Outside Insights | October 2017 | By Guest Author

4 Tips to Keep Property Taxes from Hurting Your Bottom Line

These strategies can lower the amount operators pay in property taxes.
A property’s assessment plays a big part in how much the owner pays in property tax. flickr: Mike Mozart
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Property taxes can be one of the biggest line item costs for restaurant owners, but they don’t have to be. There are strategies they can use and information they can gather to help manage, and even lower, the amount operators pay in property taxes. Below are tips to keep property taxes from impacting a restaurant’s bottom line:

Your restaurant’s assessment matters … but you may be able to change it

A property’s assessment plays a big part in how much the owner pays in property tax, so it’s crucial the assessment is fair and accurate. However, sometimes assessments in a certain area haven’t been done in a while or the market has drastically changed since the last assessment. In these cases, a restaurant owner should respond to the assessment they have been given in order to ensure the values are as low as possible. The frequency at which a property can be reassessed varies on the location. In some areas, properties can be re-assessed annually or could range three to five years.

This is especially important during the sale of a property as the previous owner may not have contested the property’s assessment in the years leading up to the sale, which would skew that property’s taxes and potentially lead to higher property taxes than are necessary.

Appeal your property taxes annually

Property tax appeals are how restaurant owners can make the case for why their property taxes should be lowered. While the tax rate in a certain area is something the local government determines and cannot be changed, the amount an owner ends up paying in total property taxes can.

Property tax appeals can be done with the help of a consultant or attorney that specializes in property taxes or by any property owner. The key for restaurant owners is to make sure they are appealing their property taxes as often as possible in order to catch any mistakes in previous appeals or to account for any changes in the property’s value. Property tax appeals are done through a local assessor. Commercial property owners can find their local assessor’s office online, which will have the details about when and how to complete a property tax appeal.

Collect data on your local market

A successful property tax appeal needs data and evidence in order to back it up. This includes anything from information on comparable properties (properties in your area that are similar in size, location, value, etc.), trends in restaurant sales, the local real estate market, or even local labor market data can be useful in an appeal.

For example, if there is an article talking about how restaurants have been seeing a decline in sales because of the economy, an owner could use that article in an appeal to argue that their property taxes should be lowered since there are factors outside of their control affecting their restaurant’s success.

The key is for restaurant owners to use the data in a way that supports their argument for why their property taxes should be lowered.

Get creative with your argument for an appeal

The great thing about property tax appeals is that it’s a gray area. It’s all about presenting an argument with solid evidence and data to back it up. There’s no right or wrong answer when it comes to property taxes. Restaurant owners, or an agent acting on behalf of the owner, can sway a decision simply based on how compelling their argument is.

Matthew Fossey is the Executive Vice President of East Operations at Paradigm Tax Group. Fossey has more than 12 years of experience in property tax consulting, specifically within the restaurant and hospitality industries.