The term commercial and industrial machinery and equipment includes tangible personal property that is used to produce income or is depreciated or expensed for IRS purposes such as office furniture and fixtures.
The Kansas Constitution provides that commercial and industrial personal property will be appraised starting at its "retail cost when new" and depreciated straight line over a maximum of seven years. If the economic life of the machinery or equipment is less than seven years, it will be depreciated straight line over the shorter life. However, so long as the property is "being used," the appraised value shall not be less than 20% of the retail cost when new of such property. This classification of property is assessed at 25%.
"Retail cost when new" means the dollar amount an item would cost when new to a purchaser at the retail level of trade. It is not a used sale price, and it is not a wholesale or manufacturer’s cost. It is the total cost a taxpayer incurs to acquire new property and place it in operation in order to use it to produce income over a period of years in a commercial or industrial setting. The term "retail cost when new" does not include sales tax or freight and installation charges that are separate and readily discernible from the set retail price. If a taxpayer cannot determine the retail cost when new of a used item from a reliable source, the county appraiser will estimate the retail cost when new using the used sales price of the item and a formula prescribed by the state. The county appraiser will determine the economic lives of the assets listed on a rendition. Economic lives are based primarily upon IRS publication 946 class lives. Contact the county appraiser’s office for questions regarding economic lives of commercial and industrial machinery and equipment.
Commercial and industrial property should be considered as "being used" until the property’s condition and other objective evidence clearly indicate that it is no longer used and will never again be used and will never again be used in an income producing capacity. For further interpretation of what constitutes being used, contact the county appraiser’s office.
Items used exclusively for business purposes or in certain nonprofit entities are exempt from taxation if the retail cost when new of the item is $250 or less. An "item’ for purposes of the $250 exemption is generally going to be an "item" as it is reported on the rendition. However, if a line item consists of a group of like kind goods that can be used independently, the line item is actually several items. For example, "6 new chairs at $100 each" consists of 6 items qualifying for exemption. On the other hand, an asset that must be used in conjunction with other goods in order to serve its purpose is not an "item". Rather, it is only part of an "item". For example, if a taxpayer lists a "computer keyboard" as a line-item on the rendition, the line-item does not constitute an entire "item". The computer keyboard cannot serve its purpose without the remainder of the computer system; therefore, the keyboard is part of a computer system. The computer system is the item. The keyboard and its other components, even though they may be separately identified and listed, are merely parts of an item for purposes of the $250 exemption.
"Items" of commercial and industrial property with a retail cost when new of $250 or less are not required by law to be reported to the county appraiser. However, if you list all your commercial property without eliminating these exempt items from your list, the county appraiser will exempt them from taxation. In fact, your county appraiser may ask taxpayers to continue to list these exempt items for informational purposes, this does not mean these exempt items will be taxed.
The following is a list of example "items" of machinery and equipment to use as a guideline for the $250 commercial and industrial exemption:
Example "Items" of Machinery and Equipment:
Computer System (including monitor, tape drives, mouse, printer, etc.)
Bed (mattress, box springs, frame & headboard)
Shelf (one free-standing shelf unit; as high/wide as used by the entity)
Kitchen pan and lid
Kitchen utensil (example: fork)
Also refer to instructions on the back of Schedule 5 of the rendition and/or contact the county appraisers office for more information.