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Your Ultimate Guide to Business Personal Property Taxes in Texas

As a business owner in the State of Texas, by law, you are required to report to your county appraisal district all personal property used in your business, known as Business Personal Property Tax or BPPT for short. It's essential to be aware of your Business Personal Property Tax as this tax applies to all property used in the production of income, not used in trade or profession. The tax is assessed on any tangible property, including machinery, furniture, fixtures, inventory, and vehicles. There are exemptions available for certain types of property and some circumstances where no tax will apply. Learn about what this tax entails so you don't get caught off guard when it comes time to file your taxes!

What is a business personal property tax?

Business Personal Property tax is an ad valorem tax on tangible personal property used for income production. Any item a company uses to conduct business and that the business may take with them if they moved locations, such as furniture, machinery, supplies, tools, etc., is considered business personal property. While Texas does not impose an individual income tax, it levies a statewide business personal property tax on businesses that own items of tangible personal property (e.g., inventory, machinery). Cities may also levy their own business personal property tax, in addition to the Texas tax. However, a business is subject to no more than one of these taxes.

What is the difference between Business Personal Property Tax and Real Property Tax?

Not to be confused, real property refers to permanently attached items to a physical location, such as buildings, pavement, land, electrical and any rights conveyed by deed, lease, bill of sale, or other instruments in writing that do not expire on the happening of an event (e.g., mineral leases). Business personal property is taxed differently and is subject to slightly different computation rules than real property.

Are there exemptions for Business Personal Property Taxes?

Yes, as home to more than 1.4 million businesses, Texas has one of the most complex tax laws in the country. This is because it's up to cities and counties to decide which assets they want to exempt from taxation and what rate they'd like to charge for each exemption. Texas leads all states with 434 different business personal property exemptions, according to the 2006 Comparative Property Tax study conducted by the American Society of Appraisers.

What is an example of a Business Personal Property Tax Exemption?

The State of Texas provides tax exemptions for specific items used in the oil and gas industry. For example, pipelines used to transport oil, natural gas, or other products are exempt from taxation when operated in a rural area. However, this exemption isn't available if the facility is within 5 miles of a municipal water source.

What are some of the most common exemptions?

A variety of items are exempt from taxation in Texas, including:
• Agricultural machinery and irrigation equipment
• Aircraft used to transport people
• Fuel or supplies for oil and gas companies
• Certain types of drilling equipment
• Vessels that deliver petroleum products to foreign ports
• Farm machinery and equipment used to cultivate the soil for agricultural, forestry, or commercial purposes
• Insurance company property used in the production of taxable income

How are business personal property tax exemptions determined?

The law provides certain conditions to qualify for an exemption, such as the location where the equipment is used, age criteria, and employment status of the taxpayer possessing the item. The statutes also allow exemptions qualified based upon industry type (retail/wholesale), operating environment (urban decay), and dollar value thresholds of assessed value per square foot of space occupied under lease by the commercial tenant.

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