Personal Property Audits
PERSONAL PROPERTY AUDITS
The State Board of Equalization (SBOE) reached a court settlement with several airlines and railroads in lawsuits dating back to 1990. As part of the settlement, on January 1, 1998, the SBOE mandated and implemented a statewide Audit Plan for tangible personal property. The Audit Plan requires audits of selected accounts on an annual basis. In Shelby County, accounts to be audited are randomly selected by the Tennessee Division of Property Assessments (DPA).
The basic goals of the personal property audit are (1) to verify that the information reported in the personal property schedule is accurate and that the appraisal and assessment on the account is correct, (2) to update assessment rolls for errors and omissions so that future periods will reflect proper amounts, (3) to aid property owners in understanding reporting and filing requirements, (4) to help create equity in taxation by assuring that everyone pays their fair share, and (5) to create an awareness in the business community that everyone is subject to an audit at any time, thereby, ensuring more accurate and responsible reporting by property owners.
TYPES OF AUDITS
Desk Audits – Desk audits are audits done in the assessor’s office on the tangible personal property schedules (TPPS) filed by property owners each year. A desk audit is an intensive, in-house review of the schedule. The ten (10) groups, leases and non-standard values are reviewed for accuracy and consistency.
Field Audits - A field audit occurs when a representative from the assessor’s office confirms the totals in each group of the TPPS for completeness by working with the business owner. The size of the business determines the procedures to be used and the amount of resources needed to complete the audit. Small accounts are accounts in which the appraised value of the business personal property is less than $100,000. These audits are currently being performed by assessor staff. Large accounts have appraised values of $100,000 or greater and are performed by our contract auditor.
Audit of Small Accounts – The business owner is required to provide a detailed listing of all tangible personal property used in the operation of the business including items personally owned, not owned, borrowed or leased. The listing is to include a description, year acquired and costs of all assets. If the business owner does not have a listing, the attached Fixed Asset Listing form may be completed and submitted. If a listing is submitted incomplete or is not provided, a representative of the Shelby County Assessor’s Office will be required to visit the place of business and assist in preparing the listing.
For more information on audits of Small Accounts, see “Shelby County Assessor Auditing Information Sheet”.
Audit of Large Accounts – For accounts with an appraised value of $100,000 or greater, a detailed audit is required. The audit includes a reconciliation between the cost listed on the personal property schedule and the cost identified in the financial records of the business. The business owner is required to make available to the contract auditor the applicable items listed in the attached “Copies of Documents Required for Each Year Under Audit – Large Accounts”. In addition, a physical inspection of the business operation is required.
For more information on audits of Large Accounts, see “What to Expect If You Are Selected For Audit - Large Accounts”.