Personal Property Tax: The forgotten tax for many small businesses?

by Joe Heinrich, Volunteer Business Mentor, Seattle SCORE

Most small business owners are perfectly aware of the Federal, Washington and city taxes they are obliged to pay. However, the one that tends to fall through the cracks is the local Personal Property Tax on businesses by the county in which the business is located. This article explains what personal property is, how to self-report a business’s personal property, how the tax is assessed and how much a business may have to pay in Personal Property Tax.

What is “personal property” of a business?

Taxable Personal Property typically includes items used by a company to conduct business. Examples of personal property which may be assessed include furniture, fixtures, electronic equipment, telephones and machinery. Leasehold improvements and leased equipment are also included as personal property. However, personal property does not include property which is attached to a building or to the land which a business owns as that is considered “real property”.

Exempt personal property includes inventory (i.e., items owned to be resold or used as raw materials to products to be manufactured and sold) and vehicles used on the roadways. 

How to report a business’s personal property?

If a business uses personal property that is not exempt, it must complete a Personal Property Tax Listing Form by April 30 each year. Listing forms are available from the local county assessor’s office. The listing must identify all taxable property located in the county as of the first of the year. The assessor uses this information to value property for taxes due the following year. As a property owner, a business is responsible for filing a personal property listing each year that it has taxable property even if it does not receive the form by mail. If the business has multiple business locations, it must complete a separate listing for each location. Once taxable personal property is listed on the tax rolls, the assessor mails a new listing form each year. The business then has an opportunity to add or delete property, as appropriate, and return the form to the county assessor by April 30.

How the personal property tax is assessed?

The assessor values the property at 100 percent of its current market value. Market, or true and fair value, is the amount that a willing and unobligated buyer will pay a willing and unobligated seller. After performing a personal property assessment, the assessor informs the property owner of the assessed value. The business should contact the assessor’s office if it believes an assessment is incorrect. The assessor, or its representative, can explain how the value was determined and make corrections if appropriate. If the business still believes the assessment is incorrect or excessive, it has the right to appeal the assessment to the local county board of equalization.

How and when to pay personal property tax?

Personal property is subject to the same levy rate as real property. Property tax payments are due by April 30 and October 31. If the amount of tax due is $50 or less, full payment is due by April 30. If the tax due is more than $50, half of the amount due may be paid by April 30 and the balance by October 31. The county treasurer mails property tax statements every February. The owner of the property on January 1 of the assessment year owes the tax due the following year. The tax is due even if the business closes, or the property is sold or transferred before the end of the year. For example, a property owner submits a list of personal property held as of January 1, 2018, and then sells the property in July 2018. The property owner (seller) owes the full amount of taxes due in 2019 for the 2018 assessment year.

In the Washington counties in which Greater Seattle SCORE operates, the tax rate is between 0.5% and 1.0% of assessed value, with King County having the highest tax rate. For example, if the tax rate is 0.5% and the assessed valuation of the taxable personal property is $100,000, then the personal property tax would be $500.

Penalties are assessed for late payment of personal property taxes. The penalty is five percent of the tax due per month, up to a maximum of 25 percent. If the assessor does not receive a business’s personal property information, the assessor will estimate the value of the personal property based on the best information available.

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