Key Tax Concerns for Manufacturers

The complexities of manufacturing translate into complex tax returns, schedules and elections. This is reinforced by the Corporate Manufacturing Survey, a Web-based survey conducted among manufacturing corporations from more than 20 industries. Data was collected over a two-week period starting on March 3. More than three-quarters of respondents were from companies with annual revenues of more than $100 million.

Key findings:

  • 92 percent of respondents agreed manufacturers that export goods must understand the available tax strategies to lessen their overall tax burden.
  • 83 percent of respondents face challenges determining tax liability and sales and use tax provisions when doing business in more than one state.
  • 71 percent of respondents have trouble keeping up with the business tax credits and deductions that are most critical to minimizing their federal tax liability.

Specific pain points that accountants at manufacturing companies need to be prepared to address include:

  • Multistate tax liabilities. Several states have developed their own formulas to determine how to tax manufacturers that generate income both in the taxing state and elsewhere. Accountants must remain current on changes in the statutes and regulations governing these formulas.
  • Sales and use tax provisions. Each state has its own manufacturer-specific sales and use tax provisions, such as specialized sales tax exemptions and definitions of various types of taxable transactions. Companies must be aware of general sales tax trends as well as relevant provisions in the particular states where they do business.
  • New Foreign Bank Account Reporting (FBAR) requirements. Manufacturers with an ownership interest in a foreign company with overseas bank accounts face harsh civil and criminal penalties for failing to comply with FBAR guidelines. Accountants must understand both the FBAR requirements and more recent notices and guidance.
  • Tax issues for exporters. U.S. manufacturers that export goods can decrease taxes on foreign-earned income through numerous complicated tax provisions and regimes — but accountants must understand topics such as calculating the extraterritorial income exclusion and meeting foreign trading gross receipts requirements.
  • Frequently changed manufacturing tax credits and deductions. Tax regulations change, expire — and can prove costly to companies that fail to keep up. Claiming the proper federal and state credits, deductions and incentives in the proper amounts can be challenging.
  • Managing your assets. In the world of manufacturing — as competition becomes more intense and customers demand more services — it is important that management not only control overhead but also understand how it is assigned to products and ultimately reported on the company’s financial statements.

CCH Solutions can help simplify this complicated tangle of regulations and requirements with:

  • Multistate Income Tax Smart Charts identifies states that use a special formula for manufacturers, including specific factors and their percentages, along with links to the appropriate statutes and/or regulations.
  • CorpSystem® Sales Tax Office takes the hassle out of determining the tax liability of materials used for manufacturing. Sales Tax Office helps you improve the accuracy of your sales and use tax calculations and reduces audit risk. This advanced software system combines industry-leading tax rate and taxability content with highly accurate jurisdiction boundary information — automating your sales and use tax compliance. Sales Tax Office handles real-time sales tax calculation for multiple business entities and/or divisions, multiple ERP modules, or even different ERP systems.
  • International tax products help you navigate complex taxation issues when importing or exporting.
  • Tax Research Consultant™ keeps you current on income, payroll and excise tax laws — and includes examples, sample calculations, compliance tips, comments, planning notes, links to interactive research aids, and guidance on state tax consequences.
  • CorpSystem Fixed Assets makes your asset management, depreciation and amortization tasks a breeze. Our award-winning software uses an intuitive interface so you can easily view how an asset’s current depreciation is calculated. In addition, you’ll have access to ready-to-file IRS forms for tax returns and easy-to-use customization options for entering asset accounting information, viewing data and producing reports.

 

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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