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What is personal property tax for business?

If you own a business, you are most likely to pay business personal property taxes, but what is it? When you run a business, you own and use tangible personal properties. These properties are subject to taxation. They are taxed either by the state or by the local authorities. Any item that a business uses to conduct business and those that can be carried away when the business moves are considered business personal property.

What is taxable business personal property?

The business personal property that can be taxed varies between states. Some tax supplies and inventory while others exempt them. Assets such as tangible and intangible assets are also taxed depending on the state. For the most part, these items are not taxable. Assets such as bonds, stocks, goodwill, patents, etc. fall under intangible assets.

What qualifies under tangible personal property?

Goods or products that are owned and used by a business or by an individual for business purposes fall under the category of tangible personal property. These include furniture and fixtures, tools, machinery, computers, and other business equipment. These are also referred to as personal property. One aspect to be clear of is that personal property does not refer to property used for personal use. It refers to property owned by an individual or a business for business use. Tax laws differentiate between personal property used for personal use and business use. Let’s walk through the business personal property in this blog.

Understanding how it works

All the personal property accounts are maintained by the BPP department. The business personal property (BPP) department is responsible for reporting new accounts every year as of January 1st, reviewing the renditions, and deleting the accounts that are no longer considered a business. Field inspections are also conducted annually by the appraisers.

For tax purposes, the property is classified either as real property or personal property. Real property includes land and building whereas personal property includes items that are not attached to the land. As far as Texas is concerned, tangible personal property that is used to produce income is taxed. As per SB 340 that was passed in the 2003 regular legislative session, if you own a business or use tangible personal property to produce income, you will have to report to the appraisal district that the property is used in the business. In case you fail to report, you will be charged a civil penalty and sometimes even a criminal penalty in terms of tax evasion.

Your role as a business personal property owner

Your initial responsibility would be to file a property tax rendition every year with the county appraisal district. A rendition is a form that provides information about your property to the county appraisal district. It includes information such as the location, description, acquisition date, and cost of the property. The appraisal districts use this to estimate the market value of your property for taxation purposes.

The appraisal districts usually mail the rendition forms during January to businesses that were operating the previous year. If you do not receive the form, contact your county appraisal district before the end of March and request for the blank forms. The appraisal districts will mail you the forms at no charge.

The deadline for filing the rendition is April 15th. Here are a few things to remember when preparing the rendition.

  • Personal properties are only taxable if they are owned as of January 1st.
  • The information on the rendition form must reflect the ownership, location, and business assets as of January 1st.

Once the renditions are reviewed your county appraisal district determines the areas where the business personal property can be taxed and sets the value. It later sends out notices of the appraised values to the BPP owners.

What can be done if your appraisals are too high?

In cases where you disagree with your county appraisal district, you can protest in front of the ARB. To do that you must initially file a written notice of protest with the ARB. This must include your name, address, description of your property, and information that indicates you are dissatisfied with the action taken by your CAD. The last day to protest is May 31st. Issues can be resolved even without appearing in front of the ARB via phone calls or by visiting the office.

To know more about Business Personal Property Taxes Read the Free Book “What You Need To Know About Personal Property Valuation”, the only book written on BPP Valuation.

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Blog Author

Patrick O’Connor, MAI, Owner and President
Patrick O’Connor has been active in reducing property taxes, providing expert witness testimony and appraising commercial real estate property since 1983. Pat is active in publishing analyses and data with respect to the real estate market, while being a highly regarded media spokesperson for the real estate community. He holds a MAI, the highest achievable designation from the Appraisal Institute, and is a licensed senior property tax consultant. Pat earned a Master of Business Administration from Harvard University. In 2001, he authored the first definitive consumer guide to Texas property taxes, Cut Your Texas Property Taxes.

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