Commercial and Personal Property
There are both similarities and differences.
Like residential property, commercial property is assessed each year at full of market value, which is defined as the amount a buyer, willing but not obligated to buy, would pay to a seller willing but not obligated to sell.
The three methods used to determine real property value include:
- Market: Sales comparisons
- Cost: Reproduction or replacement cost new, less accrued depreciation
- Income: Capitalization of market rents
As with residential property, the valuation of commercial property is divided into land and improvements. We begin by establishing land value, which state law requires us to value as if it is vacant. This value is determined using the market approach, which analyzes sales of comparable land.
In establishing the value of the improvements (buildings, etc.), all three techniques are applied, if appropriate, but the cost and income approach are most often used in assessing commercial properties.
Yes. Personal property refers to assets used in conducting a business. The chief characteristic distinguishing personal property from real property is mobility, meaning it can be moved from one place to another.
Taxable personal property includes, but is not limited to:
- machinery and equipment
- supplies and materials that are not held for sale or not components of a product
- tools used in a business
- leased equipment, leasehold and tenant improvements, lessee-owned improvements on public land
- commercial vessels not subject to excise tax
- machinery and equipment used in agriculture, manufacturing, construction and logging
Detailed information about taxable personal property and the reporting process is available here.
Most personal property assessments are based on the cost approach, using information provided by the taxpayer on personal property listing forms furnished by the assessor. The assessor uses this information to determine value, taking into consideration the age, cost and type of property.
Sole proprietors are eligible for a $15,000 Head of Household exemption deducted from the business's total assessed value.
An exemption for certain farm equipment is also available using this form (.DOC, external link).
In addition, some real estate and/or personal property is exempt from property tax based on its use or ownership. A detailed summary of exemptions is provided on pages 1-49 of this Department of Revenue report (.DOC, external link).
The assessment is done by the county in which the business is physically located. The location of the business owner's residence is not relevant unless that is also the location of the business.
In King County, contact the Department of Assessments with questions about the valuation of your personal property at 206-296-5126. If you have questions about your bill, contact Treasury Operations at 206-263-2844.
If you have not filed with this office before, you can download a form or you may contact us at 206-296-5126 or by e-mail at Personal.Property@kingcounty.gov to request a Personal Property Listing form.
Businesses in operation on the first day of January will be sent a listing form. Please use that form to report your assets. You must complete and return their personal property listing forms by April 30 to avoid a penalty. If you have not received a listing form, please contact our office at 206-296-5126.
Late filers are subject to a penalty of 5 percent per month up to 25%. This penalty will be added to your personal property tax bill.
No, but be sure to include the preparer's contact information
If you have questions or need help completing the form, call us at 206-296-5126 or toll free 1-800 325-6165 (ext. 6-5126). Or e-mail us at Personal.Property@kingcounty.gov and we will contact you.
Report business personal property you own, lease, formerly leased but now own, building improvements, supplies and such items as laser disks, game cartridges, rental video tapes, title plants and DVD's. A summary list of the categories of business property to report is included on the listing form provided by the assessor. Click here for a complete list of business property categories.
Include personal property used in your business on Jan.1 of the year in which you report. For example, if you had $20,000 of business assets in place on Jan. 1, 2010, you would report them on the 2010 listing form. Any items obtained in 2010 after Jan. 1 would be reported on the 2011 listing, if still in use on Jan. 1, 2012.
The listing form includes instructions for completing the form. If you have any questions about how or what to report, just call the number on the first page of the form.
A video providing an overview of personal property tax is available at http://dor.wa.gov/Content/Home/VideoHub/hubfiles/1a.html (external link).
List the total purchase cost of your personal property assets, excluding sales tax. Total purchase cost of an item includes all costs associated with making the property operational; for example, installation, freight and engineering charges. Include the value of any trade-in.
If I use a piece of equipment (computer for example) in my business but also use it for personal activities, what part is taxable?
Even if the computer was used only 1% of the time for business, it is 100% assessable.
Supplies, including such items such as paper, envelopes, staples, etc., should be reported. Supplies are defined as items used to conduct everyday business. Report the cost of supplies on hand on January 1 or take 1/12th of your annual supply expense, whichever is easier to determine.
Inventory (items held for resale) and items that become part of a business product or service (such as bottles or cans used in food manufacturing) are exempt and do not need to be reported.
Leasehold improvements are improvements or additions to leased property that benefit the lessee (tenant or renter). Improvements made to a building that you own and occupy, are not leasehold improvements. You should report leasehold improvements as personal property if (a) you, as the tenant, made or own the improvements or additions; or (b) you, as the landlord, made or own the improvements or additions for a specific tenant.
Include sales tax in the cost you report and provide information in the "Building/Office Space Lease Data" and "Conditions of Lease" sections of the form to help us determine the assessment.
If you own the building you occupy, do not report leasehold improvements.
Both need to be reported. For the majority of equipment currently being leased, the leases are categorized as operating leases. In this case, the tax will go to the lessor, but the lessee is required to list the leased property on the personal property listing. For capitalized leases, the lessee assumes the tax.
List assets you formerly leased under "Owned Business Assets."
The information you provide will be entered into our computer system, and we will use this information to calculate an assessed value. A Personal Property Valuation Notice showing this assessed value will be sent to you. This value is multiplied by the levy rate for your business's location to determine personal property taxes. The valuation notice also provides information about the process and timelines for appealing the valuation.
About mid-February of the following year, you should receive a tax bill from the King County Finance Division showing the assessed value that appeared on the Personal Property Valuation Notice, along with the amount of taxes due.
Your tax is based on the property's assessed value, which is its original cost minus depreciation. Depreciation is determined by the items' description, purchase price and year of acquisition. This value then is used to calculate your personal property tax.
First, contact us. We will review your account information with you to make sure an error has not been made. If appropriate, an Assessments Auditor may be asked to review the assessment and may make an adjustment.
If the assessed value is still disputed, you may appeal the value to the County Board of Equalization. Contact them at 206-296-3496 to obtain appeal forms and related information.
You'd need to submit a completed listing in the year your business was first in operation on January 1. For example, if you started your business on June 10, 2010, you would first file a listing in 2011 listing those assets used by your business as of Jan. 1, 2011.
If you contact us at the onset of your business, we can set up an account and make sure you get the listing form in plenty of time to complete and return it by the April 30 due date.
The person who owned the business on Jan. 1 is liable for the tax for that year. Taxes are not prorated.
This is at the discretion of each county assessor. King County's policy is to waive non-filing penalties for voluntary filing. If, however, we discover non-filing, the county can apply non-filing penalties for up to three tax years. Assessments for up to three previous years, if applicable, would still be due.