factory equipment

“I have to file a tangible what?”

Nearly all businesses are required to file a tangible personal property (TPP) tax return. Yet we regularly come across clients who not only haven’t completed theirs… they’ve never even heard of it.

TPP includes all goods, property (other than real estate), and other articles of intrinsic value that you can physically possess. This can include equipment, desks, computers, waiting room furnishings and even break room appliances.

Because these items are considered business property, your business pays a separate tax on their value. You declare your TPP on a separate return (Form DR-405) to your county’s property appraiser; this must be filed by April 1 of each year. The property appraiser then assesses an ad valorem tax based on the value of the property cited on the form.

Failure to file (or filing late) can lead to penalties of up to 25% of your total TPP tax amount. With the deadline fast approaching, here are five quick facts to get you up to speed!

Fact 1: There are specifics regarding date of TPP ownership and number of locations.

Your return must include TPP possessed by your business as of January 1 of the year you file. If your business has multiple locations, a tangible personal property tax return must be filed for each location. You’ll file your TPP tax return with the county property appraiser in which the property is located. (Keep that in mind if your multiple locations are in different counties.)

Fact 2: Some items are not considered tangible property.

Inventory, household goods and some vehicular items are excluded. We often see TTP tax returns that cite trailers used to haul equipment. You should not include these on your return.

Fact 3: There is an exemption!

If the value of your TPP doesn’t exceed $25,000, you will be exempt from filing a return in the following years. Once this value exceeds that amount, however, you must resume filing TPP tax returns.

Fact 4: The condition of your equipment helps determine its worth—and your tax burden.

The property appraiser uses the condition of the TPP as a metric when valuing it. So codes are included on the TPP tax return to indicate the condition of each item. If the incorrect code is used, the property appraiser might overestimate the TPP’s worth. If a piece of valuable equipment is damaged during the year, the condition should be noted properly.

On a similar vein, we sometimes see TPP tax returns that report equipment a company no longer possesses. Don’t pay taxes on something you don’t have! Review your TPP return every year for any property that was disposed of since your last filing.

Fact 5: If you closed your business last year (before Jan. 1 of this year), you might still have to file a TPP tax return.

If you sold your business, you must indicate on your return the date of sale and the buyer. You must also list the business’s assets and whether they were included on the sale or discarded. If you kept any TPP for business purposes, you must report that as well.

If your business ceased operations entirely, contact your county property appraiser’s office to let them know. Counties can differ on how they handle returns in these situations.

Understanding the basic concepts of TPP and your return obligations should be part of your tax strategy. James Moore’s manufacturing CPAs can help you through the TPP tax return process. With our help, you can avoid costly penalties and reduce your tax burden—and keep more money in your business!

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.