If you’ve paid property taxes on your home, you might be surprised to learn that a similar tax exists for business personal property. These taxes, which vary by state, apply to tangible personal property used in business operations, such as equipment, machinery, furniture, lab supplies, office supplies and other assets.
While businesses are generally aware of their compliance obligations regarding income taxes, payroll taxes, and sales taxes, many startups overlook business personal property (BPP) tax.
The year 2025 marks five years since the onset of the COVID-19 pandemic. Counties and states are now actively pursuing businesses that failed to file their business personal property statements or declarations, imposing penalties on previously unreported business personal property taxes.
Here, we provide an overview of business personal property tax, its importance, and actionable steps to help you navigate filing requirements across states.
What is Business Personal Property Tax?
Business personal property tax is a levy imposed on tangible personal property used in business operations. Unlike real property tax, which applies to land and buildings, this tax covers movable assets that are not permanently affixed to real estate. Examples include:
- Office furniture (e.g., desks, chairs)
- Computers and IT equipment
- Manufacturing machinery
- Leased property
- Tools and equipment used in operations
Why is Compliance Important?
Avoid Penalties
Late or inaccurate business personal property tax filings can result in penalties, interest, or audits.
Maintaining Good Standing
Compliance ensures businesses remain in good standing with state and local governments, preventing potential disruptions in operations.
Financial Planning
Proper tax reporting allows businesses to budget accurately and avoid unexpected financial burdens.
Strengthening M&A Readiness
Property tax compliance plays a crucial role in mergers and acquisitions (M&A). Buyers will conduct thorough due diligence to assess outstanding property tax liabilities, ensure accurate asset valuations, and confirm that the target business has met all filing requirements. Overlooking this aspect can result in unforeseen tax burdens after acquisition to the buyer and unfavorable outcomes for the seller.
Key Filing Requirements Across States
1. Filing Deadlines
Most states require businesses to file annual property tax returns, typically due in the first quarter of the year. For example:
- California: Business property statements are due by April 1 with automatic extension to May 7.
- Texas: Renditions must be filed by April 15 and have a 30-day extension available upon request.
- Florida: Business personal property return must be filed by April 1 and has a 30-day extension available upon request.
- Maryland: Business personal property return must be filed by April 15 and has a 60-day extension available upon request.
- Washington: Business property statements are due by April 30 with NO extension available.
2. Exemptions and Exclusions
Some states offer exemptions for certain types of property or businesses.
Small Business Exemptions: In some jurisdictions, businesses with assets below a certain threshold may be exempt. For example:
- California: $100,000
- Texas: $2,500
- Florida: $25,000
- Maryland: $20,000
- Washington: $0
Inventory Exclusions: Inventory is often excluded from personal property tax.
Actionable Steps for Businesses
To ensure compliance with business personal property tax filing requirements, businesses should follow these steps:
1. Maintain Accurate Asset Records
- Keep detailed records of all business assets including purchase dates, costs, depreciation schedules, and locations.
2. File Timely and Accurate Returns
- Mark your calendar with filing deadlines and ensure all required forms are completed accurately.
- If you need more time, file for an extension before the due date.
3. Consult with Tax Professionals to Understand Local Tax Rules
- Work with a tax professional or CPA who specializes in business personal property tax to ensure compliance and identify potential tax-saving opportunities.
- Research the specific requirements in your state and locality.
4. Review Exemptions and Conduct Regularly Reviews
- Identify any exemptions or deductions your business may qualify for, such as small business exemptions or inventory exclusions.
- Regularly review and reconcile financial records to ensure accuracy.
5. Stay Updated on Tax Law Changes
Monitor changes in tax laws and regulations that may impact your business personal property tax obligations. Some states will update their exemption thresholds, for example:
- Colorado: Increased the exemption threshold from $52,000 to $56,000 for year 2025
- Arizona: Increased the exemption threshold from $248,691 to $569,905 for year 2024
Business personal property tax compliance is a critical responsibility for businesses operating across states. By understanding filing requirements, maintaining accurate records, and leveraging professional guidance, businesses can avoid penalties, reduce taxable liability, and contribute to their local communities.