- INTRODUCTION - The Business Personal Property department of the McLennan County appraisal District is responsible for developing fair and uniform market values for businesses located in the district. The law requires that all property not specifically exempt be taxed. However, because personal property is easily concealed and frequently moved because of the need to determine situs, the taxation of personal property is more difficult than the taxation of real property. Items not permanently affixed to a real estate are generally considered to be personal property. To differentiate between real and personal property our appraiser must consider the manner in which the property is attached or secured in the location, the purpose for which it is used and whether it is to remain permanently - affixed or be removed at some time. A general rule here at MCAD is that an item is personal property if it can be removed without serious injury to the real estate or to the item itself. DISCOVERY OF PROPERTY The extent to which taxable personal property can be assessed depends upon its discovery. Complete discovery requires adequate staff and supporting resources. It must be carried out with due respect to MCAD's standards, guidelines, statutory policies, and case law. Three major areas should be considered in a discovery program: methods of discovery, interpretation of data, and situs. Since most personal property is movable in nature, the most difficult step in the assessment of personal property is developing a system - '1 of property discovery. Listed below are several methods used in - 'finding personal property. 1. The personal property rendition is a way for McLennan Appraisal District to set up new accounts. This rendition allows us to apply its own depreciation schedules to equipment, furniture and fixtures, and machinery that are listed on the form. 2. The use of newspapers, press releases, and trade magazines will often assist MCAD in locating the addition of personal property that results in news businesses opening or old businesses expanding within its jurisdiction. 3. Telephone and city directories are particularly valuable in locating commercial, service, or industrial operations new to the jurisdiction. 4. Visual inspections (ride outs) are very helpful in finding new or closed businesses. 5. Vehicle printout (vpo) secured by an outside vendor is the - best source for vehicle information. 6. The Sales Tax list provided by McLennan County is another great resource. This list shows everyone who filed for a DBA in the county. PROPERTY TAXABLE There are different categories of personal property: inventories, supplies, fixed assets, leasehold improvements, and vehicles. . Actual physical property that can be seen, weighed, measured, felt or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has no intrinsic value is considered tangible personal property. Examples of tangible personal property are: furniture and fixtures, machinery and - equipment, machinery tools, dies, and inventory. This type of '2 property is taxable in Texas if it is located in the state for longer than - a temporary period or it is continually in the state. Personal property that is not tangible or properties that have evidence of ownership of property rights and may be in the form of a document are intangible personal property. Examples of intangleable personal property are: raw materials, work in progress, finished goods, and goods held for resale. It is MeAD's duty to place all taxable personal property on the roll. If the owner fails to render the property, it is our constitutional duty to assess the property. INVENTORY All items of personal property that are to be bought and sold for the principle purpose of making a profit are called merchandise and make up the merchants or manufactures stock or inventory. Items that are used in connection with the operation of a business or profession, but are not for sale, are called supplies. Merchant's inventory can include stock in trade, consigned goods, and goods in storage. Stock in trade consists of commodities comprising both goods and equipment, if these are held for resale. Most stock in trade in the hands of retailers and wholesalers belongs to the merchant who holds them. Inventory may, however, sometimes contain consigned goods. GOODS HELD FOR RESALE This type of inventory is usually merchandise in the hands of a retailer, wholesaler, distributor, or public warehouse, after having passed through various channels of trade. An appraisal of goods held for resale must carry the full accrued cost at the level of trade where the goods are resting. '3 CONSIGNED GOODS - Consigned goods are inventories in the possession of an agent, usually held for sale by that agent. Ownership of the inventory is retained by the consignor. The agent, as the consignee, simply sells the goods for a fee or a commission. GOODS IN STORAGE In most cases, goods in storage are taxable by the jurisdiction in which they are located. The Chief exceptions are when the goods are in transit in the interstate commerce and meet the statutory requirements. RAW MATERIALS Raw materials are natural resources used in manufacturing and - manufactured goods awaiting assemblage into a new product. This type of inventory is usually in the hands of the manufacturer. GOODS IN PROCESS Goods in process have been placed into a manufacturing process, which has begun to change their form. Direct and indirect labor cost and other expenses have accrued thereto in the process. FINISHED GOODS This property has become a finished product to be shipped to a buyer or profit center to the manufacturer and ultimately sold. IN TRANSIT GOODS Goods in the hands of a common carrier or other carrier are deemed to be in transit. Usually these goods are moving from one point to another and, if traveling interstate, are controlled by the ICVC. In - '4 most such situations, the goods cannot be assessed if they have not - reached their destination. LEASED EQUIPMENT Leased items differ from otherwise similar personality because they produce income for the owner not through use but through receipt of rents in exchange for the use by someone else. Assessors are discovering that taxpayers today lease everything from credit card machines to earth moving equipment. Difficulties arise in all aspects of assessment: finding and listing the property, determine the appropriate trade level at which the property is to be valued at, valuing the property, establishing situs and tax liability, avoiding duplicate assessments, and handling special problems with external and functional obsolescence. - WATERCRAFT AND AIRCRAFT When it comes to Aircraft and Watercraft MCAD uses listings from outside sources. These listings come from Texas parks and Wildlife, FAA, and airport hanger listings. VEHICLES When it comes to appraising vehicles, MCAD uses an outside vendor. This vendor provides us a listing of all commercial and business vehicles registered in the county. This vendor also provides us values of the vehicles using the NADA Blue Book. Vehicles reported to us on rendition's are valued in house using the NADA and Kelly blue Book. -- '5 Assessment date - The rule is that property which is taxable on January 1 remains taxable for the entire year no matter what occurs later in the year. For example, ifa business closes in March, the owner is still responsible for the taxes for that year. MECHANISC OF ASSESSMENT PLACE OF TAXATION Situs is the place where property is taxable. Personal property is taxable if it is in the jurisdiction on January 1 for more than a st temporary period. A taxing jurisdiction can only assess personal - property that has a situs within its boundaries. Property usually has situs at its normal location or home base. RENDITIONS Renditions filed with McLennan appraisal district are confidential and are not open to public inspection. Below is the McLennan Appraisal districts "Guide to Business Personal Property Rendition of taxable property" worksheet available to the taxpayers. Texas Property Tax Laws require you to render all tangible property used or held for the production of income as of January 1 ST. To render means, to list all property used or held for the production of income. Property owners may protest appraised values before the appraisal review board (Tex. Property Tax Code, Section 25.19). - '6 - Although the state mandated deadline to file your business personal property rendition is April 15th, McLennan County encourages early submission by March 2nd ifat all possible. There is also an automatic 30 day extension you can give to businesses owners ifthey apply for it by April 15. Renditions are confidential Information contained in a rendition cannot be disclosed to third parties except in very limited circumstances. In addition, the tax code specifically provides that any "Good Faith Estimate" of value you provide is not admissible in proceedings other than a protest to the ARB or court proceedings related to penalties for failure to render. The final value we place on your property is public information, but your rendition is not. The rendition must be filed by April 15th by one ofthe following methods. The mailing address for the general rendition forms is: McLennan County Appraisal District PO Box 2297 Waco, TX 76703-2297 The street address for onsite or physical deliveries to MCAD is: 315 s 26th st Waco, TX 76710-7400 The e-mail address for electronic filing of rendition information is: - [email protected] - Penalties for failure to file the rendition or the explanatory statement There are two levels of penalty for failure to comply. If you fail to file your rendition before the deadline or you do not file it at all, the % penalty is equal to 10 of the amount of taxes ultimately imposed on the property. T his is according to section 22.28 of the Property Tax Code. To appeal late penalties for renditions you mailed and MCAD did not receive, there must be documented proof from a mailing service. If a court determines that you have committed fraud or have committed other acts with the intent of evading taxes on the property, a penalty equal to 50% of the taxes ultimately imposed on the property may be levied. Your rights if a penalty is assessed against you - If a penalty is assessed against you, you can file a request for a waiver of the penalty. You must file the request in writing with the chief appraiser within 30 days after you receive the notice that the penalty has been imposed. Your request must include documentation showing that either you substantially complied with the rendition law or that you made a good faith effort to do so. The documentation should also address: (1 )Your compliance history with respect to paying taxes and filing statements or reports; (2)The type, nature, and taxability of the specific property involved; (3)The type, nature, size, and sophistication of your business; (4)The completeness of your records; (5)Your reliance on advice provided by the appraisal district that may have contributed to your failure to comply and the imposition of the penalty; - '8 (6)Any change in appraisal district policy during the current or - preceding tax year that may affect how property is rendered; and (7)Any other factors that may have caused you to fail to timely file a statement or report. The chief appraiser is required by law to consider these factors and notify you in writing. If the chief appraiser declines to waive a penalty and you have made a timely request for waiver, you may protest the imposition of the penalty to the appraisal review board. The board may waive the penalty if it finds that you substantially complied with the rendition law or made a good faith effort to do so. Exemptions Vehicle exemption from ad valorem taxation for one motor vehicle - (passenger car or light duty truck with a manufacturer's rated carrying capacity of one ton or less) owned by an individual that is used in the course of the owner's occupation and also for personal activities of the owner. The exemption does not apply to a vehicle (taxi, limousine, etc.) used to transport passengers for hire. This exemption must be applied for annually no later than April 30th of the tax year. Goods-in-transit exemption from ad valorem taxation of tangible personal property (inventory) that is detained at a location in this state that is not owned, either directly or indirectly, or under the control of the person who acquired or imported the tangible personal property, and the tangible personal property is transported to another location in or out of this state within 175 days. This is a complex law similar to the exemption of Freeport goods and is only '9