Business Property Tax

I paid income tax when I earned the money, then I paid sales tax on this when I bought it, are you telling me I have to pay tax on it again? Every single year?

If you live in one of the 25 state that charges business property tax, this is reality. You are taxed on the assets you use to run your company. Let’s break it down.

Business Property Tax

Property tax was popularized in the early 1800s, 100 years before income tax was legal. Property tax is based on the principal that if you have more, you pay more. It has nothing to do with how much you make, but how much you own. People with more stuff (and money) pay more in taxes. Property tax is levied on real estate (land); personal property like vehicles, boats, and RVs; and business assets (furniture and equipment). If you have a 180,000 square foot super-size store with four acres of store fixtures, you are going to be paying a lot more than a work at home consultant with a computer, some business cards, and two packs of sticky notes.

As income tax became popular during the 20^th century, property tax phased out, but not completely. It is still how most localities (like counties) raise the money for schools, roads, parks, fire protection, and other services provided by local governments.

How Do I Pay It?

Property tax is paid in two steps. First, you report to the assessor what assets you have. Usually, each county has an elected tax assessor. Then the collector calculates the tax and sends you a bill. That means there are two dates to remember each year. The date to assess what you have and the date to pay the bill. You have to do both on time every year.

Property tax records are often public record in most states. That means anyone can look up the property tax records of your business, including if you forgot to assess or failed to pay on time. In Arkansas, it is the law that the newspapers publish a list of everyone delinquent on their property tax each year.

Summary

Business property tax is levied on the things your company owns that you use to make money.

25 states have business property tax.

Property tax funds local schools, roads, and emergency services in most states.

Property is assessed first, then paid at a later date.

For the next blog in this series – Payroll Taxes – click here