Personal property tax is often the forgotten tax that can creep up on taxpayers. Businesses with tangible property only in Ohio do not need to worry about property taxes; as of Jan. 1, 2009, Ohio’s personal property tax was repealed. However, if your business has fixed assets, inventory or even just rents property in many other states, your business may have a property tax filing requirement. Personal property tax is known by different names; some individuals might call it a tangible return, while others may refer to it as a personal property tax return. There are also numerous states like Ohio that do not tax the tangible personal property owned by a business.
The starting point for personal property tax compliance is the filing of a rendition—a listing of the assets/inventory that you own in a particular location. Most renditions are due between January and April, though some are due later in the year. For the most part, renditions are filed at the county level, although some are filed with the state. A rendition is location-specific, meaning if you have multiple locations within the same county, you will have to file a separate rendition with the county for each location. Each jurisdiction will have a listing date that must be utilized in preparing the rendition. Generally, this listing date is December 31 or January 1. Based on these listing dates, all assets owned by a business on this date must be reported on the rendition.
Understanding the Personal Property Tax Process
Filing personal property taxes is a three-step process:
- Prepare and file the rendition.
- Receive the assessment—this is not a bill but a notification from the taxing jurisdiction as to the taxable value of the property that has been reported. After receiving the assessment, you will have a period of time to protest the valuation. This time period is typically about 30 days.
- After the time period for protesting has expired, you will receive the actual bill for property reported.
It is important to compare the assessment received from the county (#2 above) with the actual rendition filed to make sure you are in agreement with the values reflected. As indicated above, you commonly only have a short period of time to file any protests if you are not in agreement with the valuation.
Most reporting jurisdictions within the same state will have the same rules for reporting the property. You have to watch, though, because rules vary from state to state. For example, some states might exempt software or all leasehold improvements, while other states may tax these items. Whomever prepares your renditions must be aware of the rules in all taxing jurisdictions relevant to your business.
Most states tax inventory. Depending on the return, inventory can be reported by end of year value, a monthly average or a beginning and ending month average. Some states that tax inventory will provide an exemption to reduce the inventory value that is taxed. Both Texas and Georgia are examples of states that tax inventory but provide a method to reduce the taxable value. This is referred to as a Freeport Exemption.
The new IRS capitalization policy has created a new wrinkle when it comes to personal property tax reporting. Technically, even if an asset is expensed, it still is reportable on a tangible personal property rendition. Assets remain on a personal property tax rendition and are reportable even if the asset has been fully expensed or fully depreciated. The only way an asset is removed from a rendition is if it is sold, disposed of or moved to another location.