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Personal Property
Definition
Personal property is defined by exception: property that is not real property is personal property. In short Business Personal Property can be defined as assets used to operate a business, farm or ranch.
The main characteristic of personal property is its mobility without damage to itself or to the real estate in which it is located with some exception, see paragraph 2 below. Arizona taxable personal property within the Assessors’ Office falls into 2 divisions, Business / Agricultural and Manufactured Housing. Business / Agricultural examples are:
Personal property falls into 2 broad categories:
Intangible property consists of property which represents value, but has no inherent value of its own. Generally, intangibles are not taxed in Arizona. Intangible personal property includes:
Tangible personal property is actual physical personal property that can either be attached (chattel, real) or unattached (chattel, personal) to real property. Items that were movable and are now attached to the real estate and used in the conduct of business, such as restaurant tables and booths and bowling alleys are called trade fixtures and treated as personal property.
Vehicles
In Arizona, travel trailers, cars, and other vehicles are considered personal property, and thus owners pay a registration fee based on the value of the vehicle, rather than one based on the age or weight as in many other states. This fee is comprised of a registration fee and an "in lieu" tax which is collected by the Arizona Department of Transportation. Because the fee is based on the value of the vehicle, it is also deductible from income taxes, along with taxes paid on real and personal property.
Mobile Homes
Mobile homes may be classified as either personal property, or as a vehicle, or as realty, depending on a number of factors.
Real Vs. Personal Property
It is not always easy to distinguish between real and personal property. There are a number of criteria used to determine in which category a property may belong.
Physical Annexation
Physical annexation of the property - Generally, if it can be removed without damage to the property or to itself, it is considered personal property.
Constructive Annexation
Constructive annexation of the property - If an item is so essential to a property that it cannot perform the function for which it was designed without that item, it may be considered to be constructively annexed.
Ownership Transferal
The method in which ownership is transferred - This is considered along with, not separately from, the 2 criteria above. Ownership of real property is usually transferred in a formal process, and ownership is not complete until the financial obligation has been satisfied.
For instance a mortgagor does not truly own a property until the entire mortgage has been paid. Ownership of personal property is transferred much more casually, using receipts and bills of sale.
Owner Intent
The intent of the owner - This is also a factor considered with, not separately from, the first 2 tests. If the appearance of the item indicates that it is intended to remain annexed indefinitely, the item may be real property for tax purposes.
Intent may also be determined by factors other than simple visual appearance, such as in an agreement between parties, or in a contract between lessor and lessee. Historic use might be an indication of intent. If doubt exists, a series of test should be performed.
Helpful Chart
The following chart is excerpted from the Arizona Department of Revenue Personal Property Manual, and gives some examples of real and personal property as defined in Arizona.
Some items of property may be either real or personal, depending on how they are annexed, how they are used, or how they interact with related property.
Personal property is defined by exception: property that is not real property is personal property. In short Business Personal Property can be defined as assets used to operate a business, farm or ranch.
The main characteristic of personal property is its mobility without damage to itself or to the real estate in which it is located with some exception, see paragraph 2 below. Arizona taxable personal property within the Assessors’ Office falls into 2 divisions, Business / Agricultural and Manufactured Housing. Business / Agricultural examples are:
- Farm machinery
- Industrial equipment
- Leased machinery or equipment
- Office furniture and fixtures
Personal property falls into 2 broad categories:
- Intangible
- Tangible (chattel)
Intangible property consists of property which represents value, but has no inherent value of its own. Generally, intangibles are not taxed in Arizona. Intangible personal property includes:
- Accounts receivable
- Bonds
- Insurance policies
- Patents
- Stocks
Tangible personal property is actual physical personal property that can either be attached (chattel, real) or unattached (chattel, personal) to real property. Items that were movable and are now attached to the real estate and used in the conduct of business, such as restaurant tables and booths and bowling alleys are called trade fixtures and treated as personal property.
Vehicles
In Arizona, travel trailers, cars, and other vehicles are considered personal property, and thus owners pay a registration fee based on the value of the vehicle, rather than one based on the age or weight as in many other states. This fee is comprised of a registration fee and an "in lieu" tax which is collected by the Arizona Department of Transportation. Because the fee is based on the value of the vehicle, it is also deductible from income taxes, along with taxes paid on real and personal property.
Mobile Homes
Mobile homes may be classified as either personal property, or as a vehicle, or as realty, depending on a number of factors.
Real Vs. Personal Property
It is not always easy to distinguish between real and personal property. There are a number of criteria used to determine in which category a property may belong.
Physical Annexation
Physical annexation of the property - Generally, if it can be removed without damage to the property or to itself, it is considered personal property.
Constructive Annexation
Constructive annexation of the property - If an item is so essential to a property that it cannot perform the function for which it was designed without that item, it may be considered to be constructively annexed.
Ownership Transferal
The method in which ownership is transferred - This is considered along with, not separately from, the 2 criteria above. Ownership of real property is usually transferred in a formal process, and ownership is not complete until the financial obligation has been satisfied.
For instance a mortgagor does not truly own a property until the entire mortgage has been paid. Ownership of personal property is transferred much more casually, using receipts and bills of sale.
Owner Intent
The intent of the owner - This is also a factor considered with, not separately from, the first 2 tests. If the appearance of the item indicates that it is intended to remain annexed indefinitely, the item may be real property for tax purposes.
Intent may also be determined by factors other than simple visual appearance, such as in an agreement between parties, or in a contract between lessor and lessee. Historic use might be an indication of intent. If doubt exists, a series of test should be performed.
Helpful Chart
The following chart is excerpted from the Arizona Department of Revenue Personal Property Manual, and gives some examples of real and personal property as defined in Arizona.
| Description |
Real Property |
Personal Property |
|---|---|---|
| Air Conditioning (Built-In) |
X | |
| Air Conditioning (Window Unit) |
X | |
| Bowling Lanes |
X | |
| Docks and Dock Levelers |
X |
|
| Electrical (Used for Structure) |
X | |
| Electrical (Used for Machinery) | X |
|
| Fuel Tank (Buried) |
X | |
| Vaults | X |
|
| Vault Door |
X |
Some items of property may be either real or personal, depending on how they are annexed, how they are used, or how they interact with related property.