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Freeport Tax Exemptions in TX, MS, and GA
Freeport tax exemptions are business personal property exemptions that apply to inventory which has been in a jurisdiction for a short period of time, usually less than a year. This exemption can be a significant source of savings for companies doing business in Georgia, Mississippi, and Texas by reducing their tax burden. To qualify for the exemption, an annual application with the county or municipality must be submitted by the same due date as the business personal property tax return. For a thorough explanation of freeport tax exemptions, please see the article, Reduce Your Inventory Taxes with Freeport Exemptions. The rest of this article will discuss statewide guidelines in Georgia, Mississippi, and Texas that may be helpful in determining if your business qualifies for this tax savings and how the exemption is calculated.
There are two types of freeport exemptions in Georgia: Level 1 and Level 2. Over 60 percent of municipalities in Georgia have adopted a freeport exemption and most of those are Level 1 freeports. The exemption percentage at both levels can be set at 20, 40, 60, 80 or 100 percent depending on the district. If a taxpayer misses the April 1st deadline, they can file for a partial exemption through June 1st.
Level 1 freeport will exempt the following types of tangible personal property:
“Inventory of goods in the process of being manufactured or produced including raw materials and partly finished goods;
Inventory of finished goods manufactured or produced within this State held by the manufacturer or producer for a period not to exceed 12 months;
Inventory of finished goods on January 1 that are stored in a warehouse, dock, or wharf which are destined for shipment outside this State for a period not to exceed 12 months;
Stock in trade of a fulfillment center which on January 1 are stored in the fulfillment center” (dor.georgia.gov).”
The Level 2 freeport jurisdictions exempt all inventory that would not qualify under the Level 1 definition. The Georgia Application for Freeport Inventory Exemption form can be found here.
To qualify for the freeport tax exemption in Mississippi, an eligible warehouse must apply for a license to operate a freeport warehouse with the local jurisdiction. Any inventory shipped out of state during the calendar year will be exempt from taxation. The licensee must report all inventory by March 31st to qualify. The application and reporting documentation can be found here.
To qualify for the freeport exemption in Texas, the inventory must not be in the state for more than 175 days and must be used for “assembling, storing, manufacturing, repair, maintenance, processing or fabricating purposes” (comptroller.tx.gov).
The savings is based on the percentage of inventory that was shipped out of the state within the 175-day window during the previous year. The Texas Freeport Exemption application form is due by April 30th and can be found here.
Tips for the Taxpayer
If you do business in Georgia, Mississippi, or Texas and are unsure of your eligibility for freeport exemptions, contact the local property tax assessor’s office or a property tax consultant to determine if your business meets the criteria to qualify for potentially significant tax savings.
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For More Information
If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.
Contributor: Shannon McCormick-Grubbs
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