Ah, it’s fall — the season that gives way to cooler weather, and brings the anticipation of unending cuisine
enjoyment from Thanksgiving through New Year’s Day. What could possibly disrupt this most pleasant season? Only the tangible tax bill from your county tax collector. How rude! Where does this bill come from? Who decides how much our stuff is worth and what the tax rate is? It must be an unlawful invasion of our privacy to assess a tax on our “personal property...” But it’s not: Florida statutes clearly state that the counties can do just that.

Actually, you’re invited to participate every year (on April Fool’s Day, no less) by filing a return with the property appraiser in every county in which you do business. Even more bizarre, you don’t send any money with this tax return. You wait for another seven months for the revelation of how much you will share with your mayor, sheriff, school board and water management district. Well, you do get a little peek at the surprise in August, when your TRIM (Truth in Millage) notice arrives, estimating the value of your stuff according to the property appraiser and a couple of estimates of the tax rate the county is considering. So how does this little nugget of indigestion come to be the annoyance that it is each year?

Every business owner, landlord, lessor and owner of a mobile home is required to file the Form DR-405 by April 1st, disclosing the tangible personal property owned at the beginning of the year. Tangible property is defined as everything other than real estate that has value by itself, and is being used for business or income producing purposes. This definition includes supplies, but does not include software. You simply
list the items, cost and date purchased of each item in fifteen categories with a summary of the totals by year. Then the magic computer in your property appraiser’s office determines how much it’s all worth, and sends you a proposed valuation with your TRIM notice. At that time you can protest the proposed tax rates at public hearings listed on the notice, or the valuation by scheduling a meeting with the property board to explain why you have a difference of opinion.

The valuation protest process is not unreasonable, if you have facts to support your case. They will get back to you relatively quickly on whose valuation is correct. Once all of that dispute is settled, the property rolls are certified to the Department of Revenue in late October, along with the real estate tax assessed values, and bills start rolling off of the computer to be delivered to a mailbox near you. You can choose to pay the bill in November, with a four percent discount, or pass on one percent per month until the end of March, when you owe the full amount. Thereafter, the interest assessment is added each month until the summer, at which time the tax collector has a process of getting others to pay your delinquent taxes for you, by purchasing a tax certificate. This gives him the right to collect further interest until you pay your late tax bill, or to seize
your property to recover their advance toward the payment of these taxes.

The assessment is based on two fundamental sources. The first is your report of the tangible assets that you own. From that report, the property appraiser applies a depreciation factor, based on the type of equipment, improvements or supplies that you have, to estimate its current value. There is no formal appraisal done on an item by item basis, since there simply isn’t enough staff to perform such a task for every business. The second source of assessment is based on the onsite visit of the appraisers during each year to make sure you have reported all of the stuff that you use in your business. This accountability is required by the Florida
Department of Revenue to ensure that every business reports its assets accurately.

Once the property appraiser has the list of assets, their age and cost, they apply a standard depreciation factor on each class of assets, based on their assumed useful lives. That life can range from two years for such items as video tapes, games and DVD’s to fifty years for certain utility equipment. From that table a factor is developed to determine the current remaining value of your tangible assets and it isn’t a straight line calculation. Certainly if you are still using an item, it has value, so the minimum value cannot be zero
and in most cases it’s 20% of the original cost. All of this is done to determine the assessed value of your tangible assets.

The tax, or millage, rate is determined by all of the boards and councils of the taxing districts authorized to use ad valorum taxes to fund their county, districts or authorities. This rate will always be the same millage rate used to assess real estate taxes. The product of the assessed value determined by the property appraiser and the millage rate set by the governing authorities is the resulting tax. Your part of the process is to pay the tax no later than the next March 31st.

Most will agree that the tangible personal property tax isn’t a popular tax to report or pay, but it’s a long established source of revenue for local government, so do your best to report it accurately and timely to minimize your tax and potential penalties.

Adam Robinson is a partner in Patrick & Robinson, CPAs.