KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** Comment on Tax or other consequence to lease or sale / S or C Corp July 18, 2025 ************************* Comment on Tax or other consequence to lease or sale from article on May 15, 2025 ************************* Ken, The email from Jeff on May 15th regarding the treatment of leases is an issue that we run into fairly often. You gave Jeff good legal advice and told him to consult his accountant regarding tax treatment. Jeff should be aware that not only are there Federal Income Tax issues regarding leases, the Sales Tax issues can be very complicated. There are two different types of leases, Operating and Capital. An traditional lease, in which the customer uses the equipment for a fixed amount of time, makes monthly payments, and then turns it back to the Lessor, is generally an operating lease. In a Capital Lease the customer either owns the equipment at the end of the lease, purchases it for a “Bargain” Price, or uses it for so long that it asset has very little value (think of a ten year lease on a computer server). States tax lease transactions differently depending on whether the are operating leases or capital leases. States also define the “End User” differently and this can depend on whether it is truly an operating lease, the type of equipment, the nature of the use, whether it is an “Improvement to Real Property: etc… In some situation the Lessor pays the sales tax, in some situations the Lessee is charged the tax. Sometimes the tax is due over the life of the lease, in some situations it is taxed at all. Some states tax intrusion equipment to the Lessees, some to lessors, but have different rules for fire equipment. Getting this wrong can saddle a company with a huge sales tax bill. Consult your accountant, but make sure that your accountant not only knows the sales tax rules, but, more importantly, how they apply to what you do. Mitch Reitman 817 698 9999 XT 101 Reitman Consulting Group Fort Worth, TX 76133 ************************* Response ************************* I am comforable recommend Mitch for your accounting and tax issues. ************************* S or C Corp ************************* Ken: During the ending of the recent accounting audio event you had quickly made mention of being able to QUICKLY switch the accounts (the part of the business that is the $$$) from full C to Sub-S. Due to loss carry forward I had allowed ( foolishly ) the business to continue this way and in the event I wish to do an ‘exit’ I would prefer to NOT be double taxed as Uncle will get enough of my blood! At this point I’m getting WEEKLY venture capitalists calling on me and been thinking………ESPECIALLY with the passage in Missouri of Proposition A……… If you are going to publish this, please set name as ANON ************************* Response ************************ I will simply state, use the Sub S election for corporations, and that is the preferred entity for the alarm industry. For accounting and tax advice call Mitch Reitman, not me. ************************ STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** WEBINARS: https://www.kirschenbaumesq.com/page/alarm-webinars *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ******************** Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth *********************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* PODCASTS: https://podcasts.apple.com/us/podcast/ken-kirschenbaum-presents/id1794851477 ************************* Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
