Not all spending in December revolves around holiday gifts. Office furniture and equipment sellers also see a surge in sales as companies deplete budgets and make last-minute tax...
Not all spending in December revolves around holiday gifts.
Office furniture and equipment sellers also see a surge in sales as companies deplete budgets and make last-minute tax moves.
But this year seems to be a little more lucrative, as many businesses try to take advantage of two tax breaks under the Jobs and Growth Relief Reconciliation Act of 2003.
Not only does the act increase to $102,000 Section 179 deductions [which allow a business to expense assets in the year they are purchased instead of depreciating them], it gives companies a first-year 50 percent bonus depreciation for qualifying purchases made before Dec. 31.
“They are in a rush to buy as many copiers, computers … everything they think they can buy right now to take advantage of the tax loophole,” said Don Wyatt, owner of Celestial Data Systems in Chandler, Ariz. “It’s worked out really well for us.”
Business has doubled for Wyatt compared with the same time last year. He said sales on copiers, servers and other equipment have been on the upswing since November, as companies started end-of-year tax planning.
Sales of office furniture are up about 15 percent this year for Goodmans Interior Structures in Phoenix, which also operates G2 Office Furniture Market. And December sales have been stronger than a year ago, said Chief Executive Murray Goodman.
“There has definitely been an impact of the ending of the bonus depreciation,” he said. “People are definitely wanting us to get their stuff delivered the end of the year.”
Large retailers Staples and OfficeMax couldn’t be reached for comment.
Staples has reported stronger holiday sales, particularly on digital cameras and networking products, than last year. Accountants expect some of that results from small businesses seeking to invest in equipment before the end of the year.
Overall business spending has picked up modestly this year, some of it stemming from pent-up demand for computers and software.
Monthly surveys in 2004 by the National Federation of Independent Business (NFIB) indicate a higher number of entrepreneurs plan to invest in cars, furniture, land or equipment for their businesses compared with 2003.
Much of that correlates with their confidence in the economy.
“Overall, 2004 is much healthier from an economic standpoint in the small-business community,” said Phoenix certified public accountant Sandy Abalos. “There’s definitely momentum (to purchase equipment) out there.”
It also helps that more say the time is right to expand. NFIB’s November survey showed 29 percent of small-business owners believe the next three months are a good time for growth. In October, just 20 percent said the outlook for expansion was good.
But a huge driver to buy now rather than wait is end-of-year tax planning, Abalos said.
“The entrepreneur is asking, ‘What can I do to reduce taxes?’ We’re [accountants] saying, ‘Are there any fixed assets you need?’ ” said Abalos, who is taking her own advice and purchasing a much-needed copier.
On Section 179, computers, business equipment and qualifying leased equipment may be 100 percent deductible up to $102,000.
The deduction, which was to expire this year, was extended to 2007 and is indexed for inflation. Benefits phase out for companies spending more than $410,000 on equipment placed into service this year, Abalos said.
For companies that spend more or are not eligible for Section 179, the bonus depreciation can greatly reduce taxes, she said. But there are limitations, so check with your tax adviser.