How to File the Connecticut Personal Property Tax

In Connecticut, businesses are subject to a local tax on their tangible personal property. This tax is administered by the city or town where the business assets are located and is distinct from taxes on real estate or state-level business income taxes. All businesses, including home-based operations and professional practices, must report their taxable assets to the local assessor each year.

Identifying Taxable Personal Property

The personal property tax applies to tangible items a business owns that are not part of the real estate. This includes a wide range of assets used in the course of business, such as office furniture like desks and chairs, fixtures that are not permanently attached to the building, and all types of machinery and equipment. Computers, printers, and other electronic devices also fall into this category.

Some less obvious items are also considered taxable. Commercial leasehold improvements, which are modifications made to a leased space, are taxable to the tenant. Unregistered motor vehicles or vehicles registered in another state but located in Connecticut are subject to this tax as well. This is an important distinction, as vehicles with a current Connecticut registration are taxed separately.

Inventory, which refers to merchandise held for sale in the ordinary course of business, is not subject to personal property tax. Real estate is taxed separately, and intangible property, such as financial assets, patents, and copyrights, is not taxable. Software that is bundled with the purchase of computer hardware is generally considered part of the hardware’s cost and is therefore taxable.

Completing the Annual Declaration

The primary tool for reporting taxable assets is the Annual Declaration of Personal Property. This involves creating a detailed inventory of all taxable assets owned by the business as of the October 1st assessment date. For each asset, you will need to know its original cost and the year it was acquired. This information is typically found in a company’s fixed asset records, accounting ledgers, or past federal tax returns.

The declaration form is provided by the local assessor’s office in the municipality where the property is located. Many towns make these forms available for download on their official websites. If a business does not receive a form in the mail, it is still the business owner’s responsibility to obtain and file one. The form requires the business to list all its taxable personal property, grouped by the year of acquisition.

Once the assets are listed with their original costs and acquisition years, the next step is to calculate their depreciated value using a specific depreciation schedule. This schedule assigns a percentage to each year of acquisition. This percentage is then applied to the original cost of the assets from that year to determine their current value for tax purposes. All property must be included, even items that have been fully depreciated for federal income tax purposes.

Filing Your Declaration and Paying the Tax

After completing the Annual Declaration of Personal Property, the form must be filed with the assessor’s office for the town where the assets were located on the October 1st assessment date. The standard filing deadline across the state is November 1st. Failing to file on time results in a significant 25% penalty being added to the total assessment of any business that files its declaration late.

Once the declaration is submitted, the local assessor reviews it and finalizes the assessment. The assessor applies an assessment ratio of 70% to the depreciated value to determine the property’s taxable assessment. The final tax bill is then calculated by multiplying this assessed value by the municipality’s current mill rate.

Businesses can expect to receive their personal property tax bill the following summer, typically in July. Depending on the municipality, the tax may be due in a single payment or in multiple installments. If a payment is late, interest is charged at a rate of 1.5% per month, which equates to an 18% annual rate, calculated from the original due date.

Available Tax Exemptions

Businesses in certain industries may be able to reduce their personal property tax liability through specific exemptions. State law provides a full exemption for Manufacturing Machinery and Equipment (MME) used in manufacturing, biotechnology, or recycling, provided it meets certain criteria. The equipment must be installed in a manufacturing facility and be the type of property that is depreciated over five or seven years for federal tax purposes.

There are also exemptions available for certain new commercial vehicles, which can provide relief for businesses that rely on transportation. To take advantage of any exemption, a business must still file the annual declaration and any other required forms by the November 1st deadline.