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Freeport Tax Exemption

Does Your Business Qualify for the Texas Freeport Tax Exemption?

Posted by Kevin Harris, CPA on Mar 25, 2019 9:16:00 AM

Applications Due by April 30

The 30th anniversary of the Freeport Exemption is a great reminder to certain business owners who can benefit from this Texas tax break. If you have inventory in the state of Texas for 175 days or less, and you transport that inventory outside of the state, you may qualify for a business property tax deduction. Savings are calculated based on a percentage of tangible property goods – known as Freeport goods – that you transported out of Texas during the prior year. Depending on the circumstances, savings can be substantial.

Background

In 1989, Texas voters approved a constitutional amendment that exempts Freeport goods from property taxes. The tax break was part of a larger effort to attract companies to Texas by offering the tax exemption. Local taxing jurisdictions had the option to adopt the exemption.

Every city, county and school district in Texas represents a separate tax entity; not all jurisdictions approved the Freeport Exemption. Still, some business owners are lucky to receive favorable tax treatment when they qualify in all three tax jurisdictions.

Qualifications

  • Freeport inventory includes: raw materials, finished goods, supplies and works in progress for the purpose of assembling, repair, maintenance, storage, processing or fabricating
  • Freeport property includes goods, merchandise, ores, and certain aircraft and aircraft parts
  • Oil, liquid, natural gas or gaseous materials that are immediate derivatives of oil refining or natural gas are excluded from the Freeport Exemption
  • Goods must be transported out of Texas within 175 days of the date they are acquired, manufactured or brought into Texas
  • Goods – known as goods-in-transit – may be sold in-state instead of being shipped out of state. However, the property still must meet all of the Freeport property requirements, and be transported out of Texas within 175 days after it was first acquired in or imported into the state 

Application Process

  • There is an annual application
  • Applications must be filed with the county appraisal district
  • Strict documentation includes sales reports, inventory reports, and financial statements

Application Deadlines

You must submit the application and supporting documentation to the appraisal district between January 1 and April 30 of the tax year for which you request the exemption. Any late applications must be filed no later than June 15, and penalties will apply.

Are you leaving any opportunities for tax breaks on the table? The Tax Services Group at Goldin Peiser & Peiser works with companies to ensure they are not overlooking the Freeport Exemption or any other tax credits and incentives for which they qualify. 

Our tax experts can work with your business to manage the application and documentation process. For more information, please contact Kevin Harris at 214-365-2473.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Tax Exemption, Freeport