilities and improve your bottom line, but finding which assessments to appeal can be challenging.  

By organizing your data in an ideal way, you can more easily identify patterns, outliers, etc. Relying on a software solution, for example, to organize your assessments and values data in one place, you can make large-scale data-driven, strategic appeal decisions across your entire portfolio.  

You need to see all your data because determining appeal opportunities isn’t as straight forward as flagging large increases. For example, let’s consider property value assessments, which are the annual adjustments made by the jurisdiction to the value of the real estate for the purposes of calculating taxes. Tracking these values alone isn’t necessarily enough. Assessment values are not always tied to fair market value, so tracking the local real estate market can only help you so much.

Software like itamlink enables you to filter across every data point and, in that way, can provide more insight into entire portfolio or jurisdictional trends and nuances that all influence whether or not you should appeal an assessment value.  

Used correctly, data can influence your tax burden significantly, and it pays to be prepared.

3. Turn property tax data into valuable finance intelligence.

We live in a modern, digital era. There’s no need to try to manage a wildly disparate tax burden across state lines with binders and spreadsheets.  

On top of that, hidden within all that data are insights that can be used to inform your business decisions. Trying to unlock those insights manually in spreadsheets is a futile exercise. However, using the computing power of software like itamlink can take your decision making to the next level.  

Imagine if you could stop wasting countless hours entering data manually, chasing down payment approvals, communicating when payments are approved and can be processed, and then adding those payments back into your spreadsheet. How much time would you get back? What could you do with that time?

We recommend using the robust filtering and reporting power of itamlink to optimize property portfolio values, both in terms of expenses and future planning.  

More than…  

  • avoiding penalties
  • taking advantage of early payment discounts, and  
  • identifying appeal opportunities

…itamlink is built for property tax forecasting and budgeting with accuracy and ease. Serve this data up to your finance team and you help your organization lever reliable information for the next fiscal year.  

Business Intelligence and Risk Management

When describing itamlink, it’s easy to stick to a data management story. After all, easily managing thousands of pieces of high-risk property tax data is nothing to scoff at. Really, “data management” may be the practical story of itamlink—but it’s not the whole story.

The reason we built itamlink, and do what we do today with such passion, is much more interesting.  

When property tax data and processes are NOT well managed, the risk to your business is great. Late payment penalties are really just the beginning when we talk about managing risk. So, you try your best and are grateful when you pay fewer penalties than you did last year even though that hardly seems like a real win.

The fact is, if it was easy to perfectly manage property taxes at scale, no business would lose documents, miss early payment deadlines, incur penalties, or worse. If it was easy, every real estate tax professional out there would be running a ship with no leaks... and that’s just not the case.

When your property tax data and processes ARE well managed, you can eliminate the risk and actually turn data into intelligence. You can optimize your entire portfolio’s value. You can take the savings and invest in new opportunities. You win, but more importantly, the economy wins… communities win.  

Why itamlink?

Our industry-leading tax software, itamlink, has been developed specifically for owners and occupiers of multi-property portfolios. You might own a handful of sprawling properties in different counties and across multiple parcels or roll numbers. Or maybe you have a vast portfolio including hundreds of locations across the country.  Either way our software can track and manage your deadlines, spotlight appeal opportunities, track approvals and payments, forecast your future tax burden, and so much more.

With all your data stored in one central, secure, seamless data repository, and then integrated with your ERP, management, and other financial applications, all of your tax information is accessible and synchronized across your company. Centralized data access minimizes manual data entry, duplicate efforts, and many other common sources of error that can have a devastating impact on your portfolio value.

In this digital era, security is of paramount concern, which is why itamlink is SOC1 and SOC2 Type II certified. On top of that, we offer additional security, including MFA, audit logs, and more. No matter what your needs, we protect your data for you.

Our clients rely on itamlink to free up time, save money, and accurately manage the property taxes for their sizeable property portfolios. But perhaps most important of all is that itamlink gives our clients the data they need to theorize what the financial burden will be in future tax years or if adding new locations.  

Your data is safe with us, your forecasts are as accurate as possible, and everything can be managed from one centralized location.  

Imagine the risks and costs of going without the right property tax solution for your business. Then, contact us to book your free individualized demo and consultation.  

Many businesses operate on razor-thin margins, and even expected expenses like property taxes can be a significant factor in whether or not the company falls in the red. Moreover, property taxes can get complex when your business operates across state lines, and it’s a significant consideration for whether or not you can expand into another state or if the financial burden will be too much to make it a worthwhile investment.

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© 2023 Rethink Solutions. All Rights Reserved
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© 2023 Rethink Solutions. All Rights Reserved