Personal Property, also known as Business Personal Property is generally those items not permanently affixed to real estate. It includes any equipment, furniture, fixtures, tools, signs, machinery, inventory or supplies used in a business or for a commercial purpose, other than real estate, and most licensed vehicles. Personal Property is movable and can be removed without serious damage to the real estate or to the item being removed.
TO WHOM IS THE TAX ASSESSED?
The owner of the property as of January 1 before the fiscal year begins is generally the person assessed the tax. In the case of machinery or tangible personal property leased for profit, the tax may also be assessed to the person in possession. Personal property of a deceased person may be assessed to the estate or executor. Jointly owned property may be assessed to one or more of the owners. Partnership property is assessed in the partnership name. See MGL Ch 59, §18.
WHO IS REQUIRED TO FILE A PERSONAL PROPERTY REPORT KNOWN AS THE "FORM OF LIST"?
Any individuals, partnerships, associations, trusts and corporations that own or hold tangible personal property on January 1st preceding the fiscal year, must file a "Form of List" (State Tax Form 2).
The owner must identify and describe the property, including make and year of manufacture, and further provide the purchase price or original cost and year of purchase. The owner does not have to include an estimate of value.
The list of property is filed under oath.
WHEN SHOULD I FILE THE "FORM OF LIST"?
A "Form of List" must be filed with the Assessors Office on or before March 1st each and every year. An annual reminder notice is published in the local newspaper along with postings placed in public sites throughout the City. The Chicopee Chamber of Commerce has also published the reminder in its newsletter.
The Form of List, State Tax Form 128, is available in the Assessors Office or online at the DOR Website
WHAT DO THE ASSESSORS DO WITH THE "FORM OF LIST"?
The information contained in the "Form of List" is used by the Assessors to determine the taxable or exempt status of personal property and, if taxable, its fair market value. The Assessors may request further information about the personal property in writing, or may inspect the business in person.
WHAT HAPPENS IF I DON'T FILE A "FORM OF LIST"?
In the absence of a return, an estimate will be made and taxes assessed will be based upon the estimate. Failure to submit the "Form of List", or late filing, does not relieve the Assessors from the duty to assess the tax, and could result in denial of any appeal by the applicant under MGL Chapter 59, § 61.
IS THE "FORM OF LIST" A PUBLIC DOCUMENT?
The "Forms of List" are confidential and therefore not available to the public for inspection under the public record law. They cannot be disclosed to anyone except persons who need to see the information to perform necessary duties in the Assessors' Office and the Department of Revenue for the purpose of administering the tax laws.
WHAT IS MEANT BY TYPE OF OWNERSHIP?
Generally, businesses fall in to one of the following categories:
1. Individuals, partnerships, Associations or Trusts
2. Business Corporations
3. Manufacturing Corporations
HOW DOES THE TYPE OF OWNERSHIP AFFECT THE "FORM OF LIST"?
Type of ownership affects which items will be taxed locally. Most corporations pay a corporate excise tax to the Commonwealth of Massachusetts on their furniture, fixtures and inventory so they are exempt from paying a personal property tax locally on these items. Machinery, however, is still taxed by the local municipality.
SUMMARY OF TAXABLE PERSONAL PROPERTY:
Type of Ownership
Inventory, Stock in Trade
Furniture & Fixtures
Tools and Equipment
Poles, Underground Conduits, Wires and Pipes
Unregistered MotorVehicles And Trailers
WHAT METHOD IS USED TO VALUE THE PERSONAL PROPERTY?
Like real estaet, all personal property must be assessed at fair cash value. Generally, personal property is usually valued by the cost method, taking into account quality, age and condition.
Massachusetts prescribes no specific depreciation tables, either by statute or regulation. Property in use is considered to have some rediual value, even if it has exceeded its useful life. The exact amount of depreciation and residual value is dependent on the specifics of the property and its use.
IS MACHINERY TAXABLE?
Refrigeration, air conditioning, laundry, dry cleaning, and machinery used in administrative functions are considered exempt for corporations and manufacturing corporations. If machinery is used to provide entertainment, a service or produce a product for sale, it is taxable. Machines that are used specifically and primarily for accounting or administrative functions are not taxable.
WHAT IS CONSIDERED MACHINERY FOR PERSONAL PROPERTY PURPOSES?
Machinery is generally a mechanical device with independent moving parts or electric components designed to perform a specific function.
Examples established by case law include air-conditioners, refrigerators, electric generators, pumps, calculators, etc. Machinery does not include simple tools or equipment, furniture, shelving, and other non-motorized hand tools.
WHAT IS MACHINERY "USED IN THE CONDUCT OF BUSINESS"?
Machinery used to sell goods is exempt, such as candy vending machines, but machinery used to provide service such as video game machines are taxable.
Accounting and administrative functions are those that provide in-house record keeping functions such as copiers, computers, and fax machines that are used in the company's internal functions. If machinery is used to provide a service for a fee, it will be taxable.
WHAT IS MANUFACTURING?
Manufacturing is not defined in the Massachusetts General Laws, but has been described as a process that transforms raw or finished materials by hand or machinery, and through human skill and knowledge, into something possessing a new nature and adapted to a new use.
In order for a manufacturer to be so classified, the manufacturing must occur in Massachusetts and be a substantial part of its business.
HOW DOES A CORPORATION BECOME CLASSIFIED AS A MANUFACTURER?
For property tax purposes, a corporation that is engaged in manufacturing must apply to and be classified as a manufacturer by the Commissioner of Revenue in order to receive the manufacturing corporation exemptions.
Application for classification as a manufacturer must be made on or before January 31 in order to be classified as of January 1 prior, the fiscal year assessment date.
IS ANY PERSONAL PROPERTY EXEMPT?
"Tools of Trade" of a plumber, carpenter, auto mechanic and other trade professionals are exempt from personal property tax (e.g. small tools that can fit in a toolbox).
Tools of other professions are, however, taxable. These include the equipment and machinery used in the conduct of business (e.g. dentist's drills, x-ray machines, typewriters, etc.) Computers are also subject to personal property tax unless a corporation uses them for administrative purposes.
Intangible personal property is specifically exempt from personal property tax. It includes stocks, bonds, cash, mortgages, and others evidence of ownership of property rights.
IS THERE AN ABATEMENT PROCESS FOR PERSONAL PROPERTY?
If a taxpayer feels that the property tax should not have been assessed or if the amount of the assessment is too high due to an error, an application for abatement can be made. If no "Form of List" was filed for the fiscal year, the Assessors cannot grant abatement for overvaluation of personal property that year. If the "Form of List" is not filed on time the Assessors can grant an abatement only if the taxpayer shows a reasonable excuse for the delay, or unless the tax assessed is more than 150% of the amount that would have been assessed if the list had been filed timely. In that case, only the amount over the 150% of the correct value can be abated. (MGL Ch 59, § 61)
I BOUGHT MY BUSINESS EQUIPMENT AT A YARD SALE. ISN'T THE TAXABLE VALUE THE PRICE I PAID FOR IT?
Items purchased second-hand are not necessarily valued at the sale price. Cost is not value. Personal property is valued taking into account quality, age and condition.
THE STEREO SYSTEM AT MY SHOP IS MINE FROM HOME. IS IT TAXABLE PERSONAL PROPERTY?
Yes. It is being used by the business so one must conclude that it is part of the business.
THE POWER TOOLS I USE IN MY SHOP ARE OWNED BY THE BUILDING OWNER. WHY AM I BEING TAXED FOR THEM?
The tools are being used by your business so one must conclude that they are part of your business. It is not the city's responsibility to allocate the tax to the building owner for you.
THE COFFEE MACHINE IN MY STORE IS LEASED. SHOULD I BE TAXED?
Leased equipment is not taxed to the lessee, not to the storeowner. The lease agreement should clarify the taxing issue.