Which States Have Business Personal Property Tax?

Business personal property tax is based on a list of your assets. However, not all states tax these assets in the same way. If a state does tax business personal property, not all states follow the same tax rules, codes, or even have the same deadlines.

Business personal property taxes can get especially tricky (and costly) if you own a business with multiple locations - like convenience stores, hotels, fast food franchises, banks, etc - or one with lots of expensive equipment/assets - like manufacturers, distribution centers, textile mills, etc.. It’s important to consult with a professional that can help you navigate local and municipal business tax laws and understand your obligations. Let Sharon H. Lyall, CPA help eliminate some of your burden so that you can focus on your business.

But first, let's start with finding out if the state you or your businesses are in actually tax business personal property.

WHICH STATES DO NOT TAX BUSINESS PERSONAL PROPERTY? 

No one wants to pay more tax than they should. If you happen to operate in one of the twelve states that does not tax business personal property, you do not need to file a business personal property return. It may be tempting to move, or open, your business in one of these locations. 

The twelve states that do not tax business personal property are: 

1. North Dakota 
2. South Dakota 
3. Ohio 
4. Pennsylvania 
5. New Jersey
6. New York 
7. New Hampshire 
8. Hawaii 
9. Delaware 
10. Illinois 
11. Minnesota 
12. Iowa 

For those who do business outside of the states where business personal property is taxed, there is often a tax levied to produce a similar revenue stream for local governments. That may be real estate tax, inventory tax, or sales tax, etc.

If your business or organization owns a lot of equipment, you might decide to move your business to New York, where only real property (like land and the structures attached to it) are subject to taxation.

However, New York also has an extremely complicated tax code and some of the highest  real estate taxes in the country. Additionally, according to the New York State Department of Taxation and Finance, “Many specific pieces of equipment, which may be considered as personal property in other states are defined as real property under the NYS Real Property Tax Law.” 

It’s important to understand the full picture before you start, or move, a business to a state that does not tax business personal property. It may seem like a great idea but, as noted above, states frequently find other ways to make up for the loss of business personal property revenue. 

WHICH STATES TAX BUSINESS PERSONAL PROPERTY? 

Of course, if there are 12 states that do not tax business personal property, there are 38 states that do. 

“For those who do business in states where business personal property is taxed, it is often that the rules most tax focused CPA’s use to guide their work (i.e. IRS, and State Income tax rules) are not the rules that are needed for business personal property tax work. 

Similar to the medical field the world of tax is becoming highly specialized and it takes someone with the know-how to insure your business is taxed fairly and properly. 

Unlike those other taxing bodies, such as the IRS, the taxpayer is responsible for reporting their business personal property and understanding the differences between business personal property and real estate according to the county's rules, not the rules used to calculate their Federal income tax and, where appropriate, state income tax.” Jeremy Lyall 

Filing business personal property taxes is one of the most complicated parts of the tax cycle. 

Even something as seemingly simple as deadlines vary state-to-state and, in the case of North Carolina, can even vary county-by-county. 

Every county in NC has a filing deadline of Jan. 31, UNLESS you file for an extension in the counties where you are doing business. If you are doing business in multiple counties, you may file for an extension in each county - each county has its own deadline.

If we take a look at the most populated counties in North Carolina, you can see that even the extension deadlines don’t always match up. 

Georgia is similar to North Carolina - each county has its own deadline. In a state like Tennessee, there is one deadline for the entire state but you still file with the individual counties.

“South Carolina has one deadline but you file your return with the State Department of Revenue and the return breaks down the valuations of your personal property by county. Basically, the South Carolina Depart of Revenue handles the administrative work for the counties. They even distribute the tax revenue to the counties.” Jeremy Lyall 

That isn’t the only thing South Carolina does differently - they also use a much different system to value your business personal property tax. In South Carolina, an assessment ratio is applied to the depreciated cost of your assets. 

An assessment ratio is set by the state to ensure the tax burden is equal across the jurisdictions and industries. Many states use a 100% assessment ratio, which is essentially the market value.

For example, for most manufacturing property not subject to a negotiated fee in lieu of taxes, the assessment ratio applicable to manufacturer's property remains at 10.5%.

With the variations from state-to-state and, sometimes, county-to-county, it can be tricky to understand your tax obligations. Working with a professional can help provide you with important insights on your company - such as miscategorizations on prior filings - and ensure that your taxes are being filed accurately and in compliance with local tax laws.

If you have questions about the tax obligations of your business or organization, please contact Sharon H. Lyall, CPA for more information. Be sure to ask about our Free Asset Review.