Members 6Imzadi Posted April 14, 2007 Members Share Posted April 14, 2007 Does anyone here lease their equipment? What are the pros and cons of doing this? Are there any recommendations of reputable companies that lease? Any other thoughts/flames? Link to comment Share on other sites More sharing options...
Members W. M. Hellinger Posted April 14, 2007 Members Share Posted April 14, 2007 Are there any recommendations of reputable companies that lease? I strongly recommend Doug Kocsis at DK capital: http://www.dkcapitalinc.com/ I've been associated with Doug for possibly 10 years or-so. Link to comment Share on other sites More sharing options...
Members Not Serial Posted April 14, 2007 Members Share Posted April 14, 2007 property tax on equipment? what type of equipment does one pay property tax on other than property? i have only paid sales tax on gear, property tax on property. Link to comment Share on other sites More sharing options...
Members BillESC Posted April 14, 2007 Members Share Posted April 14, 2007 Leasing also allows your equipment to work for its' monthly payment (as apposed to saving until you can purchase.) There is a lease product called the One Dollar Put. In this contract you make payments over the course of the term and at the end you send them one dollar and they send you the bill of sale. We work with Balboa Capital Corp and a few others. In Virginia, there is Busines Personal Property Tax that we pay on our gear and sales inventory every year. Link to comment Share on other sites More sharing options...
Members W. M. Hellinger Posted April 14, 2007 Members Share Posted April 14, 2007 property tax on equipment? what type of equipment does one pay property tax on other than property? i have only paid sales tax on gear, property tax on property. If your state is like the one I live in, then EVERYTHING you use in your "for profit" business is possibly subject to at least county property tax. ALL of your equipment (everything from the paper stapler to the mixing console) should be listed on your county property tax declaration and will be put on a depreciation schedule (the depreciation rate is determined by your county tax assessor) and will be taxed at the going rate, which here is somewhere around 1 1/2% of the taxable value per year. The only business related items I'm aware of that would not be included on your property tax statement would be licensed vehicles and inventory for resale (or consumables, like batteries and paper towels). The penalties for skirting personal property tax can be pretty stiff... including back taxes going back as many years as you've been in business. Link to comment Share on other sites More sharing options...
Members Not Serial Posted April 14, 2007 Members Share Posted April 14, 2007 i guess i do not know. i am not self employed but do own a significant chunk of personal equipment that i use at and for my job. some of it is tax deductable but i have never heard of having to pay property tax on what i own. perhaps i have not heard of this because i do not run a 'for profit' business? Link to comment Share on other sites More sharing options...
Members W. M. Hellinger Posted April 14, 2007 Members Share Posted April 14, 2007 i guess i do not know. i am not self employed but do own a significant chunk of personal equipment that i use at and for my job. some of it is tax deductable but i have never heard of having to pay property tax on what i own.perhaps i have not heard of this because i do not run a 'for profit' business? I believe the definition of a "for profit" business is any activity involving payment for goods or services that isn't registered as "non profit". Technically, I believe that even if you just mow your neighbor's lawn for $10 (or a 12-pack of beer)... that activity is technically "for profit"... and is therefore subject to all the tax laws associated with "for profit" businesses. If you haul the lawnmower in your pick-up truck to the lawn that you're getting paid $10 to mow... your pick-up truck is now regarded as a commercial vehicle, and technically should be registered, licensed, and insured as-such... and there's a good chance you are legally mandated to maintain a DOT log book, and commercial driver's license and DOT health card... and have a valid DOT number plastered on the side of your vehicle (and many states have a 0.00% tolerance for blood alcohol involving commercial drivers... even when driving a personal, totally non-commercial vehicle). All of this is part of the reason it's very difficult to legitimately operate a part-time production venture (or band)... where you receive pay for services rendered. Of-course, if you are an amateur (you don't get paid a red cent in any way, shape, or form to do what you do), then most or all of these legal encumbrances might not apply. Of-course, the way to know for sure about the property tax issue is to ask your local county assessor. It's better you ask them rather then having them "discover" you. I know... you've got to be thinking: "Crap! This can't be right?" Right? That's what I thought too when all this came down on me... a couple decades ago. That's when I decided I need to either jump in with both feet, or get off the edge of the pool... Cause there's virtually no way to make a part-time thing work-out... legitimately and profitably anyway. Link to comment Share on other sites More sharing options...
Members agedhorse Posted April 14, 2007 Members Share Posted April 14, 2007 It's called "Unsecured Business Property Tax" and it's paid to the county thatthe business resides in. Somewhere around 1.25% of assesed value PER YEAR. It is a BIG issue for companies who have large production inventories. If you lease, the leasing company is responsible to pay the same tax in the county the property resides in, so there's no savings by leasing. Link to comment Share on other sites More sharing options...
Members paulwannabe Posted April 15, 2007 Members Share Posted April 15, 2007 I feel like an idiot. I thought you were talking about renting your sound system out for other people to use. I would definitely NOT recommend that. I did that once for a New Year's party that my church was hosting. They asked me about using my PA system, and although I was not going to be in town for the party, I agreed to set everything up for them a few days in advance. I was under the impression that the guy who would be running the sound had some idea of what he was doing. I think his wife told me that he had done this before or something. Well, the party came and went and I got my gear back in working condition. Or so it seemed. A couple months later, I attended another event at our church, and the same guy was running sound, but with another PA. He was supposed to play some background music while everyone ate. It was a disaster. I listened in horror as he continuously fiddled with knobs, leading to frequent volume swells and outbreaks of distortion. Apparently, he was a knob fiddler who just couldn't help himself. My heart sank at the thought of what he might have done to my system. There's no telling how many times he could have pushed the mixer and/or amp into clipping. Like I said, my gear still worked after the New Year's party, but I don't doubt that the speakers sustained some clipping damage that will take it's toll over time. The moral of the story is, never lend your gear. When it comes to ownership, there's a natural tendency to take better care of things that YOU own and have paid for YOURSELF. Without intending to be malicious, many people don't take the same care for other people's possessions as they would their own. The End. Link to comment Share on other sites More sharing options...
Members BillESC Posted April 15, 2007 Members Share Posted April 15, 2007 Paul, There are those of us who rent gear as part of our livelyhood. We try to make our systems idiot proof, but you know the old saying, "When man makes something indiot proof, God invents a better idiot." Contracts are required. It's a sad fact of life but even if you're lending your gear out of the goodness of your heart, you must have a written contract. We've rented a system for 50 people for a back yard party and discovered there were 400 in a field. With a contract, damage is recoverable. I have a wedding coming up on the 21st. where two adjacent rooms require the hundred and fifty attendees to hear the toasts. We'll supply a pair of HR824's on designer stands fed wirelessly from an ATW 3171a wireless mic. Thats one of several systems for the weekend. Serious money is available in the rental market, but the investment requires protection. Link to comment Share on other sites More sharing options...
Members DJ Swydez Posted April 15, 2007 Members Share Posted April 15, 2007 Contracts are required. It's a sad fact of life but even if you're lending your gear out of the goodness of your heart, you must have a written contract. We've rented a system for 50 people for a back yard party and discovered there were 400 in a field. With a contract, damage is recoverable. Serious money is available in the rental market, but the investment requires protection. I know that many of the places that I have rented from require a security charge to be placed on your credit card when you rent the gear out from them... most of the guys at the stores try to way over do it with how much they are putting down as the worth of the gear, but you can easily talk them down a bit to a more reasonable number... however, this security charge allows the rental place to easily deduct money from your credit card if any gear comes back damaged or broken, or not at all... this way the customer ends up paying for the damaged gear, not the supplier... I know one time we accidentally had a blacklight bulb break, so the guy showed us the replacement part and its price and deducted that much from our security charge in order to replace it... this keeps the customers honest and hopefully more careful when using it since "you break it, you [pay for] it"... Link to comment Share on other sites More sharing options...
Members milesdf Posted April 15, 2007 Members Share Posted April 15, 2007 it"... yeah but this is easily abused for gear that happens to fail under normal operating circumstances due to normal wear and tear. I've had a rental house threaten to charge for high frequency drivers that weren't sweeping correctly on very nice eaw wedges. they looked into it further and it turns out they just had a little dirt in them (probablly from normal use, they were the kind that could be disassembled and cleaned). we used them on an indoor stage for a normal opener+headliner show, no way we {censored}ed them up. the way they dealt with it though wasnt very nice, threatening to charge us before they found out what was wrong and if it was easily rectified. even though in the long run it got all sorted out, I will never do business with this company ever again. on the other hand i've had lighting rentals from other companies have bulbs fail, either a replacement bulb was included with the rental or I called the company to get a new one, the burnt bulb was sufficient proof that this was a failure due to normal operation and there was no charge. I think in a lease, if you have an issue with your gear it is your responsibility, i think there are penalties if you end your lease with your gear not in the condition it should be in though. Link to comment Share on other sites More sharing options...
Members W. M. Hellinger Posted April 15, 2007 Members Share Posted April 15, 2007 If you lease, the leasing company is responsible to pay the same tax in the county the property resides in, so there's no savings by leasing. That's true Andy, but: At the end of the lease, if you buy the gear from the lease company for 10% of the origional sale price... that pretty well establishes the value of the gear to the taxman... which is a heck of a lot better depreciation schedule than the... oh... 20-30 year depreciation schedule they're apt to put on something like an amplifier. Link to comment Share on other sites More sharing options...
Members jbutler1982 Posted April 15, 2007 Members Share Posted April 15, 2007 But W.M., in almost every state a lease is just like a sale... so arnt you actually getting worse on taxes, since you have to pay the higher sales tax every time the lease is renewed? (and alot more than 1 1/2 percent?) Or do you just sign one lease for multiple years / long time periods? Link to comment Share on other sites More sharing options...
Members BillESC Posted April 15, 2007 Members Share Posted April 15, 2007 At Balboa Capital you can select the term of the lease, usually from one to five years. You're only paying sales tax once for the term. Considering you can get $ 10,000.00 worth of gear for less than $ 225.00 a month it seems to me one gig a month pays for the lease. Link to comment Share on other sites More sharing options...
Members agedhorse Posted April 15, 2007 Members Share Posted April 15, 2007 That's true Andy, but: At the end of the lease, if you buy the gear from the lease company for 10% of the origional sale price... that pretty well establishes the value of the gear to the taxman... which is a heck of a lot better depreciation schedule than the... oh... 20-30 year depreciation schedule they're apt to put on something like an amplifier. Yes, but the depreciation schedule the leasing company uses is also reflected by the lease rate, otherwise their income statement would show a loss when depreciation is factored in as an expense. Also, generally the leasing company must pay the equiv. of sales tax on the equipment as it's not for resale (it may technically be called a use tax) at the sales tax rate. Then when you buy the equipment you pay sales tax again on the residual value. Leasing can be an excellent tool, but not always and the big picture really comes into play. If you have no other way to capitalize the equipment then it's great. Also, depreciation schedules have improved a lot for electronic equipment these days. 5-7 years is not unreasonable. Link to comment Share on other sites More sharing options...
Members W. M. Hellinger Posted April 15, 2007 Members Share Posted April 15, 2007 Yes, but the depreciation schedule the leasing company uses is also reflected by the lease rate, otherwise their income statement would show a loss when depreciation is factored in as an expense. Yes, of-course... I guess my explaination was too vague concerning which taxman. My reference was to the county tax assessor. I'm into paying my fair share of taxes, but I'm not interested in paying more than my fair share of taxes. I believe our property tax rate here is somewhere around 1 1/2% of the assessed value per year. That can be significant if your assessed values on a substancial inventory is unrealisticly high. Here's a specific example to help clarify: In 2001 (6 years ago) I bought a Starband 360 satellite internet system. I bought the hardware outright for $808. I probably could have leased it for possibly less than the combined purchase price plus sales tax plus the interest on my company bank note plus, plus, plus. Anyway... I just pulled up my county tax assessors taxpayer's copy of the assessed depreciated values of property that the county assessor has set for my property... and I see Mr. Joe Reynolds, our Whitman County Tax Assessor, thinks my satellite internet system is still worth $463... which means I am obliged to pay the county tax assessor's office approx. 1 1/2% of what Mr. Joe Reynolds thinks it's worth, being approx $6.95 this year for the priviledge of owning my satellite system in his county. And what's my 6 year old used POS satellite internet system really worth? I suggest an established fair market value for this used pile of electronic hardware is somewhere around $25: http://cgi.ebay.com/Starband-360-Satellite-System_W0QQitemZ300095199427 If our county tax assessor had my satellite system realistically appraised at the fair market value of $25, then my yearly tax bill for that item would be approx. 38 cents... a savings of approx. $6.50. If I had leased the satellite system, on a 3 year lease... and then did the buck punt to own it at the end of the lease... the tax assessor would either have to do a little research to determine a fair market value, or assign the value at what I actually paid for it at the end of the lease. So far, my savings in county property taxes on this one item would have been somewhere around $25 over the years if leasing would have helped set a realistic assessment of the value. And that's just this one item. My 1992 Sharp photocopier that I bought in 1993 for $648... our friendly county tax assessor is taxing that POS as if it's still worth $97. No joke, our county tax assessor thinks my 15 year old consumer grade photocopier is worth $97. Based on that, I get to pay $1.50 to the county to own that for another year. I suggest that the $1.50 that I'm getting taxed on my photocopier is actually more than the copier is worth. I doubt I could get $1.50 for it at a yard sale. On this item alone, I'm probably being taxed yearly more than 100% of the fair market value of the item... and that's just the county tax man. I could go on and on... I'll suggest our county is fairly representative of "average". It's my impression that domestic residences are oftentimes significantly underassessed, and business hardware inventory is oftentimes significantly overassessed (you gotta pay for that new county administration complex somehow). Therefore, one "pro" I see of leasing is the possibility that lease/buy financing of equipment can help in setting realistic assessed property values for your hardware inventory. Link to comment Share on other sites More sharing options...
Members DJ Swydez Posted April 15, 2007 Members Share Posted April 15, 2007 on the other hand i've had lighting rentals from other companies have bulbs fail, either a replacement bulb was included with the rental or I called the company to get a new one, the burnt bulb was sufficient proof that this was a failure due to normal operation and there was no charge. Yes, I have had it happen where I show up to a gig and one of the light bulbs in burned out in a light fixture, or when a bulb just suddenly when out because it was old... every time, the rental company replaced the bulb for free after I showed them that I did not break or kill the old bulb... However, when I mentioned the broken blacklight bulb, we were not directly responsible for its shatter, but it was a result of the party I was DJing... it was a "rave" type of event with lots of techno music, blacklights, strobes, etc... the blacklight had been on for quite some time and the bulb had heated up inside the fixture... the crowd at the party was jumping around and getting pretty excited... a couple of guys in the crowd began splashing water around by opening water bottles and shaking them over the crowd... before I or anyone else could stop them, some of the water went through the grille of the blacklight and landed on the bulb... this caused the bulb to explode with what sounded like a gunshot! It scared the {censored} out of us and many of the people at the party... luckily the light had a strong grille on the front and none of the glass went flying... we forced everyone to stop the water throwing and the party continued for hours... however, we had to pay like $50 or some crazy amount for it because blacklights are expensive to buy or something... Link to comment Share on other sites More sharing options...
Members Mogwix Posted April 15, 2007 Members Share Posted April 15, 2007 This thread is going way over my head. Thanks guys for reminding me how little I know of the world. (seriously, thanks) Link to comment Share on other sites More sharing options...
Members DJ Swydez Posted April 15, 2007 Members Share Posted April 15, 2007 This thread is going way over my head. Thanks guys for reminding me how little I know of the world. (seriously, thanks) Agreed! Link to comment Share on other sites More sharing options...
Members 6Imzadi Posted April 15, 2007 Author Members Share Posted April 15, 2007 This thread is going way over my head. And off topic. Link to comment Share on other sites More sharing options...
CMS Author Craig Vecchione Posted April 15, 2007 CMS Author Share Posted April 15, 2007 Yes, I have had it happen where I show up to a gig and one of the light bulbs in burned out in a light fixture, or when a bulb just suddenly when out because it was old... every time, the rental company replaced the bulb for free after I showed them that I did not break or kill the old bulb...However, when I mentioned the broken blacklight bulb, we were not directly responsible for its shatter, but it was a result of the party I was DJing... it was a "rave" type of event with lots of techno music, blacklights, strobes, etc... the blacklight had been on for quite some time and the bulb had heated up inside the fixture... the crowd at the party was jumping around and getting pretty excited... a couple of guys in the crowd began splashing water around by opening water bottles and shaking them over the crowd... before I or anyone else could stop them, some of the water went through the grille of the blacklight and landed on the bulb... this caused the bulb to explode with what sounded like a gunshot! It scared the {censored} out of us and many of the people at the party... luckily the light had a strong grille on the front and none of the glass went flying... we forced everyone to stop the water throwing and the party continued for hours... however, we had to pay like $50 or some crazy amount for it because blacklights are expensive to buy or something... Yup, that's not their responsibility, but yours. The rental company has no control over the use of the item once it's out of their hands. Whether intentionally or not you placed the item in a 'dangerous' environment which caused it to be damaged. Your dime. If you were a hired gun for a promoter, you could possibly go after them for compensation of your loss, as the promoter is the one ultimately responsible for who enters the venue. But that's something you need to put into your contract with the promoter. Link to comment Share on other sites More sharing options...
Members W. M. Hellinger Posted April 15, 2007 Members Share Posted April 15, 2007 And off topic. I believe the topic of discussion here is the pros and cons of leasing... and I suspect the OP is considering leasing "something"... possibly for use in some business venture. The decision to lease or purchase could rest on the sum total of fractions of a percent differences here there (as is the case with many business decisions). The devil is in the details (and possibly in the really fine print on the back side of the lease contract)... therefore good business decisions are the result of knowing all the details and being able to weight and measure the implications of those seemingly insignificant picky details. I think we're still pretty much on-topic. Link to comment Share on other sites More sharing options...
Members 6Imzadi Posted April 16, 2007 Author Members Share Posted April 16, 2007 I think we're still pretty much on-topic. Yes, sorry for the misunderstood emoticon. Actually, this is very interesting as I am the OP, and I AM thinking of leasing equipment to be scalable and compatible with another business associate's system. Link to comment Share on other sites More sharing options...
Members BillESC Posted April 16, 2007 Members Share Posted April 16, 2007 One interesting thing about the leasing process is the one page application. You fill it out send it in and usually have an answer in 24 to 48 hours. Certainly easier and quicker than most bank transactions. Leasing is simply a tool and should be considered as such. I can give you the ability to be competitive in a market over night, but of course, it will not guaranty your success. Link to comment Share on other sites More sharing options...
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