Personal Property - Frequently Asked Questions
What is business personal property?
Business personal property is all property owned or leased by a business except real property. Business inventory is personal property but is 100 percent exempt from taxation. Tangible personal property owned, claimed, possessed, or controlled in the conduct of a profession, trade, or business may be subject to property taxes. Business personal property and fixtures are valued annually as of the January 1 lien date.
What are examples of inventory and supplies?
Inventory is exempt from taxation and includes items of personalty that become part of the product or are themselves a product that is held for sale or lease in the ordinary course of business. Examples of inventories are as follows:
- Manufacturing supplies such as bolts, nuts and screws that are incorporated in a product to the sold.
- Used farm or construction equipment consigned to a dealer or auctioneer on or before lien date of January 1.
- Animals used in the production of food or fiber.
- Personal property held for sale or lease in the ordinary course of business on the lien date of January 1.
Supplies are properties used up in the normal operation of a business, but which are not intended for sale or lease. Examples of supplies are as follows:
- Stationery and office supplies.
- Janitorial and lavatory supplies.
- Fuels used in the normal operation of a business.
- Chemicals and precious metals used to produce a chemical or physical reaction.
I need to file a Business Property Statement. Are BOE prescribed forms available on your website?
Although the BOE prescribes many types of forms for use by county assessors, taxpayers must obtain the Business Property Statement, and any other required forms, from the county in which the taxable property is legally situated (the more or less permanent location of the property).
Who is required to file the Business Property Statement for leased equipment?
When equipment is leased, the law states that the county assessor may assess leased property to either the lessee or the lessor, or both, whether or not there is a private agreement between the parties to the lease. However, property is not normally assessed jointly, and county requirements for the filing of a Business Property Statement vary with respect to leased equipment. Therefore, you should contact your county assessor for further information about Business Property Statement filing requirements. A listing of county assessors is available on our website at www.boe.ca.gov/proptaxes/assessors.htm.
How does the county assessor arrive at the taxable value for personal property?
Generally, the county assessor uses the historical cost reported by the current owner and applies reproduction cost new and normal depreciation factors to estimate fair market value. For a further discussion on the index factors, see pages 1 to 10, and percent good factors, see pages 11 to 16, in the Assessors’ Handbook Section 581, Equipment and Fixtures Index, Percent Good and Valuation Factors, on our website at www.boe.ca.gov/proptaxes/prioryrs.htm.
Why must sales tax and freight and installation costs be included in the reported cost?
Sales tax and freight and installation costs are part of the total cost of purchasing assets for business use. These costs are components of asset value and, therefore, must be reported as part of your total reported cost.
I am leasing equipment from a leasing company and see that the property tax on the lease equipment is taxable. Please explain why there is a tax on property tax?
Your question is a sales or use tax question that deals with a tax on the property tax component of the leased equipment rental payments. Any lease of tangible personal property that transfers title or possession is a sale or purchase. In this case, the sales or use tax is measured by the rentals paid by the lessee. The rental payments are subject to sales or use tax which includes any payments required by the lease. This includes amounts paid for personal property taxes on the leased property per Sales and Use Tax Regulation 1660 (c) (1). You may view Sales and Use Tax Regulation 1660 on our website at www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1660.html
Can the county assessor prorate assessments or taxes between the buyer and seller of taxable personal property?
No. The county assessor must annually assess all property in the county to the person owning, possessing, or controlling it on the lien date. There is no provision in the law that allows the county assessor to prorate assessments between the buyer and seller of taxable personal property that is sold in the ensuing fiscal year.
Is software taxable?
Storage media for computer programs is to be valued as if there were no computer programs on such media except basic operational programs. Basic operational programs are those programs that are "fundamental and necessary to the functioning of a computer." Thus, while basic operational programs are taxable, application programs are exempt unless included as part of an unitemized package sale. Property Tax Rule 152, Computer Program Storage Media, explains how to properly determine the classification of computer software. You may view this rule on our website at www.boe.ca.gov/lawguides/property/current/ptlg/rule/152.html
Are boats and aircraft subject to property tax?
Boats and aircraft are taxable and are subject to annual appraisal. Their values are determined by reviewing sales of comparable boats and aircraft. Information on their locations and ownerships is obtained from the Department of Motor Vehicles, the United States Coast Guard, the Federal Aviation Administration, on-site inspections, and other public and private sources.
I sold my personal property (boat, aircraft, machinery, or equipment) after January 1. Shouldn’t the new owner be required to pay the property tax?
Even though you may no longer own the property, you are still liable for the taxes because you owned it on the January 1 lien date. When taxable personal property is sold subsequent to the lien date, it is the duty of the seller to pay the taxes on the property for the ensuing fiscal year.
Are California registered vessels owned by California residents still assessable when located outside of California waters?
Yes. Until such time as a vessel’s habitual place of mooring has been established elsewhere, a vessel documented in California continues to be taxable in California. That is, if the vessel is not in California, but is traveling from one place to another and has not become permanently situated in one place outside of California, the vessel is still assessable in California.
I purchased a boat from a private party and tried to register the boat with Department of Motor Vehicles (DMV). They said that I cannot register the boat because of tax problems with the boat. Who should I contact to correct the tax problems?
The boat may have a tax lien filed on it by the county tax collector for failure to pay outstanding property taxes. The county tax collector can put a hold on the registration of the boat with DMV until the taxes are paid. We suggest that you contact both the county tax collector and the county assessor where the boat was previously located for further information on how to resolve the tax problem. A listing of county treasurers/tax collectors is posted on our website at www.boe.ca.gov/proptaxes/taxcol.htm, and a listing of county assessors is posted on our website at www.boe.ca.gov/proptaxes/assessors.htm.
How does the county assessor locate airplanes and other aircraft?
The county assessor receives airplane ownership information from the BOE, other counties, the Federal Aviation Administration, reports from airport operators and periodic review of all airports in the county.
How are general aviation aircraft assessed?
Aircraft are taxable and are appraised annually at current market value as of the January 1 lien date. Values are determined by reviewing purchase prices, sales of comparable aircraft and other market data. In addition, information reported on BOE Form 577, Aircraft Property Statement, by the aircraft owner is used in appraising the aircraft. Other sources of information are the BOE, the Federal Aviation Administration, airport operator's report, and on site inspections.
If my airplane is for sale and is consigned to a broker, will it be assessed for property taxes?
Aircraft on consignment that is held in inventory for sale by a licensed dealer on January 1 qualifies for the business inventory exemption and, therefore, is not subject to property taxes.
When and where are aircraft assessed for property taxes:
State law requires that aircraft be assessed on the January 1 lien date annually at the tax situs where they are regularly or habitually situated in California.
Will I be assessed even if my aircraft is out of the county on January 1?
Temporarily removing an aircraft from the county on the January 1 lien date will not exempt it from property taxes if it is regularly or habitually located in that county.
Will I still be taxed if my aircraft was sold before January 1?
The new owner will be responsible for paying the taxes for the new tax year. If the county assessor has not received the necessary sales information from the FAA, you may receive an assessment notice informing you of the assessed value of the aircraft. If you receive this notice, you should contact the county assessor with the new owner's name and address, date of sale, location of the aircraft, and FAA assigned "N" number.
I own an aircraft of historical significance. How do I apply for the exemption?
The Historical Aircraft Exemption provides a property tax exemption for aircraft of historical significance. For property tax purposes, "Aircraft of Historical Significance" means any aircraft which is an original, restored, or a replica of a heavier than air powered aircraft which is 35 years or older; or any aircraft of a type or model of which there are fewer than five in number known to exist worldwide. The requirements for the exemption are in Revenue and Taxation Code section 220.5. To apply for the Historical Aircraft Exemption, BOE-260-B form, Claim for Exemption from Property Taxes of Aircraft of Historical Significance, must be filed each year with the county assessor. A listing of county assessors is available on our website at www.boe.ca.gov/proptaxes/assessors.htm.