It’s not unusual to rack up hefty late charges for failing to return a rented DVD of The Sopranos or Six Feet Under on time. But what happens when your local video store is late—on paying its taxes?
As of July 1, Hollywood Video’s 20 stores in Salt Lake County were more than five months past due on so-called “personal” property taxes to Salt Lake County. Collectively, the stores owed the county $3,716.50, according to the county Assessor’s Office.
Talk about late fees.
So, on July 11th, the assessor slapped notices on the Oregon-based video rental chain’s 20 stores in question, threatening property seizure if the county wasn’t paid, and promptly.
One store owed a whopping … $16.59. What gives?
For a long time, personal property taxes have been a thorn in the side of businesses, small and large. Personal property, in terms of taxes, is everything of value—not including real estate or saleable merchandise—that companies own. So, every year, across the state, businesses have to inventory their “personal” effects, from chairs to printing equipment, and then report the value to the state and the county.
Apparently, someone counted wrong. In Hollywood Video’s case, it reported the total value of its personal property to the county. The stores paid the county approximately $99,000 in such taxes over the past two years, according to the company. But when the assessor’s office audited the business, numbers didn’t add up. Hollywood Video was a couple thousand dollars off the mark. And someone at corporate headquarters forgot to pay the bill.
Allen Tippetts, director of the personal property division of the Salt Lake County Assessor’s Office, says that his office rarely threatens property seizure. In his 19 years on the job, Tippetts said this kind of thing doesn’t usually happen with big companies unless they are restructuring or having financial difficulties. But usually all it takes is the notice posted on the front door, and companies quickly pay up. He can count on one hand the amount of times the county has actually had to seize property and sell it at auction.
Hollywood Video spokesman, Andrew Siegel, said the whole affair was a misunderstanding. In an e-mail statement, he wrote: “Hollywood Video operates 20 stores in Salt Lake County and has paid approximately $190,000 in property taxes to the state and approximately $99,000 to the County in the last two years. Salt Lake County recently audited Hollywood Video’s property tax obligations and requested an additional $3,715. A check in that amount has now been issued and sent via overnight delivery, which we are confident will fully resolve this matter.”
But the personal property tax and the time-consuming process companies go through to pay it has plagued more than just a video-store chain.
State Rep. John Dougall, R-Highland, has been trying to reform the nature of this tax for some time. Personal property taxes are cumbersome and difficult to comply with, he says, so a lot of people just don’t comply. “You’ll have businesses spend days auditing their inventory, and they’ll pay $50 in taxes,” Dougall says. “For some small businesses, it costs more to deal with the filing than what is collected.” This is why he sponsored a 2006 bill to remedy some of the burdens this tax puts on businesses. The bill went into effect on Jan. 1, 2007, and gives exemptions to all companies whose property is valued below $3,500. This is 55 percent of businesses in the state, he says.
Still, that leaves a lot of companies who have to pay this tax. And often, companies disagree with the assessor over how much their property is worth, says Steve Kroes, the executive director of the Utah Foundation, a public-policy think tank based in Salt Lake City. “Some of the issues with this tax are that it’s hard to determine how much this property is really worth,” he says. A lot of personal property, like computers, lose value every year, and it’s hard to determine how much such property is worth. In addition, Kroes wonders why assessors spend so much time on collecting such small amounts of money. According to a brief on the subject by the foundation, personal property taxes only accounted for 6.3 percent of total property tax revenues across the state in 2003. The biggest chunk of revenue from property taxes, according to the foundation, is from real property: $1.2 billion in 2003. But, still, statewide, personal property taxes account for $100 million in revenue for local governments.
Tippetts from the Assessor’s Office agrees. The personal property tax is a small chunk of the total tax base, he says. But without it, there would be a revenue shortfall, and the county would have to shift taxes elsewhere. Last year the county collected $55 million in personal property taxes, says Tippetts, and that’s not exactly a drop in the bucket.
So this leaves companies like Hollywood Video with the burden of annually counting every computer and television it owns, assessing their value and paying their taxes—on time. Next year, they’ll probably send the check early because no one likes notices from the assessor on their front door—especially businesses.