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Liable for Personal Property Taxes in Washington State?
Scott F. Usher, MST, CPA
Senior Manager, Tax Services - with contributions from Debby Cunningham
January 11, 2010
Real property isn't the only business property subject to property tax in Washington State. If your business owns personal property, such as machinery and equipment, furniture, fixtures, supplies, and leasehold improvements, you are subject to Washington State's personal property tax filing requirements and liable for paying personal property taxes each year.
The tax, administered at the county level by the assessor's office, is levied on personal property that you own or control and use in your business as of January 1 each year. The tax rate is the same as that for real property.
Property Subject to Tax in Washington State
For property tax purposes, personal property refers to those assets used in conducting a business, distinguished from real property based on the characteristic of mobility. Generally, Washington law requires that all personal property be assessed for tax purposes.
According to the Washington State Department of Revenue, "Taxable personal property includes (but is not limited to): office machinery and equipment as well as supplies and materials which are not held for sale or do not become an ingredient or component of an article being produced for sale. Furniture and fixtures in commercial use, leased equipment, certain leasehold improvements, lessee-owned improvements on public land and commercial vessels not subject to excise tax also are assessed and taxed as personal property. Additionally, agricultural machinery and equipment, manufacturers', contractors' and logging machinery and equipment also are assessable as personal property."
While improvements to land are generally considered real property, all other property―including leasehold improvements―is taxable as personal property unless specifically exempted by law.
Exemptions
There are a number of types of personal property that are exempt from tax, including inventory, raw materials, livestock, certain cargo containers and motor vehicles, custom software and intangibles.
Property owned by not-for-profit organizations and public schools and certain farm equipment may also qualify for exemption.
Finally, if your business is a sole proprietorship, you may be eligible to exclude up to $15,000 in assessed value under the head of household exemption.
Reporting Requirements
In Washington State, the assessment of personal property taxes and the resulting tax calculations are the responsibility of the county assessor for the county in which the property is located.
Washington businesses are required to file a listing of their personal property―including descriptions, acquisition dates and costs―with the county assessor's office by April 30 each year. There are no extensions granted.
Based on the information you supply, the assessor determines the value of your property and sends a valuation notice, which can be appealed. Generally, appeals must be filed within 30 days of the date the assessment was mailed or July 1, whichever is later―although some counties have extended the period from 30 days to 60 days.
Payment of Taxes
That assessed value is the basis for calculating your personal property tax for the following year. Assessors' offices mail property tax statements in February each year. The tax is due even if the business closed or was sold, or the property was sold. For a business or property sold during the year, the tax is not prorated between old and new owners.
Generally, half of your personal property tax liability is due on April 30 and the other half on October 31. If the amount of the tax is $50 or less, the full amount is due on April 30.
The amount of tax due becomes a lien on the personal property, which can carry over to a new owner if the previous owner did not pay the tax.
Penalties and Interest
You can be assessed a penalty for failure to file your personal property listing and interest for failure to pay the tax when due.
If you do not file the required personal property listing for your business, you will be assessed a penalty equal to five percent of the tax due per month, up to a maximum of 25 percent of the tax due the following year. Your county assessor is allowed to estimate the value of your property based on the best available information.
If you do not pay the amount of tax due on April 30, the entire amount of the tax for the year becomes due on May 1. Interest applies at the rate of one percent per month until paid in full. A penalty of three percent is assessed if the tax is not paid by June 1 and an additional penalty of eight percent is assessed if the tax is not paid by December 1.
For More Information
The Washington State Department of Revenue has published a general fact sheet entitled Personal Property Tax, which it publishes online.
Many counties in Washington also provide information on the procedures they follow in administering the tax. For example:
 King County: www.kingcounty.gov/business/licenses/PropTax.aspx
Pierce County: www.co.pierce.wa.us/pc/abtus/ourorg/at/PPropertyGeneral.htm
Thurston: www.co.thurston.wa.us/assessor/faq-persproperty.html
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