Tax Protalk Floor Plan Inventory

Floor planning is a method of financing inventory purchases where a lender pays for assets that have been ordered by a distributor or retailer and is paid back from the proceeds from the sale of these items.

Tax protalk floor plan inventory. This article reviews how you can manage floor plan financing with quickbooks. These loans are made against a specific piece of collateral i e. With floor plan financing you will work with a third party financing institution a floor plan financing company to. The loans are also inspected periodically by lenders by checking the inventory of all collateralized vehicles.

Floor plan loans are among the safest of all financial instruments. I believe it s considered property tax on the goods that are held in inventory at a warehouse. But because inventories are so immense the car business is very sensitive to both floor plan interest rates and the tax treatment of interest expenses. Floor plan finance companies are uniquely attuned to the needs of auto dealers.

Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. I m not familiar with floor tax. A floor plan is a method that a business such as an auto dealership can use to finance inventory that they are holding for resale without having to tie up their own capital in that inventory. An auto rv manufactured home etc.

Ask your own tax question. Customer reply replied 12 years ago. Using cash or a bank line of credit to purchase inventory can work for some car dealers but many floor plan financing companies offer a variety of dealer specific benefits. The arrangement is most commonly used when large assets such as automobiles or household appliances are involved.

Krs 132 200 16 provides for an exemption from local tax for. Some states such as louisiana have sought to solve this issue by creating state income tax credits to offset a business s inventory tax. Inspections of collateral inventory should be carried out periodically by the floor plan lender. Many states have a floor tax that is a sales tax other have a property tax.

Since dealers may send cars off the lot for demonstration purposes or possibly for minor maintenance items it is a good idea for the floor plan lender to notify the dealer in advance as to when the collateral inspection will take place so that it. Immediate elimination of the tax could wreak havoc on local government budgets. In mississippi for instance the inventory tax was estimated to generate 168 million in 2010 for mississippi localities. Retailers use a short term loan to purchase inventory items and the loan is repaid as inventory is sold.

How does floor plan financing work specifically to benefit auto dealers. New farm machinery and other equipment held in the retailer s inventory for sale under a floor plan financing arrangement by a retailer as defined under krs 365 800. What kind of inventory.