Heavy Equipment Dealer’s Special Inventory

Heavy Equipment Dealer’s Special Inventory
Instructions for Filing Forms and Paying Property Taxes

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For property tax purposes, Texas law requires that a heavy equipment dealer’s inventory is appraised based on the total sales of heavy equipment in the prior year. Dealers must file with the county appraisal district a Dealer’s Heavy Equipment Inventory Declaration form listing the total value of the inventory sold in the prior year. Also, the dealer must file with the county tax office a monthly form — Dealer’s Heavy Equipment Inventory Tax Statement — listing the heavy equipment sold, and prepay their property taxes for each item of heavy equipment. Instructions for filing both forms follow.

Texas law permits the Comptroller’s office to act only as an advisory agency with regard to property taxes. The Comptroller helps property owners and tax officials interpret the property tax laws. Texas law also requires the Comptroller to adopt forms for filing the heavy equipment dealer’s inventory.

Dealer’s Instructions

Steps to calculate, report and pay dealer’s inventory property taxes:

Step 1 - A dealer files the Dealer’s Heavy Equipment Inventory Declaration form:

file one declaration per year;

file each January, between January 1 and 31;

file with the county appraisal district and send a copy to the county tax office; and

if a new dealer, file a declaration form within 30 days of opening business.

Step 2 - A dealer reports current year’s inventory market value.

Complete the following items on the Dealer’s Heavy Equipment Inventory Declaration form:

breakdown of sales and leases or rentals with an option to purchase for prior year (January - December);

breakdown of sales and leases or rentals with an option to purchase amounts for prior year (January - December); and

other general information about the retail business—mailing address, name and business location.

Divide sales amounts for inventory sales by 12 for current year’s market value:

the current year’s tax bills received in October will be based on this market value and the current year’s tax rates; and

the inventory’s market value is not the value of the dealer’s heavy equipment on January 1, but an average of the regular monthly inventory sales from the preceding year.

Penalties

A dealer who does not file the declaration by February 1 of each year commits a misdemeanor punishable by a fine up to $500 per day until filed. A tax lien is attached to the dealer’s business personal property to secure payment of the penalty. A dealer forfeits an additional penalty of $1,000 for each month or portion of month that it is not filed.

Step 3 - A dealer files the Dealer’s Heavy Equipment Inventory Tax Statement:

file 12 statements per year;

file each month by the 10th of the following month. For example, file January inventory tax statement by February 10th;

file with the county tax office, including a check for prepayment of taxes. Send a copy of the form to the county appraisal district. If you do not sell, lease or rent heavy equipment during the month, you must file a tax statement indicating no sales; and

if a new dealer, file each month, but do not send a prepayment of taxes.

Step 4 - A dealer makes a prepayment of taxes.

Calculate the unit property tax factor.

Find the aggregate tax rate by adding the preceding year’s tax rates for each taxing unit that taxes the retail business. Look either at the preceding year’s tax bills or call the county tax collector. Each property is taxed by a county and by a school district. It also may be taxed by a city and special districts (such as a junior college and/or hospital district, depending on where the business is located).

Example of 2004 tax rates:

County tax rate = $0.40

School tax rate = $1.40

City tax rate = $0.60

Special district tax rate = $0.05

Aggregate rate = $2.45 per $100 of value

Divide the aggregate tax rate by 12 for a tax rate per month.
Example: $2.45/12 = $0.20417 per $100 of value.

Divide the aggregate tax rate per month by $100 for a tax rate per $1.00 of sales price.
Example: $0.20417/$100 = $0.0020417 rate per $1.00 (unit property tax factor).

Change the unit property tax factor each January to use the preceding year’s tax rates.
Example: Use the 2004 adopted rates to determine the unit property tax factor for January through December 2005.

Report and pay the unit property tax payment:

multiply the sales price of the heavy equipment by the unit property tax factor.
Example: $20,000 x $0.0020417 = $40.83 in tax prepayment; and

apply unit property tax factor to each item of heavy equipment sold, leased or rented in a month and report to the county tax office, along with tax prepayment. Send a copy of the monthly tax statement to the county appraisal district.

Step 5 - A dealer files a report of inventory sales monthly.

Report the following on the Dealer’s Heavy Equipment Inventory Tax Statement:

date of sale;

model year of heavy equipment;

make of heavy equipment;

heavy equipment identification number;

purchaser’s name;

type of sale:

HE—regular heavy equipment inventory sale;

FL—fleet sale—sales of five or more items of heavy equipment from the dealer’s inventory to the same buyer within one calendar year;

DL—dealer sales—sales of heavy equipment to another dealer;

SS—subsequent sales—dealer-financed sales of heavy equipment that, at the time of sale have dealer financing from the inventory in this same calendar year. The first sale is reported as a heavy equipment inventory sale, with sale of this same item of heavy equipment later in the year classified as a subsequent sale;

sales price—means either (1) the total amount of money paid or will be paid to a dealer for heavy equipment or (2) for a lease or rental with an option to purchase, the total amount of the lease or rental payments plus any final consideration, excluding interest;

unit property tax value;

total unit property tax value for each page and for the total report; and

total sales—number of items of heavy equipment for each type of sale and by total sales amounts.

The chief appraiser may examine the books and records of the dealer by personally delivering a written request to the custodian of the records at the dealer’s location. The request must be delivered at least 15 days prior to the date of the request to view the records and must contain a statement notifying the dealer that he or she may seek judicial relief from compliance with the request.

File report and payment by the 10th day of the following month.

Step 6 - On behalf of the dealer, the county tax collector pays the annual inventory taxes from the dealer’s escrow account and bills the dealer for any additional amount due.

Receives annual property tax bills, usually in October and November:

taxing units send a copy of the dealer heavy equipment inventory tax bill to the county tax assessor-collector;

dealer pays all other tax bills to the taxing units; and

county tax assessor-collector pays the inventory tax bill from the escrow account—usually in early January after the dealer’s December payment—to the taxing units.

Receives tax receipt for payment and any additional tax bill from county tax assessor-collector for any deficiency in escrow account:

dealer must pay the deficiency by January 31 to avoid delinquent penalty and interest;

if taxes become delinquent, dealer pays each taxing unit, plus penalty and interest;

taxing units receive any excess taxes that remain in escrow account;

the dealer may not withdraw funds from the escrow account; and

the escrow account begins with a zero balance for the next tax year’s prepayments.

Penalties

A dealer who does not file the monthly tax statement by the 10th day of the following month commits a misdemeanor punishable by a fine up to $100 per day until filed. A tax lien is attached to the dealer’s business personal property to secure payment of the $100 penalty. A dealer forfeits an additional penalty of $500 for each month or portion of month that it is not filed. Further, a dealer who fails to remit the taxes due pays a 5 percent late payment, with another 5 percent due if not paid within 10 days.

Questions

Call the local county appraisal district for specific questions on the declaration form;

call the local county tax office for specific questions on the monthly tax statement form; and

call the Comptroller’s Property Tax Division Information Services Team at 1-800-252-9121 for general questions on the declaration or monthly tax statement forms. You may also contact us by e-mail at ptd@cpa.state.tx.us.

Remember:

A dealer must list the property tax separately because it cannot be included in the sales price and sales tax assessed against it.

Heavy equipment dealer’s special inventory laws are found in the Property Tax Code Sections 23.1241 and 23.1242.

Example of 2004 tax rates:
County tax rate	=	$0.40
School tax rate	=	$1.40
City tax rate	=	$0.60
Special district tax rate	=	$0.05
Aggregate rate	=	$2.45	per $100 of value