Personal property tax and Personal property tax exemption

Michigan businesses are subject to a special tax for owning property. This tax is called personal property tax. Personal property tax can be levied upon any size business, but is usually not levied until a business formally forms as a LLC, Corporation or S Corporation, or rents a business location.

Most businesses are not aware of this special tax, so it comes as a surprise when they move their business to a new location or rent space for the first time and are presented with this ‘new’ tax. It is also an easy tax to overlook as the tax deadline is kind of in the middle of the tax filing season, and it is hard to remember to file since the fact pattern of when you should file is so specific.

The good news is that most small businesses can file a one-time form and that will exempt them from having to file or pay this tax until they either:

  • Move to a different location- The exemption is location specific.
  • OR – Purchase too much equipment. Technically this exemption is only available for small businesses. The State defines a small business for personal property tax purposes as a business that has less than $80,000 of equipment owned in an annual period. They give a more specific definition of $80,000 of true cash value of equipment, but unless you want to become a tax gladiator you probably don’t want to know what that means.

If you want more information about Personal Property Tax Exemption, search: Michigan form 5076. As we mentioned above, once you file the Personal Property Tax Exemption you should not have to file this form again until you move, open a new location, or buy enough property where your property value is over $80,000.

For those businesses that are not small businesses under this definition, don’t worry there are special programs available for businesses with high equipment costs such as manufacturers.

We help many other individuals and businesses with tax reporting, general tax compliance and advice. If you do not feel comfortable taking care of these filings, reach out to us at [email protected].

Anthony Momany, Managing Member, Capstone CPA Group PLLC

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