How business licenses can impact property taxation

Business licenses and property taxes are two essential yet often siloed areas of compliance. But did you know that they can be more connected than you might think?

Let’s explore how business licenses can affect property taxation, what your company needs to know to stay compliant, and why treating these areas holistically can save time, money, and headaches.

A business license is a government-issued certificate that allows a company to sell a product or service in a specific jurisdiction. These can range from general business licenses to industry-specific permits, zoning permits, health department licenses, and more.

There are three types of business licenses:

• Business licenses are issued by the government to grant permission to conduct operations within their borders.
• Permits certify that safety and health requirements are met. These are generally issued for one-time actions at a specific location.
• Tax registrations are the first step the government requires to begin collecting taxes from a business.

Depending on the location and the nature of your business, you might need multiple licenses — and they often need to be renewed on a regular basis.

Many companies manage licenses manually — updating spreadsheets, setting calendar reminders, and sending emails to stakeholders. Others may use software or outsourced services to track due dates, filing requirements, and jurisdiction-specific regulations.

Common challenges with business licenses:

• Jurisdictional complexity: Licensing requirements and processes can vary widely by state, county, and city.
• Changing regulations: With over 35,000 jurisdictions in the U.S., staying on top of updates across all jurisdictions can be overwhelming
• Regulated products: The types of products or services sold by a business dramatically impact business license requirements.
• Skill of the licensing team: Many companies have a highly skilled person or team that has figured out how to manage business licenses. But company changes like location or product expansion, changes in licensing requirements, and staff departures can make it easy for renewals and registrations to fall through the cracks.

Property tax is a tax assessed by local jurisdictions on all real property and personal property owned by a business. Real property typically includes land and buildings, while personal property can include machinery, equipment, furniture, and other assets used in business operations.

Managing property tax typically involves:

• Cataloging all property but also identifying the taxability and reportability, as well as categorizing property personal property
• Preparing, printing, and filing personal property tax returns
• Reviewing assessments to identify incorrect valuations
• Appealing incorrect property assessments
• Reviewing tax bills, tracking deadlines, and paying them on time
  

Some companies handle this in-house, while others rely on third-party providers to manage the lifecycle of property tax compliance.

Common challenges with property tax:

• Paper-based compliance: Most jurisdictions send paper bills and assessment via postal mail, and require companies to print and mail returns.
• Asset valuation: Ensuring an accurate, up-to-date inventory of taxable assets is critical.
• Deadline tracking: Missed filing deadlines can result in penalties and interest.
• Jurisdictional nuance: Just like business licenses, property tax rules vary significantly across locations.

While business licenses and property tax compliance may seem unrelated, they can have more in common than you might expect:

• Licensing data can trigger property tax assessments. When you register a new business location or apply for a specific license, local jurisdictions may use that information to assess whether new property tax obligations apply.
• Shared jurisdictional oversight. Some localities cross-reference licensing data with property tax rolls to identify unreported or underreported property.
• Shared penalties. Companies that are behind on their property taxes may be unable to renew certain business licenses, which can have additional impacts on their ability to operate.
• Changes in business operations affect both areas. Expanding into a new city? You’ll likely need to update your business licenses — and you’ll also need to account for new property tax filings.
  

If your licensing compliance isn’t in lockstep with your property tax compliance, you could inadvertently trigger audits, miss key deadlines, or incur penalties.

So, what’s the solution? Companies that treat licensing and property tax as interconnected — rather than isolated — obligations are better positioned to avoid risk and uncover efficiencies. Here are a few best practices:

• Centralize data. Use a single system or service provider that can track both licensing and property tax activity across jurisdictions.
• Monitor change events. Track business milestones (e.g., new locations, new assets, acquisitions) that may trigger obligations in both areas.
  

Leverage automation and expertise. Automated tools and managed services can help ensure nothing slips through the cracks — especially as your business grows.

Business licenses and property taxes don’t have to be compliance pain points. With the right approach, companies can simplify processes, improve accuracy, and reduce the risk of costly missteps.

Avalara’s suite of compliance solutions — from business license management to property tax managed services — helps companies stay compliant, no matter where they operate or how complex their operations become.

Want to learn more about simplifying compliance for your business? Contact us today or explore our property tax and license management solutions.