The holiday season is fast approaching, but that also means tax season is just around the corner. Time to do a little year-end tax refresher course. From state and sales tax to personal property tax, it is important to understand all of the different types of taxes and make sure you’re not accidentally leaving anything out.
Property tax is not just about owning real estate. You may still owe property tax on “tangible personal property” like furniture, computers, machinery, tools, equipment, and supplies. Most likely, your business owns and uses at least a few items that qualify as property.
How Property Tax is Utilized and Levied
Property tax pays for local government operations. The tax is calculated on the Fair Market Value of taxable, tangible personal property owned by a non-exempt entity. An entity that owns little personal property pays very little property tax. Entities that own a lot of personal property pay the tax based on that property’s market value.
Property taxes are levied at the state and local level, based on assessed valuations established by elected county assessors and, in the case of certain properties, by the State Tax Commission’s Property Tax Division.
Salt Lake City’s general property tax rate is .015288%. Salt Lake City property owners may submit an appeal of assessments against their property to the Salt Lake County Board of Equalization, within the time period permitted by law.
Property Tax Debate
Does property tax target asset heavy business? The concern in property tax is whether or not similar businesses are being taxed in the same manner, not whether an asset based business pays more than a business with little or no tangible personal property. This is a sticking point for those rendering services, selling software, or licensing intangibles.
Other states have moved to eliminate or at least reduce the TPP (Tangible Personal Property) tax. This creates state level competitions as businesses can relocate to localities that don’t have the tax.
The Salt Lake County Tax Assessor’s office points out that the property tax burden is spread among the tax base to cover the budgets of local government entities. While other states have eliminated the personal property tax, they have found that they have to institute some other form of taxation to make up the revenue. As well, some counties rely heavily on personal property tax revenue, while others take in very little. The amount depends on the kind of industry that exists within a county. The legislature cannot enact changes to personal property tax without amending to the Utah State Constitution.
Recent personal property tax exemptions have passed because they have created a minimal tax shift and eased the filing burden on Utah’s small business.
If you are uncertain about how property taxes apply to your business, it’s smart to speak with an accountant or other professional.
What do you think about eliminating TPP tax? We would love to hear your comments.