Personal property is generally defined as property not permanently affixed to or part of the realty. Generally everything that is not real estate is personal property. To differentiate between realty and personal property, the tax official must consider the manner in which the property is attached or secured at the location, the purpose for which the property is used, and whether it is to remain permanently affixed to the realty. There are two classes of personal property: tangible and intangible property.
Tangible personal property is the actual physical property. All business property, other than structured components, contained in or attached to a building. This property includes, but is not limited to: machinery, equipment, tools, furniture, fixtures, computers, and other similar items.
Intangible personal property is property that has no mass or substance and is the representation of property rights. This property includes but is not limited to: money, shares of stock, annuities, patents, stocks, bonds, notes receivable, insurance policies, money market certificates, and similar items.
Actual age is the number of years from the date of acquisition to the present.
Composite factor is the calculation of the index factor and percent good that is applied to an asset’s acquisition cost to arrive at a market value.
Economic life is the estimated period it is anticipated an item of personal property may be profitably used for the function it was designed.
Effective age is the age of personal property comparing its present condition and usefulness to its economic life.
Historical cost is the cost of an item of personal property at the time it is bought. It is also known as the original cost or acquisition cost.
Percent good is the percentage of replacement cost new value remaining in a property.
Remaining economic life is the period of time an item of personal property may be expected to profitably perform the function for which it was designed. This is the same meaning as “useful life”.
Useful life is the period of time an item of personal property may be expected to profitably perform the function for which it was designed. This is the same meaning as “remaining economic life”.
Value in use is determined from the use of items, or at the point they will be used by the owner for their intended purpose. The market value of an item in use is, essentially, the cost to the owner to replace that item with a like item of similar age and condition; the principal of substitution. Estimates of market value are based on information pertaining to cost and depreciation rates or the percent good of the personal property.
Leasehold improvements are improvements or additions to leased real property, which are made by the lessee and taxable to the owner of the real property (lessor). Items such as storage bins, display counters, walk-in coolers, fixed equipment in service stations, portable buildings, pumps, and tanks are examples of personal property which are often misclassified as leasehold improvements. Interior decor packages have been determined to be a custom or special interior finish and therefore should be regarded as “trade fixtures” and treated as business personal property.
Situs is the physical location of the property. The situs of real property is where it is permanently located. The situs of personal property is different due to its movability. Therefore, personal property is to be assessed in the taxing jurisdiction in which it is located on October 1 (statutory lien date).
Supplies are common types of property, which are often misclassified and unreported by taxpayers. They render a service to the business but are not embodied in the final product. They include, but are not limited to: office and professional materials, wrapping materials, repair parts, clothing, lubricating oils, mail, selling and advertising materials, chemicals, pallets, fuels, and other consumable items. Supplies are to be valued at their acquisition cost including freight-in.