Is All Personal Property Taxed?
The Arizona Constitution and statutes offer several exemptions from personal property tax. Personal property used by the owner for private, domestic purposes is not subject to personal property taxation (except for manufactured housing). Household goods and furnishings, personal wardrobes and jewelry, or recreational possessions used in the owner’s residence or for private activities are exempt from property taxation.
Governmental or charitable organizations defined in ARS §§ 42-11101 through 42-11129 may be exempted from property taxes with the approval of the County Assessor.
Business inventory, raw materials and merchandise held for resale, most livestock, and the first $50,000 of full cash value for most taxpayers are exempt from property tax. The amount is adjusted, annually, based on the average annual percentage increase, if any, in the GDP price deflator in the two most recent state fiscal years.
Vehicles licensed by the state for use on the public highways, waterways, or air space are not reported as taxable personal property.
Most personal property leased or rented to others is taxable and the County Assessor should be consulted for specific filing and record keeping instructions.
How is Personal Property Valued?
Based on the original cost and age of all personal property in your possession as of December 31 of the prior year, the County Assessor will calculate the current replacement cost new less depreciation of each item. Assessed value is based on the full cash value after application of the $50,000 exemption and the assessment ratio for the legal class of the property. The tax rates for the county and local governmental jurisdictions in which the business operates are applied to the assessed value.
The original cost of a personal property item includes the purchase price plus all freight and installation costs, as well as sales taxes.
How Do I Report Taxable Personal Property?
Personal property is reported on the Business Property Statement (DOR Form 82520) for commercial business property or the Agricultural Business Property Statement (DOR Form 82520A) for agricultural properties. These forms are available from your County Assessor. List property that has been acquired or disposed of during the year, and confirm property items still in your possession. A Personal Property Statement must be filed if a form, notice, or demand has been sent by the County Assessor. It must be filed annually by April 1. A separate return must be filed for each business location.
Failure to complete and return the statement by the deadline may result in a 10% penalty. Any difference in acquisition cost as found on the taxpayer’s books and records from that reported will be considered “escaped” property. Escaped property is subject to taxation, interest, and applicable penalties for a period of three years from the date the notice of escaped property was mailed by the Assessor.
If the Assessor does not mail a business personal property reporting form, it is the owner’s responsibility to report his personal property to the Assessor. Failure to do so may result in tax liability and penalties for three tax years upon discovery of such property by the Assessor’s office.