Other Taxes
Non-Income Taxes Expensed in Operations
Other Taxes refers to the various tax expenses a company incurs that are not related to income taxes (which are reported separately in the tax provision). These include property taxes, sales and use taxes, payroll taxes (employer portion), excise taxes, value-added taxes (VAT) not recoverable, franchise taxes, and other governmental levies tied to operations. Classified as operating expenses, they are recurring costs of doing business and directly reduce operating income. Understanding this line item is essential for assessing total tax burden, cost structure, and operating margins beyond just the effective income tax rate.
What are Other Taxes?
Other Taxes encompass all tax obligations excluding corporate income taxes. These are primarily transaction-based, asset-based, or employment-based levies imposed by federal, state, local, or foreign governments.
Unlike the tax provision (which is based on pre-tax income), other taxes are generally fixed or volume-driven and treated as operating costs. They are expensed as incurred and included in operating expenses, typically within cost of revenue or SG&A.
These taxes represent the 'hidden' tax burden—often overlooked compared to headline income tax rates but material for total cost analysis.
Common Types of Other Taxes
Major categories include:
Typical Other Taxes
- Property taxes: On real estate, equipment, and sometimes inventory
- Payroll taxes: Employer share of Social Security, Medicare, unemployment (employee portion withheld)
- Sales and use taxes: Collected/remitted on sales or paid on purchases
- Excise taxes: On specific goods (fuel, alcohol, tobacco)
- VAT/GST: Non-recoverable portion in some jurisdictions
- Franchise/business license taxes: Based on capital or revenue in certain states
- Customs duties/import tariffs
- Environmental or carbon taxes
Industry-specific taxes (e.g., bank levies, telecom spectrum fees) may also appear here.
How Other Taxes Are Reported
Placement in the income statement:
Common Locations
- Within Cost of Revenue (e.g., excise, production-related)
- Within SG&A (property, payroll, franchise)
- Separate line as Other Operating Expenses or Taxes Other Than Income
They reduce operating income and are included in EBITDA calculations (not added back like depreciation).
Tip: Total tax burden = Income taxes + Other taxes; compare across peers for true cost competitiveness.
Examples
Example 1: Retail Company
Example 2: Manufacturer
Growth in other taxes can reflect expansion (more property/employees) or rate changes.
Importance in Financial Analysis
Analysts examine other taxes to: - Calculate total effective tax rate (income + other taxes / pretax income) - Assess operating margin quality - Benchmark cost structure vs. peers - Evaluate geographic exposure (varying state/local rates)
Rising other taxes relative to revenue may signal inefficiencies or unfavorable locations. They are recurring and included in normalized profitability metrics.
Warning: Some companies net recoverable VAT/GST—gross presentation can inflate both revenue and expenses.
Key Takeaways
Other Taxes include non-income governmental levies like property, payroll, and sales taxes.
Classified as recurring operating expenses, reducing operating income.
Material component of total tax burden beyond headline income tax rate.
Vary by industry, geography, and asset/employee intensity.
Monitor as % of revenue for cost efficiency and peer comparison.
Other Taxes
Non-Income Taxes Expensed in Operations
Other Taxes refers to the various tax expenses a company incurs that are not related to income taxes (which are reported separately in the tax provision). These include property taxes, sales and use taxes, payroll taxes (employer portion), excise taxes, value-added taxes (VAT) not recoverable, franchise taxes, and other governmental levies tied to operations. Classified as operating expenses, they are recurring costs of doing business and directly reduce operating income. Understanding this line item is essential for assessing total tax burden, cost structure, and operating margins beyond just the effective income tax rate.
Table of Contents
What are Other Taxes?
Other Taxes encompass all tax obligations excluding corporate income taxes. These are primarily transaction-based, asset-based, or employment-based levies imposed by federal, state, local, or foreign governments.
Unlike the tax provision (which is based on pre-tax income), other taxes are generally fixed or volume-driven and treated as operating costs. They are expensed as incurred and included in operating expenses, typically within cost of revenue or SG&A.
These taxes represent the 'hidden' tax burden—often overlooked compared to headline income tax rates but material for total cost analysis.
Common Types of Other Taxes
Major categories include:
Typical Other Taxes
- Property taxes: On real estate, equipment, and sometimes inventory
- Payroll taxes: Employer share of Social Security, Medicare, unemployment (employee portion withheld)
- Sales and use taxes: Collected/remitted on sales or paid on purchases
- Excise taxes: On specific goods (fuel, alcohol, tobacco)
- VAT/GST: Non-recoverable portion in some jurisdictions
- Franchise/business license taxes: Based on capital or revenue in certain states
- Customs duties/import tariffs
- Environmental or carbon taxes
Industry-specific taxes (e.g., bank levies, telecom spectrum fees) may also appear here.
How Other Taxes Are Reported
Placement in the income statement:
Common Locations
- Within Cost of Revenue (e.g., excise, production-related)
- Within SG&A (property, payroll, franchise)
- Separate line as Other Operating Expenses or Taxes Other Than Income
They reduce operating income and are included in EBITDA calculations (not added back like depreciation).
Tip: Total tax burden = Income taxes + Other taxes; compare across peers for true cost competitiveness.
Examples
Example 1: Retail Company
Example 2: Manufacturer
Growth in other taxes can reflect expansion (more property/employees) or rate changes.
Importance in Financial Analysis
Analysts examine other taxes to: - Calculate total effective tax rate (income + other taxes / pretax income) - Assess operating margin quality - Benchmark cost structure vs. peers - Evaluate geographic exposure (varying state/local rates)
Rising other taxes relative to revenue may signal inefficiencies or unfavorable locations. They are recurring and included in normalized profitability metrics.
Warning: Some companies net recoverable VAT/GST—gross presentation can inflate both revenue and expenses.
Key Takeaways
Other Taxes include non-income governmental levies like property, payroll, and sales taxes.
Classified as recurring operating expenses, reducing operating income.
Material component of total tax burden beyond headline income tax rate.
Vary by industry, geography, and asset/employee intensity.
Monitor as % of revenue for cost efficiency and peer comparison.
Related Terms
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