Thursday, June 07, 2007

How to Avoid Tangible Personal Property Taxes on Furniture, Fixtures and Equipment Acquired With Real Estate

HOW CAN I AVOID PAYING DELINQUENT TAXES ASSESSED ON EQUIPMENT WHILE IT WAS OWNED BY MY SELLER?

Short answer: offer the taxed tangible personal property to the tax collector. In Florida—as in many other jurisdictions--this will put an end to your liability as a subsequent purchaser for value. So if the taxes, interest and penalty owed are greater than the value of the equipment—and the tax collector won’t negotiate with you—consider telling the tax collector to go ahead and seize the property. If the tax collector doesn’t negotiate with you after you make this offer, arrange for him to come and pick up the property, provided he has appropriate court orders and warrants authorizing him to do this.

Discussion and analysis: Assume a laundromat is purchased in 2006. In 2007, the owner is given notice by the tax collector to pay tangible personal property taxes from the year 2000 on the washing machines he purchased along with the laundromat. Is the new owner liable for these taxes even though he didn’t buy the equipment until years after the January 1, 2000 tax assessment date?

The subsequent owner is responsible for paying the taxes, which constitute a lien on the taxed equipment. As an alternative to paying the taxes, the new owner can surrender to the tax collector the taxed property, based on the following briefly-stated analysis.Initially, a tangible personal property tax is "in rem", i.e., against "the thing", or taxed tangible personalty, itself.

By statute, the tax collector first goes to the property itself, in whomsoever's hands it may be found. This is virtually the universal approach to collection of delinquent tangible personal property taxes in the U.S.

For example, in Florida, section 197.413, Florida Statutes, provides the procedure to be followed by the county tax collector in collecting delinquent tangible personal property taxes.In pertinent part, that statute provides that after filing suit and obtaining from the court issuance of a court order for levy and seizure of personal property, and warrants to be served on individual taxpayers, the tax collector may seize property on which taxes are due, even when such "goods" or "chattels" are in the hands of another person.

"Goods and chattels" is a phrase which generally denominates personal property, as distinguished from real property.Subsection (8) of section 197.413 provides as follows:8) A tax warrant issued by the tax collector for the collection of tangible personal property taxes shall, after the court has issued its order as set forth in subsection (6), have the same force as a writ of garnishment upon any person who has any goods, moneys, chattels, or effects of the delinquent taxpayer in his or her hands, possession, or control or who is indebted to such delinquent taxpayer.

The legislature in Florida, as elsewhere, generally provides a strong arsenal of weapons to favor the taxing authorities in the assessment and collection of taxes.The best you can do is to go and reason with the tax collector, and show him that you were not the taxpayer at the time the taxes were levied and that you purchased the property in good faith with no actual notice of the delinquent taxes.

The response of the tax collector may well be that you should have inquired and made sure the taxes were paid at the time you purchased the equipment--just as you would have inquired concerning the tax status of any real property.The only good news here--i.e., if the tax collector does not negotiate some settlement with you at your request--is that once you deliver the property of the delinquent taxpayer to the tax collector levying the warrant, the receipt of the tax collector shall be complete discharge of any obligation you have to the tax collector for those delinquent taxes on the seized property.


The tax collector is authorized to pursue the former owners—but not the present owners--of the taxed property for the difference in unpaid delinquent taxes, penalties and interest.Seizure and sale of personal property are virtually universal enforcement mechanisms for the collection of unpaid and delinquent tangible personal property taxes. This is not unique to Florida. Review the regulations governing your state to ascertain any variations.
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Daniel A. Weiss has over 26 years experience as a Florida property tax attorney. Daniel Weiss was named in the 2007 Annual Edition of the South Florida Legal Guide as one of the top lawyers in the practice areas of both Real Estate - Land Use, Zoning & Environmental and Real Estate - Commercial. For a free consultation regarding your property, contact Daniel Weiss at 866-374-7850 or go to our website:: http://www.tannebaumweiss.com/property_tax.php

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