Property tax bill

Does my business owe property tax if it doesn't own real estate?

Some questions aren’t always as simple as they seem. For instance, “Do I owe property tax if my company doesn't own real estate?” If you’re familiar with the Avalara tax blog, you may have guessed the answer: It depends.

That’s because there are two types of property tax:

  • Real property
  • Personal property

If you don’t own real estate, you’re off the hook on the first type. But most states also tax business personal property (yes, tax has some fun oxymoronic terms).

It can get overwhelming if you aren’t familiar with business personal property tax, especially if you don’t have experience with real property tax. So, let’s answer a few more questions:

What is business personal property tax?

There are two types of business property tax. Real property tax applies to the land, structures, and anything permanently attached to the ground. Personal property tax applies to anything of value that’s moveable, like machinery, inventory, equipment, etc.

In a nutshell, if your business owns a certain amount of personal property, then yes, you do owe property tax. The threshold varies for each state, so be sure to check the rules for any state your business owns personal property in.

How is business personal property tax determined?

In general, it’s up to you to determine the value of your business’s property and file a personal property tax return accordingly. This often includes:

  • Managing an asset inventory
  • Assessing property value
  • Tracking depreciation values
  • Applying valuation factors (index and depreciation tables) based on property types
  • Filing a return

Of course, each state sets its own rules on personal property taxability and rates. You could owe vastly different tax bills if you have multiple locations with the same asset types but in different states. Understanding the tax rules and exemptions in each state where you have personal property is critical.

How and when do I pay business personal property tax?

Generally speaking, you file a business personal property tax return using the appropriate state form; however, forms vary from state to state.

After you file, an assessor evaluates your property and assigns a personal property tax assessment based on their factors. You then receive a notice of value and, eventually, a tax bill and must remit payment.

Of course, certain states and local jurisdictions may have their way of doing business. Once again, it’s up to you to know the property tax process where you have business locations or inventory.

Like real estate, property taxes are due annually. Each state has its schedule, so businesses with multiple locations may have to manage personal property tax filing and payment throughout the year, depending on where the property is.

Can I appeal my business personal property tax?

Tax assessors are people, and often busy ones at that. Like all humans, they may make a mistake. You can file an appeal if you believe your personal property tax assessment is unfair. Most (but not all) states allow 30 days after the assessment notice for a business to appeal the assessed value.

Personal property tax appeals can get complicated, but you can do several things to prepare. The most important is to ensure you have the evidence needed to support your claims, including a complete list of assets and the depreciation tables you’re working with.

It’s also critical to file your appeal before the deadline. Once the deadline passes, the assessor’s valuation stands, and you simply owe the amount of tax you’re billed.

How do I manage business personal property tax?

Knowledge is the first step to stay compliant. Because each state determines whether, when, and at what rate they assess business personal property tax, it’s important to know the rules for each state where you do business.

Once you’ve determined whether your business must pay personal property tax, you must implement a clear, consistent process for identifying and tracking assets, maintaining depreciation rates, and determining asset values.

If this sounds daunting, don’t worry. Some professionals know business personal property rules inside and out. You can also use software like Avalara Property Tax to help you manage the process in-house.

Avalara Property Tax simplifies personal property tax through automation. The solution maintains assessor forms and depreciation schedules, tracks due dates, and centralizes data to help you properly prepare your personal property returns. It also offers a single place for all your returns and associated asset listings to be stored safely, making it simple to pull documentation when requested.

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