We asked business people around the country: what would a repeal of LIFO mean for your business?
The impact on our customers would be severe. It would be reasonable to assume that many of our larger automotive customers would be unable to withstand the tax burden, and would be forced to seek bankruptcy protection. So whereas the initial tax loss would be painful for our company, our industry can expect wholesale customer failure, the resulting financial default, and perhaps a broad based industry wide failure at the service center level as well.
The loss of the ability to use LIFO as a method of valuing our inventorying could have potentially a grave impact on our ongoing business. Our company has almost 300 employees in three states and the additional potential tax liability could be crippling.
If we had to pay the tax on our LIFO reserve we would have to pay over $1,000,000. This would put us out of business.
It would ruin us.
The repeal of LIFO accounting would cost me a minimum of $50,000 a year in additional taxes and would force me to either lay off one or two people and/or cut the amount of inventory I carry to a dangerous level.
We would have to reverse our current LIFO reserve and pay tax of over $1.6 million. The tax burden would impede our human and physical capital expansion plans.
Our LIFO reserve is currently over $2,000,000. Eliminating LIFO would cripple our firm. We have 135 full time and 20 part time employees.
LIFO repeal would cause us to pay taxes totaling approximately $50 to $60 million. These are funds that we currently have invested in the business to help provide jobs to our associates.
I run a $120 million family owned supply business and we would be affected significantly. As an example, last year we recorded $800,000 of an increase to our LIFO reserve. Without this we would have paid an additional $320,000 in taxes. Our LIFO reserve is approx. $2.5 million at this time. It doesn’t look like the current LIFO reserve would immediately be converted to earnings (this would be a huge burden), but going forward it could significantly affect our taxes paid and would probably hinder our ability to do the following: share health care costs, contribute to our Profit Sharing Plan and possibly hinder our acquisition strategy and reduction of debt.
To repeal the LIFO method of inventory evaluation would put a very heavy burden on our company. Many of the items in our inventory are slow moving and this causes the replacement cost to erode the profit we thought we made. The LIFO inventory method helps insulate us from that loss. To lose this method will affect our ability to be competitive and ability to grow. This of course means fewer people employed.
If our company is forced to recover our entire LIFO reserve at the current tax rates it would cost us more than our total net income over the past three years combined.
Repeal of LIFO would have a devastating impact on my business and in fact might threaten our very survival in these difficult times.
Our company has been on LIFO inventory valuation for over 45 years. The repeal of LIFO could very possibly have such a huge impact that we may be forced to close our doors, putting over 30 individuals employed in Pennsylvania & Ohio out of work.
As a wholesale distributor utilizing the LIFO accounting method, the repeal of such would have a devastating effect on this company. Our industry is not a high margin/high profit industry and to repeal LIFO would decrease our employee count by up to three people or about 4.5% of our workforce.
The LIFO reserve has allowed us to grow from $400,000 to $12,500,000 in sales over the past 33 years. It allowed us to increase our payroll from five to 52 employees, to sponsor a 401(k) program, pay for half of our employees’ health care, and keep 95% of them year round even though we are a very seasonal business. I do not think we would survive having to pay the taxes that elimination of LIFO would mandate without cutting the size of our business at least by half.