April 1, 2012

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Strictly Business

Revamping the Business Personal Property Tax

Candace Daly, Utah State Director, National Federation of Independent Business

April 1, 2012

One of the most detested taxes for Utah’s small businesses has been the Personal Property Tax. This tax requires businesses to track everything in their office including desks, chairs, monitors, computers, tape dispensers and more. Beyond tracking these items, small business owners are required to pay taxes on them, causing an obvious burden.

HB 41 Property Taxation of Business Personal Property was aimed to tackle this tax issue, but discussions stalled throughout the process. A $25,000 exemption was proposed for small businesses, but was opposed by county assessors who were concerned about narrowing the tax base and a possible tax shift to real property.  

Another proposed benefit of HB 41 was the discontinuation of small business audits by the county assessor’s office. This benefit, however, also did not succeed. Instead, the direction shifted to using the federal depreciation schedule to reduce the burden of tracking items with a low value. This would take an amendment to the Utah State Constitution. 

A bill was prepared by Representative John Dougall, HJR 18 Joint Resolution on Personal Property Tax, in an attempt to make that amendment. Assessors agreed that tracking minuscule items in a business office presented a burden to small business owners and auditors alike. 

The outcome: Language was reworked in Dougall’s HB 387 to draw a clear line between capitalized and non-capitalized property. For non-capitalized property with an acquisition cost of $1,000 or less, there will be an option for a non-capitalized depreciation schedule where businesses can pay the tax for three years. After those three years, small businesses will no longer be required to track or pay taxes on items listed. 

Small business will find this change very helpful when tracking business personal property. This bill will take effect on January 1, 2013.

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