Freeport Tax Exemption
A Freeport Tax Exemption allows schools, cities, and counties to exempt business inventory from taxes if goods are shipped out of state within 175 days. In Schertz, all three of these entities have enacted the exemption, which grants it a Triple Freeport designation. This allows complete Freeport Tax Exemption on all eligible inventories.
Qualifications
According to the Texas Comptroller, a freeport exemption applies to goods, wares, ores and merchandise and to aircraft or repair parts used by a certificated air carrier. The goods must be in Texas for assembly, storage, manufacturing, repair, maintenance, processing, or fabrication. Eligible goods must be transported out of Texas within 175 days of when they were acquired, manufactured, or brought into Texas.
Example:
- Day 1 your inventory is acquired or arrives in Texas
- Days 2-174 – Inventory is manufactured, stored, assembled, or serviced
- 175th Day – All the inventory is moved out of Texas
- Goodbye, Inventory Tax!
Application Process
An annual application must be submitted with the appropriate appraisal district (Guadalupe or Comal) between January 1 and April 30. Other documents that will need to be submitted include sales reports, inventory reports, and financial statements. Each appraisal district has its own form and may require other financial information or have different methods of calculating the exemption percentage.
Benefit
When benefitting from a Freeport Exemption, your savings will be based on the percent of tangible property goods that your business moved out of Texas within the 175-day window during the previous year. For example, a company that has an inventory value of $6,000,000 and shipped 70 percent of their inventory outside of Texas in the previous year would receive an exemption of $4,200,000 from each jurisdiction that grants the Freeport Exemption, leaving taxable inventory at $1,800,000.
For more information on Freeport Exemptions, including application forms, visit: https://comptroller.texas.gov/economy/local/transit-exemptions/.