An ad valorem tax is a tax that is calculated as a percentage of the value of something—such as tangible (physical) personal property (goods in a warehouse, office furniture, computer and telephone systems, inventory, etc.).
For example, county tax assessors often place a value on a business's tangible personal property and assess an ad valorem tax on the property.
In California, ad valorem taxes are primarily property taxes based on the value of real estate and tangible personal property. The California Revenue and Taxation Code governs the assessment and collection of these taxes. County tax assessors are responsible for determining the value of both real and personal property for tax purposes annually. For businesses, this includes items such as furniture, fixtures, equipment, and inventory. The assessed value is typically set at the property's fair market value. The actual tax rate is a combination of state and local rates, with Proposition 13 capping the base rate for property tax at 1% of the assessed value, plus any voter-approved local taxes and assessments. It's important to note that certain business personal property may be exempt from taxation or subject to different rules, and taxpayers may have the right to appeal the assessor's valuation if they believe it is incorrect.
