Posted on March 07, 2019
In many localities across the US, moveable assets owned by a business are designated as tangible business personal property and taxed annually by the jurisdiction they are located in. This tax is known as the Business Personal Property Tax, and the type of assets considered as business personal property include, but are not limited to, furniture, tools, signage, equipment and inventory (although these items can be defined differently by each state, county or city.) If this type of property is owned or leased, a business will be required to file a return each year to report the value of these assets.
A critical question for businesses to ask themselves when preparing these returns is; are there any exemptions or savings that we qualify for? Exemptions present opportunities for companies to find tax savings based on their business activities, such as inventory movement.
One type of exemption offered by many jurisdictions across the United States is a freeport exemption, which is an exemption or tax break on inventory that only stays within a state or location for a short period of time before being moved out of the state in question. This is a very beneficial exemption for qualifying companies and can draw businesses into counties and cities that offer this incentive.
The qualification criteria will vary by jurisdiction, however, if your business deals with constant movements of inventory described above, this is a type of exemption worth looking into. Please note, the length of time inventory can be stored will vary by locality. Businesses will need to file an annual application with the county or assessment jurisdiction where they file their personal property tax returns and the information required on this application will be specific to the jurisdiction where the exemption is being claimed.
The savings available through the exemption can vary by state or county but is typically based on the percentage of inventory or goods that were shipped outside of the state within the previous year. If you are in a state with available freeport exemptions, contact your local property appraiser for calculation details. For example, the state of Texas uses the previously mentioned percentage process. If your company has inventory moving within a facility located in Texas and you have an inventory value of $6,000,000, with 70% of the inventory leaving the state of Texas in the previous year, your business would receive an exemption of $4,200,000, if approved after the application process is completed. This would result in an amount of taxable inventory of $1,800,000 as opposed to the full inventory value of $6,000,000.
If you believe your business can take advantage of any freeport exemptions, we recommend reaching out to a tax professional to determine if your business may qualify for this exemption or any other potential savings opportunities.
Tips for the Taxpayer
Contact your local property tax assessor’s office or property tax consultant to determine if there are any freeport exemptions, or any other potential exemptions, available in the area where your business operates. Be informed of any changes with your state, county, and city legislations. Consider and examine what your business activities are to determine the potential savings available during the personal property return filing process.
How Can We Help?
Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of Federal, multi-state and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage.
Allyn files business personal property tax returns in every US taxing jurisdiction. We can manage your property tax return filing process, review the property values set by the local assessor and file protests if needed, process property tax payments, and provide audit defense for your company. Our significant expertise in this area means you can focus on your core business while we focus on ensuring you are paying your fair share in property taxes and not a penny more.
Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, contact us at: email@example.com.
Contributor: Meghan O'Hehir
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.