Tips for Preparing Business Personal Property Tax Listings
Any individual or business owning or possessing personal property used or connected with a business (or other income generating purpose) must file a business personal property tax listing annually. Tips for preparing business personal property tax listings are outlined below.
Be sure the total cost of assets reported on the property tax listing reconciles to what was or will be reported on your business income tax return. In some cases, there will be differences between the tax cost and actual cost of the asset, resulting from various tax treatments such as a like-kind exchange. Always list the actual historical cost of the asset rather than the special cost computed from the tax treatment.
Businesses not on a calendar year end should be careful to report assets owned or in possession as of January 1, rather than their fiscal year end.
Do not list licensed vehicles; they are reported and taxed through the Department of Motor Vehicles (DMV). The same goes for trailers with annual tags.
Unlicensed/unregistered vehicles must be listed on your property tax listing. Any trailers with permanent or multi-year tags should be listed with their vehicle identification number (VIN) additionally provided.
Listing supplies on hand is required, but it may be impractical to take an actual inventory count of office supplies (e.g., paper, pens, ink, etc.). To minimize this burden, county tax authorities typically allow the use of a monthly average (annual supplies expense divided by 12) to estimate supplies on hand as of January 1.
Typical supplies that must be listed include office supplies, fuels held for consumption, spare parts and replacements, small wares, cookware, medical/dental supplies, beauty/barber shop supplies, and maintenance/janitorial supplies. If an asset is on business premises, but not actually in service, it is still required to be listed on the property tax listing.
Leased equipment must be included on your property tax listing, even though the tax is not assessed directly to you. The owner of the equipment receives the tax assessment from the county. However, you may be responsible for paying the property tax under the terms of your lease agreement.
Leasehold improvements are alterations made to a leased premises to customize it for the needs of a tenant. If the improvement is structural or permanently affixed to the property, the tenant should not be assessed the related property tax. Instead, the owner of the facility receives the assessment by way of the real estate taxes charged on the facility. Therefore, leasehold improvements that are structural or permanent in nature should not be included on a business personal property tax listing.
Generally, do not list any real property on your property tax listing. In most counties, real property is separately assessed by the county for property tax purposes.
When a building is purchased with personal property inside the building, a reasonable allocation of the purchase price must be made among the building and personal property items in order to properly report the personal property on the property tax listing.
If you have undertaken a cost segregation study for the building used by your business and have classified certain structural components as equipment for income tax depreciation purposes, exercise caution when preparing your property tax listing. Certain structural components, which exist solely for the support of equipment, can be treated as equipment for income tax depreciation purposes and depreciated over the life of the related equipment instead of the life of the building. Be careful not to list items on your property tax listing that are deemed structural components of the building.
Most small businesses can elect to expense personal property purchases costing less than $2,500, however you must still list these on your annual business personal property listing. These should be listed in the expensed items group on the business personal property tax listing.
This article is not intended as tax advice. Please contact the professionals at Gilliam Bell Moser with any questions.