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3 Reasons You May Be Overpaying Business Personal Property Taxes

November 9, 2021

Normally, people pay bills without asking questions. When it comes to your business personal property taxes, if you don’t do the job right, you’re going to pay more.

Personal property is subject to state and local taxation in 43 states (Delaware, Hawaii, Illinois, Iowa, New York, Ohio, and Pennsylvania are exempt). Business personal property taxes are levied on property that can be moved or touched, such as business equipment, machinery, inventory, furniture, and supplies. This is further distinguished differently than intangible personal property, which includes stocks, bonds, and intellectual property.

Most jurisdictions require an annual return of fixed assets to be filed with the local government. The personal property tax is based on the assessed value of the assets and the tax rate.  The tax rate will vary between jurisdictions.

Here are three reasons why you may be overpaying business personal property taxes:

1. You don’t know the right classification or what is exempt.

Some specific types of business personal property such as software, warranty, training, and installation are exempt from state or local personal property taxation based on filing guidelines. In the effort to limit your tax liability, it is important to review state and local guidelines to determine what aspects are considered taxable for business personal property.

2. It’s overly complex.

It’s easy to get lost in the complexities of business personal property tax. If your organization is in multiple states, each state has their own deadlines and filing requirements. In order to be compliant, you’re probably spending a lot of time researching when everything is due, keeping track with calendars, monitoring what you report versus what the assessment notice states.

The return remitting process creates high compliance costs and complexities for those who are required by law to file an annual return. The administration of property tax compliance can be a burdensome expense for businesses. If you fail to file a timely return or fail to file correctly, the assessor may add penalties, interest, not accept freeport exemptions, or apply forced assessments to your account.

3. You don’t know how to appeal.

Most folks don’t know the tax appeal process and what additional research needs to be completed to support an appeal case. Property tax representatives have knowledge of the tax codes and have the expertise to conduct a successful appeal. The skill and experience of a seasoned tax representative can have a substantial impact on the amount on your tax bill.

It is important to ensure that your personal property assets are managed, documented, and reported accurately. If not done accurately, your company may incur increased personal property taxes, reducing your company’s net income.

It’s difficult for businesses to monitor the tax environment on their own – and chances are you’re paying too much in taxes. Our professionals understand your business and how to maneuver through the regulatory obstacle course.



Tim Anderson is a key member of the real estate practice area at MarksNelson, leading the real estate valuation and commercial property tax appeal specialty groups. He partners with clients to secure credits and incentives, provide economic development guidance, and advise on state and local tax... >>> READ MORE

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