I rent a show case, should I pay School Tax?

Houston, TX

Hello.

I rent a show case in one of the antique centers. My show case is one glass box among 100's of others under one roof that is a kind of a huge antique store. I pay a monthly fee for rent which includes utilities, like heat and light, and sales staff who help customers, maybe something else.

Now, I have received a letter from local tax office asking for a "school tax" on the property I rent, that glass box. I don't know who is right but in my opinion the owner of the store is responsible for any "land" related taxes. I can be of course wrong and will pay the bill if I am, yet I need to know what is the general way to tax.

Thus, can you give me a general advice if the government is allows to charge the "school tax" someone who doesn't own the property but rents it on monthly basis. My thinking was that the tax should be paid by the owner and he should include it in my rent fee or something similar.

Thing is, first year I didn't pay the school tax. Then, magically the account on my name has been created and I receive this bill for the second year.

This is my first small business and I am lacking information on what could be basic things. Therefore, I accept the idea that I might be wrong here.

Thank you.

Take your letter, rental agreement, & a picture of the display case to the taxing authority & ask them to explain why the property owner is not responsible for this tax, since s/he is the one deriving rental income from it. Also get them to explain exactly how the tax amount is calculated. If the school tax is a personal property tax on the case, the owner is responsible. OTOH, if it's a form of sales tax on sales from the case, you'd likely be responsible since you're the once selling stuff.

If this is a sales tax of some sort, there is probably a form to fill out to calculate the tax. Be sure to ask them to waive any penalties & interest, since you had no idea this tax even existed & were filing all your appropriate state tax forms otherwise.

Property taxes are typically the owner's responsibility but your rental agreement may have passed that responsibility to you. Read it to see if it does.

Additionally, consult the tax rolls to see if the center owner is paying taxes.

Taxing authorities have been known to do this buck passing routine when property owners are lax with payments...

irsos said:

Property taxes are typically the owner's responsibility but your rental agreement may have passed that responsibility to you. Read it to see if it does.

Click to expand...

This is very much a state specific question...which means it needs to be answered by someone who is knowledgeable regarding the OP's state, and possibly even the OP's county.

I know that in my state, the rental agreement can pass on that cost to the tenant, but its a cost that is still assessed to the property owner by the state, and its the property owner's obligation to collect it from the tenant.

However, in my state, its also possible that the state would go after a business owner/sole proprietor for property taxes, if no property tax return was filed, simply to force the business owner/sole proprietor to prove that they had no assets subject to property tax.

My state has even gotten a bit "nutty" on the issue. They will send someone a bill based on an average for the particular industry, with no regard for the amount of money that is actually reported on tax returns.

Example:

I have a client who is 75 years old but retains her real estate license and occasionally sells a home to supplement her retirement income. She has not had an employee since she retired 10 years ago. However, just a few months ago she got a bill from our department of revenue assessing her withholding and unemployment compensation taxes for the last 10 years, based on "industry average". It was easily resolved, but it was scary for the taxpayer until it was resolved.

So...this OP really needs to consult a local tax pro to determine whether or not this is a real tax issue, or a fishing expedition on the part of their state tax department.