Business personal property tax is a transaction tax that often flies under the radar. As such, understanding what it is and knowing how to manage it becomes important for complete tax compliance.
By Stacey Roberts and Connie Zoerink
What is business personal property tax?
Business personal property tax is lesser known than its cousin, real property tax, but it is still important and easily overlooked.
This tax applies to any kind of property that is not affixed to a surface and is not considered real property. It is imposed on business assets that are used in various locations like laptops, printers, and furniture.
Leased property is another aspect of this tax. Business operations in leased property is technically temporary. Since it is not considered real property, leased property falls under the category of business personal property tax.
Inventory is the final type of property taxable under business personal property tax. This can be a particularly volatile aspect of the tax because only certain jurisdictions require inventory to be reported.
How and when does a business report business personal property tax?
Typically, business personal property tax is reportable to the county where the assets are being used. One complication in the reporting process is that counties can have different assessment dates for when to recognize these mobile assets. Usually, this assessment date is January 1st but that date is liable to change from county to county.
The same rules apply for leased property. The lessee reports the business personal property tax based on the county the property is in at the appropriate assessment date.
Inventory is usually subject to spring assessment dates. These vary widely between jurisdictions, which is another reason why inventory can be hard to report correctly.
The most important duty to comply with business personal property tax is to keep track of all mobile or impermanent property so that the taxes are reported to the correct county at the correct time.
What if a business has not been compliant in the past?
At TaxOps, we have had clients who have never reported business personal property tax. This can lead to repercussions from state and local tax boards. As long as a business catches their mistake before an audit, the problem should be relatively easy to reconcile.
The reporting process for this tax is less formal because it is at the county level as opposed to the state level. For reporting problems, tax services or businesses can approach the county assessor’s office and discuss how to become tax compliant.
While this area of tax sees less audit activity, it is still something to keep in mind. If your unreported property has a large value or has been unreported for an extended period, the repercussions of an audit can be significant. Like with any tax, complying with business personal property tax will pay off in the long run.
For more guidance, reach out to the tax professionals at taxops.com.
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