What property is subject to personal property tax, business property tax, or use tax?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 15, 2021

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In addition to federal taxes, each state and some counties impose their own set of taxes. States and counties can impose personal property tax, business property tax, or other taxes on goods or services. The types of property, goods, or services that are taxable vary by state and county. Check your state tax department or county website to see what types of property, goods, or services are taxable in your area. The amount of taxes vary depending on the location, but in most places the personal property tax, business property tax, and use tax is set as a percentage of the value of the property, goods, or service.

Property Subject to Personal Property Tax

The most common types of personal property taxed by states include cars, boats, motorcycles, and aircraft that are purchased for personal use. For example, Virginia has a car tax and all residents of the state must pay a tax each year for owning a car. The car tax in Virginia is calculated based on the value of the car. The more expensive the car, the higher the car tax is.

Property Subject to Business Property Tax

Goods purchased for use by businesses are also taxed by many states and counties. Items typically subject to business property tax include most tangible items that are used by a business, such as telephones, furniture, fixtures, computers, desks, cabinets, chairs, and machinery. Some states also impose a business tax if the business takes items from inventory and starts to use them for business purposes. For example, a hair salon that purchases shampoo to sell in its salon will have to pay business property tax if it starts to use the shampoo on clients when the shampoo was orginally intended for resale to clients. By using the shampoo that was orginially purchased to sell, the salon has converted inventory to business property.

Property Subject to Use Tax

Use taxes are different from personal or business property taxes. Use taxes are imposed when there is no sales tax. The most common type of transactions that are subject to use tax is out-of-state or internet purchases. Most states exclude items such as food, magazines, and newspapers from use tax. In Maine, if a resident makes a purchase over the internet and the seller of the item does not collect Maine sales tax, the resident is responsible for reporting the purchase and paying use tax. In most states, use tax does not apply if there is a casual sale and the seller is not a business. For instance, if John is selling his car on his own, use tax does not apply because he is not a professional car dealer. 

States impose use taxes to control competition between the states. Residents of one state may be shopping for goods in another state because the sales tax might be lower or there is no sales tax. For example, the state of Washington taxes goods purchased in Oregon if the goods are going to be used in Washington.

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