Tax time is upon us, and near the end of 2019, business owners likely received a notice from their county assessor regarding taxes and their personal property that is used in the business. Personal property taxes for entrepreneurs is often confusing, especially for new business owners who may be seeing it for the first time.
Personal property tax is a tax on anything that is not real property. Examples could be office furniture, computers, small equipment, tools, and so on. The administration of the tax varies slightly by county in Wyoming. The primary statute requiring the tax is Wyoming Statute 39-13-103(b)(v). There are more statutes and rules covering personal property.
In summary, they mandate that the county assessor’s offices around the state discover, list, and value all equipment owned by businesses. Wyoming is a self-reporting state, which means that the assessors rely on businesses to report their equipment annually. This is the primary means of discovery; however, when a business does not report, other methods of discovery come into play. Information from sources such as the Wyoming Secretary of State, advertising, and canvassing also lead to discovery of non-reporting businesses.
What Happens If I Don’t Report?
When businesses do not report, county assessors use the best information available to value the equipment. For example, the best information available in Park County is often a calculated value developed by the assessor’s office by comparing the business to similar businesses in the county. Simply stated, the appraiser uses their best judgment to compare the subject business to similar sized businesses and values the subject at the median value for those businesses.
Efforts are made to contact the non-reporting business and values are adjusted in consecutive years of non-reporting in an effort to improve accuracy. Best values are achieved with the cooperation of the business owner when the business owner reports accurate purchase prices, purchase year, and other identifying details. Reported purchase prices are only an accurate value at the time of sale and the assessor’s office must calculate the actual value annually.
There are three approaches to value: sales, income, and cost, and all must be considered. The Park County Assessor’s Office values oilfield equipment, tractors, combines, commercial airplanes, and lodging furniture and fixtures at market value from published book sources. Using book values takes more time and effort on the part of the assessor’s office and is felt to be a worthwhile effort in that it produces a more accurate representation of market value than simply trending and depreciating.
As stated above, when current market values are not available, reported costs may be trended and depreciated. The trending factor is provided by the Wyoming Department of Revenue based on inflation. The trending factor adjusts reported historic cost to current dollars by adjusting for inflation.
As an example, if a piece of equipment was purchased in 2015 for $1,000 and the trending factor for 2015 is 1.0861, then the current value of $1,000 from 2015 is $1,000 x 1.0861, or $1,086.10. In other words, how much does it cost today to buy something that would have cost $1,000 in 2015?
Typical Assessment Timeline
In summary: Throughout the year, appraisers collect any data available on new and existing businesses. In the fall, a canvass of the entire county is carried out to search for new and closed businesses. In November and December, declarations are mailed to businesses. This is a full list of equipment as previously declared and requires the taxpayer to update it for the coming year as the equipment will be on January 1. Once declarations are returned and processed, a notice of valuation is sent to the taxpayer in April. The notice shows the taxable value of the equipment and the expected tax. Taxpayers have thirty (30) days to refute this value. In September, the tax bill is sent based on all that has been reported and accepted by the taxpayer with the notice of assessment.
Taxes are due in two parts, November 10th and May 10th of the following year. There is also an option to pay the full amount by December 31 without penalty.
How Does Depreciation Work?
Now that we know the trended value of the equipment, we can depreciate it based on its age. We first determine a “percent good,” which is a determination of how much useful life a piece of equipment retains, stated as a percentage of its total life. As an example, if a desk has a useful life of 10 years and it is five years old in 2020, its percent good is 10 minus five, expressed as a percentage, so, 50% good.
Combining the two examples above, if the desk is the equipment purchased in 2015 for $1,000 and is thought to have a total life of 10 years, its value would be calculated as follows for the year 2020: $1,000 x 1.0861 = $1,086.10 (This is the trended value) $1,0861.10 x 50% = $5,430.50 (This is the trended and depreciated value). Once value is determined, personal property is taxed at a commercial or an industrial level of assessment. Manufacturing, oil, and gas equipment is assessed as industrial, which is assessed at 11.5%. Commercial equipment is assessed at 9.5%. After calculating the assessed value, multiply by current mill levy to determine the tax. So for example, a construction company with a calculated market value of $100,000 in a district with a mill levy of 69.85. Commercial (9.5%). $100,000 x .095 x 0.06985 = $663.58 tax bill.
There is some work happening to possibly exempt the first $35,000 of value from this annual reporting process. This would benefit the small businesses and relieve the county assessors of some time consuming work. Stay tuned.
Help With Personal Property Taxes For Entrepreneurs Is Available
If you would like to learn more about personal property taxes for entrepreneurs, contact your local Wyoming Small Business Development Center (SBDC) Network advisor for no-cost, confidential assistance by clicking here.
You may also want to join our upcoming webinar series: Tax Considerations for the Self-Employed. This three-part series will take place on February 6, 13, and 20 and will go into detail about everything an entrepreneur needs to know for the tax season.
Special thanks to Park County Assessor Pat Meyer for information regarding this topic.
About the Author: Bruce’s experience as a former banker and Economic Development Finance Professional helps him to assist clients with all things numbers: loan applications, financial analysis, business planning and projections, and crowdfunding ideas. When he’s not in the office, Bruce loves travel, good food, and an occasional round of golf!