Is Business Personal Property Subject to California Property Taxes?

 Posted on February 16, 2023 in Property Taxes

In California, property taxes are a notoriously complex issue, and they may apply to both individual taxpayers and businesses. While property taxes will generally apply to real estate property owned by an individual, married couple, or business, they may also apply to other types of personal property. Specifically, assets that fall under the category of "business personal property" will need to be reported, and taxes may be applied to some of these assets. By understanding the requirements that apply to business personal property, owners of small businesses and other types of companies can make sure to avoid potential penalties.

What Is Business Personal Property?

Business personal property refers to the tangible assets owned by businesses and used to conduct their operations. This includes furniture, fixtures, equipment, and other miscellaneous items used by a business in its day-to-day operations. It also includes vehicles, aircraft, and boats, as well as supplies used by a business, such as office supplies, janitorial products, or fuel for vehicles. A business may also be required to pay taxes on personal property that has been leased and is used as part of its ongoing operations.

Real estate property is not included in business personal property. Inventory, such as products meant to be sold to consumers or parts used to make products, is considered business personal property, but it is exempt from property tax.

Reporting and Paying Taxes on Business Personal Property

Property taxes for businesses are handled by county assessors. The assessor in the county where a business is located will send a Business Property Statement (Form 571) to a business on December 31 of each year. Businesses that receive this form will be required to answer the questionnaire provided in this statement and submit a Business Property Statement Filing (Form 571-L). A business that did not receive a Business Property Statement will also need to submit a Business Property Statement Filing if it has taxable business personal property with a total acquisition cost of $100,000 or more.

A business will be taxed based on the assessed value of business personal property. The value is based on the fair market value of each item as of January 1st of each year, which is known as the lien date. For example, if a business purchases new equipment on July 1st, then this equipment will be assessed at its fair market value on January 1st of the next year. To ensure that property is assessed correctly, improvements or modifications made during the course of a year must also be taken into account when reporting business personal property. This includes any repair work done to existing equipment or other modifications that may have increased the value of taxable assets.

If a business fails to file a Business Property Statement when required, it may be subject to penalties. The county assessor will determine the value of the business personal property using all available information and levy penalties based on this amount. In cases where a Business Property Statement is not filed by the applicable deadline, a penalty of 10 percent of the value of the unreported property will apply. However if a business owner willfully fails to disclose business personal property, conceals taxable assets, or misreports the value of property, a penalty of 25 percent of the additional assessed value will apply.

Contact Our San Jose Business Property Tax Lawyer

Business owners in California should be sure to understand their obligations regarding property taxes on business personal property. At John D. Teter Law Offices, we can help business owners determine how to address these issues, and we can help defend against penalties that assessors may apply to property that was not reported correctly. Contact our San Jose, CA property tax attorney for legal help with these matters and other tax issues that may affect small businesses. Call 408-866-1810 to set up a consultation today.

Sources:

https://www.boe.ca.gov/proptaxes/faqs/faqsprop-pp.htm

https://www.sccassessor.org/property-information/business-owner/new-business

https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=RTC&division=1.&title=&part=2.&chapter=3.&article=3.