Personal Property

Personal Property
(Massachusetts General Laws, Chapter 59, Section 18)
Information pamphlet

I. General Information
The Personal Property Tax is assessed separately from real estate. This tax is assessed upon non-real estate, tangible assets. These assets are composed of goods, material objects and other items capable of material ownership that are not part of real estate. Items defined as tangible personal property range from the chairs in a barber shop to the furnishings of a doctor’s waiting room; from the drills used by a dentist to the poles owned by a utility company.

Personal property is assessed by the city or town where the property is "situated" on the assessment date. In limited circumstances personal property may be assessed by the community in which the owner is an inhabitant on January 1st, even if the property is located in another community on that day. This primarily applies to items that may not be permanently situated in a town, such as construction equipment.

A Form of List (State Tax Form 2) must be filed each year by all individuals, partnerships, associations, trusts and corporations that own or hold personal property on January 1st unless expressly exempt. Individuals owning or holding household furnishings and effects not located at the owner’s primary residence (domicile) on January 1st must file State Tax Form 2HF. Form 2HF is generally used by individuals who own a vacation or secondary home. A Form of List must be filed by March 1st with the Board of Assessors unless an extension is granted. Request for an extension must be made in writing to the assessors. The latest date the filing deadline can be extended is 30 days after the tax bills are mailed for the fiscal year.

The information in the Form of List is used by the Board of 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 and seek cooperation to inspect it if necessary. Forms of List are confidential and therefore are not available to the public for inspection under the public records law. They are available only to the Board of Assessors and Massachusetts Department of Revenue for the purpose of administering the tax laws.

II. Taxable Personal Property
The following summarizes the personal property that is taxable and must be listed in a form of List. This summary is formatted by the type of business ownership, since the type of ownership affects which items will be taxed locally. Most corporations pay a corporate excise to the Commonwealth of Massachusetts on their furniture, fixtures, equipment and inventory so they are exempt from paying a personal property tax locally on these items, however their machinery assets as well as the pipes, poles, wires and underground conduits are taxable.

Individuals, Partnerships, Associations or Trusts and Limited Liability Companies (501)
Individuals, partnerships, associations, or trusts are taxable on all tangible personal property except: motor vehicles and trailers subject to an excise, boats subject to an excise and non-commercial registered airplanes. Individuals are not taxable on the following additional items: household furniture and effects at the place of domicile, farm utensils and tools of a mechanic's trade, boats/fishing gear and nets up to $10,000 in value owned and used in a commercial fishing business.

Intangible personal property is exempt from the personal property tax. Intangible property includes stocks, bonds, and cash, mortgages and other evidence of ownership of property rights.

Some examples of taxable items would be:

A. Machinery Includes manufacturing machinery, copying and reproduction equipment, typewriters, computers and word processing equipment, appliances, and any other machines and mechanical devices.

B. Tools and Equipment. Includes business, or professional tools and equipment, including restaurant, laboratory and medical equipment. Examples of nontaxable "tools of a mechanics trade" are the instruments of a plumber, carpenter, auto mechanic or other tradesman such as: wrenches, hammers and saws. Taxable tools are implements of a professional (doctor, dentist, lawyer or accountant) such as: medical instruments or dental drills.

E. Business Furniture and Fixtures. Includes business, professional, commercial or service fittings and furnishings (desks, tables, cabinets, display cases), rugs, floor coverings and draperies, lamps specialized lease-hold improvements (restaurant fittings, modular walls, etc.), works of art and decorations, books and professional libraries and other fittings and effects.

F. Merchandise. Includes goods, wares, or any stock in trade in any store or other place of sale, in any warehouse or other place of storage, out on lease or consignment, etc. This could be represented by a retailer’s inventory (the shoes of a shoe store) or any finished goods or products that may be for sale or lease. These items may also include any work in progress such as a partially completed product (furniture being built, jewelry being made) and any materials or supplies used to produce a finished product (paint for a house painter).

G. Unregistered Motor Vehicles and Trailers.

H. Other. Includes animals, forest products and all other tangible personal property not specifically exempt from taxation.

Business Corporations and LLC filing federally as corporations (502) M.G.L. Chapter 63 § 30

(excludes: utilities, certain insurance co.'s, certain banks, and mfg. corps)

Business corporations are taxable on poles, underground conduits, wires and pipes. They are also taxable on all "machinery used in the conduct of business" except:

1. Machines that are stock in trade. Inventory for sale such as copy machines for sale by a copy machine distributor, or inventory for lease such as a computer being leased by a computer company is not taxable.

2. Machinery used directly in the dry cleaning or laundering process; to refrigerate goods or to air condition premises. Sewing machines and a mechanical clothes rack are not directly used in the cleaning or laundering process and would be taxable even if owned by an incorporated dry cleaners. Refrigerators or air conditioners used in an incorporated restaurant or a supermarket would be nontaxable.

3. Machinery used directly in the purchasing, selling, accounting or administrative function of the business. For example, the vending machines, bill changers and cash registers are not taxable because they are used in a selling or purchasing function. Taxable are those machines providing entertainment, such as pinball machines, video games and juke boxes. Machines that are used specifically and primarily for accounting or administrative functions are not taxable. If the machine is used to provide a service or produce a product for sale, it is taxable. For example, a photocopier owned by an incorporated restaurant and used in an administrative or accounting function in keeping the internal records for the business would not be taxable. Conversely, the photocopier of an incorporated copying business is used to generate a service, copying for a fee, and is taxable.

Manufacturing Corporations (502 M)
(Classified as "Manufacturing" by the Department of Revenue)

Businesses that are classified by the Department of Revenue as Manufacturing Corporations are taxable on: poles, underground conduits, wires, and pipes.

Centrally Valued Personal Property (505 & 506)

Valuations determined by the DOR, not the assessors for telephone and telegraph companies’ machinery, poles, wires, underground conduits, wires and pipes. Also, the pipelines of natural gas and oil companies that extend for more than 25 miles in Massachusetts. Pipelines of gas and electric companies are valued locally.

Other Corporations
Corporations that are not business corporations or manufacturing corporations are handled separately. The personal property reporting for these other corporations is outside the scope of this brochure. Incorporated utility, financial institution and insurance companies are exempt from local taxation on all their personal property, except poles, underground conduits, wires, and pipes. Financial institutions include banks, mortgage, credit card and other lending companies or institutions. Credit Unions are also exempt from taxation. Foreign insurance corporations receive the same exemptions only if the incorporating state allows similar property exemptions as Massachusetts insurance corporations. Mutual insurance holding companies are treated and taxed as business corporations.

III. Tax Bills

Personal Property is valued by replacement cost new, less depreciation, based on age and condition. The tax rate for Personal Property is the same rate that applies to Commercial and Industrial Real Estate in the City of Salem. Personal property bills are mailed and are due on the same schedule as real estate tax bills. The Fiscal Year begins annually on July 1^st and runs through June 30^th of the following year. Bills are due on a quarterly basis 30 days after the issuance: 1^st quarter bills are mailed on or about July 1^st and are due 30 days after (August 1^st); 2^nd quarter bills are mailed on or about October 1st; 3^rd quarter bills are mailed on or about January 1^st; and 4^th quarter bills are mailed on or about April 1^st.

IV. Appealing the Personal Property Tax
If the taxpayer feels that the personal property tax should not have been assessed or if the amount of the assessment is too high due to an error, and application for abatement can be made. This application must be filed with the Board of Assessors only on the 3rd quarter tax bill (typically in January). The application must be received no later than the due date of the bill. (This bill will list the valuation and taxes due). By law, late applications cannot be acted upon by the Board of Assessors. The deadline cannot be extended or waived by the Assessors for any reason. Only the current tax year is eligible for an abatement or exemption.

If no Form of List was filed for the fiscal year, the assessors cannot grant an abatement for overvaluation of the personal property for that year (M.G.L C. 59 § 64). If the Form of List is not filed on time, the assessors can only grant an abatement if the taxpayer shows a reasonable excuse for the late filing, or the tax assessed is more than 150% of the amount that would have been assessed if the list had been filed on time. In that case, only the amount over the 150% of the correct value can be abated.

IV. Additional Information
The assessment date for the Fiscal Year is the January 1st preceding the start of the Fiscal Year that begins on July 1^st (fiscal years run July 1^st – June 30^th). Each business is assessed based on its existence on the assessment date. Thus, any business that existed on January 1st would be billed for the entire fiscal year. This applies to businesses that have closed or relocated during the year so that any business that closed or relocated after Jan 1st will still be billed for the entire Fiscal Year. It should be noted that the reverse of this situation is also true in that any business that opens after Jan 1st will not be billed for the Fiscal Year.

Charitable, literary, temperance, benevolent or scientific organizations that may be entitled to an exemption of taxation must file State Tax Form 3ABC listing all property they own or hold for those purposes on January 1^st. The Form-of-lists must include a copy of their annual public charity reports to the Attorney General.

V. Conclusion
The personal property tax is levied principally on business and is based upon the non-real estate, tangible assets of the business.

Each business must file a personal property Form of List with the Assessors Office by March 1^st annually. This form enables a business to provide a list of its current assets to the Board of Assessors to determine fair and equitable assessment. This list is confidential and not open to public inspection.

The Assessor’s Office may require an owner or lessee of personal property to provide the assessors with further information about the property in writing and asked to permit them to inspect the property.

Unincorporated businesses must report on all machinery used in the conduct of business except for that machinery used only for administrative purposes.

Classified manufacturers need to only report: poles, underground conduits, wires and pipes.

Abatements must be filed only on the 3rd quarter tax bill. The application must be received no later than the due date of the bill. Non filing of the annual Form-of-List will result in a denial of the appeal. In addition, false statements that is knowingly made will also bar the taxpayer from any statutory appeal.

Questions regarding any aspect of personal property taxation should be addressed to the Assessors Office (978) 619-5607 or email Jbond@salem.com