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

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.

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.

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.

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.

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.