Inventory

Inventory is items held for resale. In Alabama, inventory is not assessed as personal property. Items such as canned goods on a grocery shelf are obviously inventory. Canned goods do not return to the store after money changes hands. Ownership of the canned goods changes to the customer. Furniture and machinery can be either inventory or assessable assets depending on the circumstances.

Items for rent or lease to others are not inventory. They return to the store after an agreed period. The customer pays for the use of the asset. Ownership of the asset does not change. The rental store owner is assessed for the asset. The leasee of an asset is obligated to report leased assets located in Jefferson County on 10/1 of each year on the Business Personal Property Return.

Sometimes leasing or renting of assets takes on some aspects of a sale. The Tax Assessor will make the determination of whether a sale of inventory or a rental or leasing occurs. A determination will be made by consideration of the nature of the transaction.

Some factors which bear on the transaction are:
• How does the lessor account for the asset?
• How does the lessee account for the asset?
• Does the leasing/rental document address a transfer of ownership?
• The nature of the business of the owner of the asset. Is it a rental store? Is there a policy publicly posted which states that the item, such as prom dresses, are only for sale?

The Alabama Attorney General addressed Rental-Purchase agreements in AG Opinion 93-00032. Tax Assessors will make the decision whether and what to assess.
[Special Topics][Personal Property Menu][Main Menu]