CARL A. HARRIS & ASSOCIATES, P.C.

The personal property tax bill is based on the assessed value of a business's tangible business personal property (mostly furniture, fixtures, and equipment) as determined by the State Department of Assessments and Taxation ("SDAT").  SDAT's assessment is based upon a personal property return which a business in Maryland is required to file each year.   This return, due April 15, must report the cost basis and year of acquisition of the personal property owned or used by the business as of January 1st of that year.  If a business fails to file a return, SDAT may estimate an assessment for the property.  The tax collector applies the local property tax levy rate to the assessed value, calculates the tax, and mails the business a bill. 

 

       Please also note the following:

 

• Assessments cannot be altered or removed by the local government levying the tax or by the Court, but only by SDAT.

 

• Liability for the tax is determined by what personal property is owned, used, or leased by the business as of January 1 of each year.  It is not determined by whatever property is owned throughout the rest of the year.  Therefore, if the business had personal property on January 1 but sold it, junked it, or went out of business between January 1 and the end of the year, the business, in most instances, is still liable for the tax.

 

• Leased personal property must be reported by both the lessor and the lessee.  SDAT will determine whether to assess the lessor or lessee from information included with the personal property return.  A lessee may be assessed even though not the owner of the property.

 

• A local government’s personal property tax bill refers to its fiscal year or tax year.  The local government's fiscal year/tax year runs from July 1 to June 30.  The statutory due date for the tax bill is July 1, and the tax bill is mailed on or after July 1, depending on the date of the assessment.  Thus, for example, if a 2016 personal property return is filed with SDAT on or before April 15, 2016, reporting property owned or used by a business as of January 1, 2016, SDAT will certify an assessment value to the local government for the business for 2016, and that assessment value will form the basis of the local government’s Fiscal Year 2017/Tax Year 2016 personal property tax bill.  The key issue each year is what personal property was owned or used by the business as of January 1.

 

• If a registered business fails to file a personal property return, SDAT may certify an estimated assessment to the local government for levying the personal property tax bill.  A tax bill based on an estimated assessment is just as valid as a tax bill based on an assessment generated by SDAT from a filed return.  When corporations and limited liability companies fail to file a return, SDAT will generally estimate an assessment for one year and then forfeit the business entity, thus revoking its right to do business in Maryland.

 

• Any and all assessment concerns must be addressed with SDAT in Baltimore.  Neither the local government nor the District Court has the authority to change a personal property assessment.  If an assessment is more than three years old, SDAT will typically decline to consider any adjustment unless the business has previously protested the assessment within the three-year period.   

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• The liability to pay this tax is not affected by the closing of the business.

 

• The personal property tax is secured by a statutory first lien on the assessed property from the date the tax is due, July 1 of the tax year.  This statutory first lien attaches to the property, and the lien follows the property even if it has been transferred.  This lien is ahead of other creditors, including UCC and purchase money lienholders.  This lien can also be a lien on any real property in the name of the business, even in the name of an individual doing business as a sole proprietor or as a general partner.

 

• Officers/directors of a defunct/forfeited corporation and officers/members of a defunct/forfeited limited liability company can be held liable for the delinquent personal property taxes of the business for the failure to marshal and liquidate the assessable personal property in favor of the first-priority statutory lienholder.