Overview of Arizona Personal Property Tax
Personal property is defined by exception: property that is not real property is personal property. In short Business Personal Property can be defined as assets used to operate a business, farm or ranch. The main characteristic of personal property is its mobility without damage to itself or to the real estate in which it is located with some exception, see paragraph two (2) below. Arizona taxable personal property within the Assessors office falls into two divisions, Business/Agricultural and Manufactured Housing. Business/Agriculture examples are: industrial equipment, office furniture and fixtures, leased machinery or equipment and farm machinery.
Personal property falls into two broad categories: tangible (chattel) and intangible. Tangible personal property is actual physical personal property that can either be attached (chattel, real) or unattached (chattel, personal) to real property. Items that were movable and are now attached to the real estate and used in the conduct of business, such as restaurant tables and booths and bowling alleys are called trade fixtures and treated as personal property. Intangible personal property includes bonds, stocks, patents, insurance policies, and accounts receivable.
In Arizona, travel trailers, cars, and other vehicles are considered personal property, and thus owners pay a registration fee based on the value of the vehicle, rather than one based on the age or weight as in many other states. This fee is comprised of a registration fee and an "in lieu" tax which is collected by the Arizona Department of Transportation. Because the fee is based on the value of the vehicle, it is also deductible from income taxes, along with taxes paid on real and personal property. Personal property is generally valued using the cost approach, as this is the most reliable method for the majority of types. RCN for personal property includes the purchase price of the item, plus installation labor, shipping costs, and any taxes applicable to the item. Depreciation is then applied to the amount to arrive at RCNLD.
Personal property appraisers that establish market value use many different sources. Retail and wholesale price books, vehicle "blue books", industry catalogs and owner records of purchases are all used. The Department of Revenue Personal Property Manual contains tables, which include factors for both appreciation and depreciation, which can then be used to arrive at RCNLD. Appreciation is included in order to accommodate for the effects of inflation on prices, although the tables are referred to as depreciation tables.
Merchandise held for resale (inventory) is exempt from taxation, and thus valuation. In Arizona, the personal property reporting system is self-reporting. The Assessors sends a notice demanding a listing of personal property to commercial enterprises within the county, and the business must return the form within 45 days with a listing of the property (the form is the 82520 for business, and the 82520A for agricultural property.) Audits may be used to check accuracy and completeness of the listings. Household goods not used for commercial purposes are exempt from taxation in Arizona.
The first $50,000 of class three commercial property and class four agricultural personal property at each business location are exempt from taxation. In addition, businesses can use an accelerated depreciation schedule on class three and four personal property. The accelerated rate applies to the scheduled depreciated value over a four year period as follows: year 1 - 35 percent, year 2 - 51 percent, year 3 - 67 percent, year 4 - 83 percent. This depreciation schedule was revised upward by the State Legislature in 1998, to allow for additional tax savings to businesses making capital investments in Arizona.
