The following is a guest post by property tax consulting firm Assessment Technologies
What Is Business Personal Property, and How Does It Affect Property Taxes?
It is imperative for business owners to understand all of the taxes that their company is subject to. This not only ensures that the company pays what it owes, but also that it does not pay more than the appropriate amount.
This is critical, because the amount that a business pays in taxes can significantly affect the company’s bottom line. In addition to property taxes, businesses also are required to pay taxes on personal property. This may sound like an incongruity at first. How can a business entity have “personal” property?
Let’s start by defining what personal property is.
A business may own real property and personal property. Real property refers to the land and any permanent structures that occupy that land. These assets are subject to property taxes. However, businesses own far more than land and buildings.
Everything that is inside those buildings or that is used on the land that is moveable is considered personal property. Everything in the office supply closet, from staples to label makers, is personal property. So are the desks, chairs and computers. The manufacturing equipment that is used to make goods and the inventory of raw materials or finished goods also are deemed personal property. Any company-owned vehicles receive the same designation.
So far we have talked about tangible personal property. These are things that can be seen and touched. However, business personal property also may consist of intangible items such as stocks, securities, bonds, patents and trademarks. None of these assets may be touched and seen the way that tangible property can, but this does not make them less valuable.
The taxing authority in your municipality may place a value on business personal property using any one of three methods.
- The first of these is the market value, meaning the price of the item on the market.
- The second is book value, which refers to the value of the item according to federal depreciation schedules.
- Lastly, your jurisdiction may rely on the Texas state comptroller’s schedule.
Personal Property Rendition
Any property that a business owns may be subject to being taxed. This is why every company is required to file a personal property rendition every year with their appraisal district. Many counties in Texas mail out suitable forms to businesses in January. Companies that do not receive such a form are required to contact the appraisal district to obtain a form.
The rendition is used by the appraisal district to help determine how much a business owes in taxes. After the rendition is reviewed, the appraisal district sends out notices of appraised value. Many business owners make the mistake of not carefully reviewing the notice of appraised value. If there are any errors in this notice, then the tax bill will be incorrect.
Taxes on business personal property can be complicated. It may make sense to have a property tax professional review the rendition before it is sent and to take a look at the notice of appraised value. Doing so may alert business owners to the need for an appeal that could save them thousands of dollars.
About the author
James is a licensed Senior Property Tax Consultant and is considered an expert throughout Texas in property tax issues relating to the medical and healthcare industries. In addition, James is a member of various professional organizations, including the Institute for Professionals in Taxation (IPT) and the Texas Association of Property Tax Professionals (TAPTP). James is a 1986 graduate from Texas A & M University and received his Bachelor of Science degree in Economics.