Are breast pumps taxable for personal property taxes?  Now I understand that this may be a question that you never contemplated…..You may be wondering, “what’s the relevance between property taxes and breast pumps?”  Or even “how can an item that might only cost $200-$500 be taxable for property taxes?”  Those are great questions.

Let’s say your company distributes breast pumps to hospitals for use in the maternity ward……  For instance, a commercial style, double pump, electric, adjustable speed breast pump complete with battery pack and a nice travel bag….not that I would know.  Even though this pump sounds really fancy, and I’m sure it is, the resulting property tax on that pump will only be around $10.  Yet, many jurisdictions (and remember 39 states tax personal property) will still require you to report it and pay tax on it.

Don’t we all file enough personal property tax returns already (Los Angeles County alone has 1.7 million personal property tax returns filed annually)….. why the need to pump out more?  Why give taxpayers an additional cost for processing a personal property return that will only result in a $10 tax (not to mention their costs for processing a $10 check to pay that tax)?  It sure would be nice to wean taxing jurisdictions off these nuisance returns.

Charlie Trotter’s is arguably one of the finest restaurants in Chicago (and the bill you receive at the end of the meal is arguably one of the largest).  In an effort to really impress my wife on our anniversary I surprised her with reservations at Charlie Trotters.  The big surprise to both of us was that they upgraded us to a table in the kitchen – typically this table has a 6 month waiting period and requires a party of 4.  From this strategic vantage point you can watch all the different chefs preparing foods, and, most importantly you are given samples of all that they prepare.  It is truly an amazing culinary experience.  I had no idea there were so many types of chefs, with such amazing skills, all in one kitchen.  From what we experienced, each chef possessed at least one core competency…. bakery, desserts, salads, sauces, etc.

When we think of a core competency we generally think of a fundamental knowledge, ability, or expertise in a specific area.  Core competencies for a business can take various forms, including technical know-how, reliable processes, technology integration, close customer relationships, product development, corporate culture and more.  Core competencies are particular strengths relative to other organizations in the industry or simply stated your company's core competencies are the things that you do better than your competitors.

Unless a company is in the property tax business, property tax compliance and management will likely  not be one of its core competencies.  The decision to outsource property tax functions, or any other function for that matter, is impacted largely by the amount of focus a company wants to give to its non-core functions.  By outsourcing, a corporation is attempting to shift one of its non-core functions to a third party who has that function as a core competency.

Oddly enough, even if a company is in the property tax business, it may not have a core competency in property taxes.  Property taxes might just be another service that they provide.  A competence that is central to your business operations but is not exceptional in some way is NOT a core competency - it doesn’t demonstrate a differentiated advantage over your competitors.

So, what’s your core competency?  Executive Chef?  Sous Chef?  Chef de Saucier?  Line Chef?  Chef de Partie?  Pastry Chef?  Banquet Chef? .... or maybe Property Tax?

Outsourcing, which became part of the business lexicon in the 1980s, is simply subcontracting a process to a third party.  The decision to outsource property taxes is usually made in the interest of reducing cost and utilizing time and energy more effectively.  It allows a company to focus on its core competencies.  Unfortunately, a couple misconceptions with regard to outsourcing property taxes have surfaced… 1) Outsourcing means losing jobs, specifically in the United States… 2) Outsourcing means a loss of control, and the resulting benefits not actually coming to fruition.

Outsourcing property taxes does not necessarily mean a loss of American jobs.  There are firms whose core competency is property taxes with compliance practices in the United States.  Companies who look at outsourcing property taxes to the United States will continue to find ways to process property tax returns in a cost effective fashion without transferring jobs overseas.  If that is an important consideration to you, make sure you ask who will be processing the returns and where.

Property taxes management can be confusing, complex and voluminous, but it does not require a loss of control.  With technological resources available and by not totally washing their hands of the responsibility, companies can successfully transition the work but not the control.  The relationship between the company outsourcing and the outsource provider should be like “the office next door”.  If you had the staff internally instead of outsourcing, what would that look like?  Take that same model and talk to your outsource provider about replicating it.

If you would like to learn more about the pros and cons of outsourcing to help you better evaluate your situation, email me at dlevan@advantax.com.