Let’s start at the beginning for those new to leasing equipment. Property taxes are owed on leased equipment. In most states, property taxes are due by December 31, though there are a few exceptions depending on where your business is located.
Since the equipment is leased through GFLS Services, your equipment financing provider, we retain title of ownership and we are responsible for reporting all equipment to your local taxing jurisdictions, as well as ensuring the property taxes are paid on time. Once we receive the tax bill on your leased equipment, our team sends a copy to you, the lessee, along with a notice that the tax amount will be deducted from your bank account.
Simply put, we receive and pay the tax bill, in turn you’ll pay GFLS Services back through an ACH (debit transfer) from your bank.
Nobody likes end-of-the-year tax surprises, so the GFLS Services team not only includes detailed information about leased equipment property taxes in lease agreements, but also verbally reviews it with you so you know exactly what to expect. Even though tax bills vary from state to state, once you receive the notice about your first one, we recommend you record that date to keep in mind for future financial planning.
The Legality and Benefits of Your Equipment Financing Provider Managing the Property Taxes
Legally, it is GFLS Services’ responsibility to pay the property tax bills on equipment owned by us, but leased to our clients. We take that responsibility seriously and always pay on time.
But doing so also means additional benefits for the lessee. It is one less bill for you to track a payment date. And, it could give you a little financial wiggle room. Initially, the property tax payment comes directly out of our pocket. Since we pay the bill first, this gives you a few days cushion which makes a big difference for businesses dealing with slow accounts receivables or strained cash flow. Unlike taxing jurisdictions, we’re able to set up monthly payment plans with our clients to cover property taxes, which can help with budgeting and minimize larger outlays at once.
Isn’t Property Tax Planning for Leased Equipment an Issue for the Accountant?
Absolutely. We highly encourage our clients to consult their accountants for advice and assistance with their company’s financial matters. However, we believe in education, too, to help business owners become more knowledgeable.
The GFLS Services team manually sets up, processes and posts all property tax accounts and bills. Since we lease equipment across the country, this is a time-consuming process. However, this saves you money since you are not paying your accountant to do so as you’d likely do if you owned, rather than leased, the equipment.
Any time you have a question about planning for or paying property taxes on your leased equipment, give us a call at (480) 478-7400. We’re always happy to review the process and answer your questions.