As a business owner you know all too well that taxes are unavoidable. While you are probably aware of the tax types that grab more headlines such as, income (both federal and state) and sales and use tax. You might not be aware of one of the lesser-known tax types that business owners often over look, business personal property tax. You maybe thinking, oh no does this apply to me, read on to find out.
Property tax is broken into two areas: real property and personal property. Real property is tax on the value of the building, and any land or other improvements included with it. When property taxes are mentioned, it’s common for people to assume their tax obligation has been met once the real estate tax bill has been paid. This is true for businesses and individuals alike.
Personal property tax is tax assessed on physical tangible goods that a business owns also known as business personal property tax or BPP for short. BPP is generally applied to machinery, furniture, fixtures, computer equipment, tools and supplies. A helpful way to highlight the difference is that real property is the structure and personal property is anything you could take out of it (note, there are some exceptions to this scenario).
Reporting and Paying BPP Tax
The first step in the BPP process is to know if it is taxable in your state. The following twelve states do not tax BPP:
- New Hampshire
- New Jersey
- New York
- North Dakota
- South Dakota
If you own a business and live in Washington D.C or one of other the thirty-eight states not listed above, you most likely have a BPP obligation. The good news is that counties and states provide various exemptions and abatements to taxpayers. For example, some localities provide a filing threshold. In Douglas County, Colorado a personal property declaration (return) must be filed but only if the total depreciated value is greater than $7,900. Other jurisdictions may not tax below a given threshold but still require yearly filing. Be sure to check with your local taxing authorities to verify the filing requirements and exclusions available.
Payment And Protests
Once you file your BPP return you will receive an assessment of value based on your filing. Assessment notices can be included with your real estate assessment, if applicable, or they can come as a stand-alone notice. Some assessments will arrive months before the tax is due and others are received with the tax bill. The important thing to note is the appeal deadline. If you do not agree with the assessment (the basis for which the tax amount is calculated) you have the right to appeal the valuation. Appeal deadlines are usually 30-45 days after the date on the notice.
It is worth mentioning that Inventory usually is excluded from the business property tax obligation. However, here is a list of states that do tax inventory:
- West Virginia
Business taxes are hard and ignoring them doesn’t make them go away. Knowing if they apply to you just adds to the confusion. Our advice pickup the phone and call your county. Ask questions about this type of tax and if it applies to your business. It is important to become familiar with the business taxes implemented in your City, County and State. It could save you time a money in the future.
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Rick Bromund heads the tax research team at ComplYant, a technology platform offering business owners and entrepreneurs a simple way to manage tax rules and requirements. Rick is an experienced professional in the tax industry and has previously held positions at Fortune 500 companies as well as one of the big 4 accounting firms.