What is Personal Property?
Personal property generally includes tangible items that are not firmly attached to land or buildings and are not specially designed for or of such a size and bulk to be considered part of the real estate. This includes merchandise, furnishings and effects, machinery, tools, animals and equipment.
All personal property situated in the commonwealth is subject to tax, unless specifically exempt by law. Property is situated in a particular city or town in the commonwealth if it is present on January 1 with the owner's intention that it remain with some degree of permanence. Property that is frequently moved from place to place or intended for use temporarily at different places is considered situated where the owner is an inhabitant or has a principal place of business (if the property is business personal property).
A primary example of exempt property involves household furnishings and effects. Household personal property at a person's domicile (primary residence) is expressly exempt from personal property tax. This exemption does not apply to property located at a second home.
Personal property is subject to taxation, in the same manner as real estate, unless expressly exempted by state law. Most personal property owned by individuals is exempt. Examples such as household effects at your primary domicile, tools of a mechanic’s trade, farm implements, money, stocks, and securities are all exempt. However, property used by most businesses is subject to local property tax.
Exemptions are applied based on the type of business ownership, nature of the property, or in some cities and towns, total assessed value. Property that is not real estate is personal property and must be reported.
All owners of tangible personal property must complete and file annually a Form-of-List with the assessor in the city in which the property is located. A form must be filed by all individuals, partnerships, associations, trusts, corporations, and limited liability companies, as well as charitable, benevolent, educational, literary, temperance, and scientific organizations, or other legal entities that own or hold personal property in the city or town.
What is the correct form to file?
Individuals, partnerships, associations, trusts, corporations, limited liability companies and other legal entities that own or hold taxable personal property on January 1 of each year must file a Form of List/State Tax Form 2
Individuals owning or holding household furnishings and effects not located at their domicile on January 1 must also file State Tax Form 2HF.
Literary, temperance, benevolent, charitable or scientific organizations that may be entitled to an exemption from personal property tax must file State Tax Form 3ABC annually. First time filers must also file State Tax Form 1B3. Charitable or non-profit organizations that do not file these forms will be subject to taxation (M.G.L. Chapter 59 §5, Clause 3(b)).
NOTE: All tax forms filed with the Assessing Department are NOT open to public inspection.
What type of items are considered personal property?
- Office furniture & fixtures such as desks, chairs, file cabinets, lamps & artwork.
- Office equipment such as computers, printers, telephones & fax machines. (This may depend upon the use of the item – see below)
- Store fixtures and equipment such as shelving, tables, ovens & signs.
- Machinery & equipment of all kinds, including construction equipment.
- Stock in trade or merchandise. (Inventory)
- Leased property (should be reported by both the lessor and the lessee).
Are corporations exempt from the personal property tax?
Generally, the answer is no. Most corporations are subject to the personal property tax on machinery used in the conduct of business as well as on networks of poles, underground conduits, wires and pipes and machinery used in manufacturing or supplying and distributing water. Corporations classified by the Massachusetts Department of Revenue (DOR) as manufacturers,
utilities, or insurance and financial institutions may be entitled to additional specific exemptions.
For further information please refer to: Frequently Asked Questions - Personal Property
Is a nonprofit organization subject to the personal property tax?
Not usually, however, nonprofits wishing to receive exemption as a charitable, literary or benevolent organization must file a form called the 1B3 with the Assessors Office. Once designated a charitable organization by the Assessor, the nonprofit must file a Form 3ABC by March 1 of every year in order to continue the exemption.
What other exemptions are available on personal property?
- Professional tools used by plumbers, carpenters, auto mechanics and other trades are exempt.
- Property taxed under the corporate excise tax or motor vehicle excise tax, boat excise tax, farm animal excise tax, or mobile home park license fees, cannot be taxed as business personal property.
- Intangible personal property is exempt from local taxation in Massachusetts.
- For corporations, machinery used directly in the purchasing, selling or administrative function, such as cash registers, are exempt.
- Corporate-owned computers are exempt only when used exclusively for internal purposes such as processing payroll or ordering office supplies. Computers used in providing a service to clients are taxable.
- Machinery of corporations used in connection with the laundering or dry cleaning process, the refrigeration of goods, or air conditioning of the premises, is exempt.
What if I do not file a Form of List/State Tax Form 2?
Failure to file a Form of List/State Tax Form 2 will result in an estimated assessment of your personal property. It could also result in a 50% penalty on any abatement you might otherwise be entitled to, as well as the loss of the right to appeal your valuation to the Appellate Tax Board.
What if I sell my property or close my business after January 1st?
If you sold your property or closed your business after January 1st, you still remain liable for the personal property tax bill for the full year. There are no provisions for pro-rated Personal Property tax abatements within the law.