Signtronix Sign Company

Thanks to our new Signtronix sign, we have grown faster than we had
anticipated, therefore, rapidly attempting to adjust to our 30% increase
of new customers this past month. Every week that goes by is better
than the previous week.

This past month, we received and put up the Signtronix sign on the same
day, June 20, 2007, and noticed an immediate reaction.

Thanks to Steve Harms, your Signtronix representative, and the expedient
service that we got from Signtronix, we are very pleased and satisfied.

Sincerely,
Gary & Mary Johnson
Komana-I-Wana Hawaiian Shave Ice
Austin, TX

Some Highlights from this Signtronix:

• Items you may want to mention to customers when talking about benefits of leasing:

• A lease does not affect a borrower’s ability to qualify for other loans.· A low monthly payment (that is paid by the increased cash flow) relieves the pressure of the business to be able to add more inventory.

• The old Tax Codes allowed leases to be expensed as advertising on the income statement.  After being paid-off, the lease could be “adjusted” and capitalized; which, in turn could be depreciated at 200% on the income statement.

• The new Tax Codes are even better.

• In response to the customer who says he pays cash for everything, tell the customer that he can now depreciate 100% of the (lease) price of the sign immediately.  Simultaneously, he only writes a check for one-fourth or one-third of the actual (lease) cost.  This is better than paying cash for everything.  All succeeding payments become money that would be paid in income taxes anyway.

Respond Signtronix Signs Company

To complete this, Signtronix quotes, As you know, knowledge is power; but, a little knowledge is dangerous.  I advise you not to get involved in accounting discussions that you can’t back up with an accounting degree or certification.  This information is provided to make you more passionate about lease/purchases.

Hopefully this article helps you to believe that leases properly done are good tools for the businesses using them, as well as to the salesperson who promotes them.

With that in mind, it is easy (signtronix signs) to tell the difference between tax accounting (i.e., accounting for the sole purpose of paying taxes and complying with law) as opposed to tax strategy.  There is also a difference between a lazy, high-paid accountant and one who works diligently and hard to constantly save his clients tax dollars.

REMEMBER, THE CURRENT TAX Codes are designed for the so-called average small business to spend about $10,000 per year on capital purchases.  (That’s a digital message center per business per year.)  This is designed by the U.S. Congress to stimulate the economy, because capital expenditures by businesses really work the best and fastest at economic stimulation; therefore, favorable lease/purchase laws will be around for a long time.

In any event, we should suggest to our customers that they should always consult their accountants.  The Tax Codes constantly change; and, most sign salesmen (except for me) are not accountants.  Don’t try to be an accountant - this information is provided to help you promote leases and answer silly leasing objections.

Most CPAs are of the opinion says Signtronix, that a business should lease/purchase “income-producing property” and pay cash for things that simply cost a business money that doesn’t generate any income.  When that is done, the business can depreciate 100% immediately while paying $100 per month, for example, for three or four years.

The “time value of money” means that a business receives a 100% immediate depreciation expense (a non-cash expense) for a small monthly payment that will be paid with “cheaper dollars” at a future date!!!  And, all those “future dollars” can be used to buy “today’s” inventory .  .  .  That converts to cash “today”.

Again, the current Tax Code literally pays for 75% of the sign .  .  .  In the first year with a lease/purchase using today’s Tax Code.  I realize that accounting articles are a turn-off for most non-accountant types.  But, most business people know that the price they pay for an accountant should be paid by the money their accountant saves them every year.

However says Signtronix Signs, businesses can now depreciate 100% of the value of the asset in the first year!!!  Again, this is a non-cash expense on the income statement (100% depreciation the first year with only one-third or one-fourth of the asset paid - not bad!)

Therefore, in response to the customer who says he pays cash for everything, tell the customer that he can depreciate 100% of the (lease) price of the sign as “Depreciation Expense” on his income statement, which is a non-cash expense.

Simultaneously, he only writes a check for one-fourth or one-third of the actual (lease) cost.  This is better than paying cash for everything.  All succeeding payments after the first year is money the client would pay in income taxes anyway.

Signtronix Signs - By the time an asset was paid/adjusted/and depreciated, 75% of that asset was paid by what normally was paid in income taxes over 3 to 10 years.  Section 179 of the current Tax Code states that a “Fair Market Value” lease can be capitalized on the balance sheet as a “Fixed Asset,” namely, “Sign.”

LEASE PURCHASE PAYMENTS are treated as a “Liability,” similar to a mortgage payment - which also remains on the balance sheet (as opposed to the income statement).  Only the monthly payment goes on the income statement as an “Expense.”

When Signtronix asked to write this article about leasing, it frankly had been a long time since I last worked with the accounting debits and credits of leasing.  But, in researching the current Tax Codes against the old Tax Codes that I worked with, I found that the new Tax Codes are even better.  Under the old Tax Codes, a business could expense the lease at 100% on the income statement as “Advertising Expense.”  That reduces the taxable income and saves the taxpayer businessman about 25% of the value of the asset from being paid in income taxes.

At this point, this gets a bit heavy, but it’s worth paying close attention.  After the lease expired, a business could then adjust the “Retained Earnings” and income statement and capitalize the sign on the balance sheet under “Fixed Assets,” i.e., “Sign” at the total value paid by the lease.  Then, that business would depreciate 200% of that value back on the income statement as an expense that didn’t even involve cash.  That would further reduce taxable income.

Continue Signtronix Sign Lease - THE SECOND BEST SIDE-EFFECT of leasing that is overlooked is that a low monthly payment (that is paid by the increased cash flow) relieves the pressure of the business to be able to add more inventory that would not be possible if the business uses all its cash to buy a sign.  Inventory can be turned into cash - but only if the business has the inventory in the first place.

Therefore, the sign will increase business income that will be paid by the “NEW’ increased cash flow.  Plus, the business has more money to buy inventory, which, in turn, creates “NEW” income since that business isn’t using all its cash to buy a sign.

More discussion on sign leasing from Signtronix:

 Rule 2) most important of all, leasing is designed for capital investment to be paid partially by tax incentives authorized by the Tax Code.  With that in mind, one must be mindful that tax evasion is a felony; and, one could land in jail.  On the other hand, tax avoidance is GOOD BUSINESS and authorized by the IRS with the full sanction of the U.S. Congress to help businesses make capital purchases that stimulate the economy.

THE BEST SIDE-EFFECT of leasing that is most often overlooked is that a lease does not affect a borrower’s ability to qualify for other loans.  Only a single monthly payment is reported as a liability against the borrower.  So, when a client says he can’t buy a sign today because he’s trying to qualify for a big loan, let the client know that the sign will only cause a $100 liability (or whatever the monthly lease price is) if he leases the sign.