Use tax optimization process and system

Details Use tax optimization process and system Use tax optimization process and system

2000-02-08

2001-10-02

Kramer, Dean J. (Department: 2167)

Data processing: financial, business practice, management, or co

Automated electrical financial or business practice or...

Accounting

C705S019000

Reexamination Certificate

active

06298333

ABSTRACT:

BACKGROUND OF THE INVENTION
This invention relates to methods and systems for leasing equipment, and particularly to sales and use tax optimization.
Each taxing authority has different laws and rules for sales and use tax on leased equipment. Some authorities impose tax at a particular percentage of the lessor's acquisition price, others impose tax on the value of a lease which is written in the authority's jurisdiction, others impose tax on the first time the equipment is leased in the authority's jurisdiction, and some authority's have varying rates if the vehicle is leased for varying terms. With some authorities, the tax is based on the depreciated value of the equipment, and with some authorities the tax is not due if the equipment is greater than a certain age.
For leasing companies which own large numbers of equipment which are of moveable nature, e.g., automobiles, trucks, trailers, modular buildings, and tractors, calculation and payment of use tax to the appropriate taxing jurisdiction at the appropriate time so as to avoid penalties and to avoid duplicate payments or over payments has been a manual process which is very time consuming, complex, subject to many sources of error, and often results in penalties from the taxing authorities due to late payments. Many of the taxing authorities allow the leasing companies to determine the tax due, subject to later auditing by the tax authority, and so it is important for the lessor to calculate the tax correctly the first time to reduce the risk of penalties.
Leasing companies have recognized that significant savings in sales and use taxes may be possible if their leasing activities are optimized with respect to equipment and taxing jurisdictions. For example, if otherwise equivalent articles are available to lease but with different sales and use tax consequences, great savings may be possible by choosing to lease the articles to incur the least taxes.
To date, no systems have become available for leasing companies to effectively systematize their sales and use tax optimization activities.
SUMMARY OF THE INVENTION
We have discovered that great savings can result from automating and optimizing leasing processes so as to minimize sales and use taxes when there are multiple taxing authorities with differing laws and regulations. We have also discovered that the timing of the payment of such taxes to such authorities can be improved by such automation.
The present invention comprises, in one aspect, a computer assisted method for a lessor to determine correct use tax on moveable equipment which may be subject to tax by more than one tax authority comprising:
creating inventory records, within an inventory module, for each individual item of equipment, the record comprising an equipment identifier, equipment category, acquisition cost, depreciation, net book value, and branch assignment;
updating the inventory record for each item of equipment to reflect each modification, improvement, disposition, and change in equipment category, and use tax paid;
creating activity records in a lease activity module comprising each lease event pertaining to each item of equipment, the events comprising revenue generating lease, non-revenue generating lease, maintenance, and termination of lease;
creating in a rules module a set of tax rules for each taxing authority where any of the items of equipment may be leased or used, the rules comprising sets of formulas reflecting relationships between tax due and one or more of: acquisition of equipment, first leasing of equipment, subsequent leasing of equipment, age of equipment, length of lease term, and equipment categories;
updating the rules module to reflect each change, addition, or deletion of each tax rule for each taxing authority; and
upon selection of a tax authority and a date range, processing the records according to the rules to determine the amount of tax which is due to the selected tax authority for each item of equipment;
upon verification that tax will be paid, updating the inventory records to reflect tax paid.
The non-revenue generating lease can be a logistics lease or a maintenance lease. A maintenance lease event is when an item is removed from available inventory and charged out to a third party maintenance party for repair or maintenance. A logistics lease is when an item is leased at a first location and returned to a second location by the lessee for no cash compensation since the lessor needs the item at the second location for logistics purposes.
In another aspect, the invention comprises a system for managing the payments of use tax on leased equipment to appropriate tax authorities and for optimizing the amount of use tax due comprising
an inventory module comprising inventory records for each individual item of equipment, the records comprising an equipment identifier, equipment category, acquisition cost, depreciation, net book value, branch assignment and any use tax paid;
a lease activity module comprising activity records for each item of equipment, the activity records comprising each revenue generating lease, non-revenue generating lease, and termination of lease;
a rules module comprising a set of tax rules for each taxing authority where the equipment may be leased or used, the rules comprising sets of formulas for determining whether, when, and how much tax is due for each lease event or inventory record creation or change;
means to update the inventory records to reflect each modification, improvement, disposition, and change in equipment category, and use tax paid;
means to update the activity records to reflect each lease event;
means to update the rules to reflect each change, addition, or deletion of each tax rule for each taxing authority; and
means to select a tax authority and date range; and
processing means to determine the amount of tax which is due to the selected tax authority for each item of equipment and to update the inventory records to reflect tax paid.
Preferably the equipment of a particular class which is available for lease for a proposed period at a particular branch is automatically ranked according to the amount of use tax which will be due upon leasing for the proposed period. The ranking can be displayed at a leasing agent workstation upon inquiry as to the availability of equipment of a particular class to be leased for a proposed period of time at a particular branch. A branch is a leasing location where inventory may be stored, returned, and leased.
The system can include a plurality of client workstations at various branches, i.e., equipment leasing branches where leasing transactions are conducted. The system can also include one or more servers which are networked to the client workstations. The server can be a webserver and the clients can include web browsers, and the information can be transmitted between the clients and web server using internet protocols, hypertext markup language, or other markup languages such as XML.


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Dun's Business Month “Trucks, taxes, and tribulation (taxation of truck fleets)”, article (v123, p124), dated Oct. 1983.

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