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Freeport Exemptions

In 1989, Texas voters approved a constitutional amendment giving local taxing jurisdictions the option to exercise or not exercise their authority to tax specific personal property known as freeport goods. Smith County is one of only a few counties in the State of Texas in which ALL taxing entities elected to grant the freeport exemption, providing a substantial financial benefit to Smith County primary employers, which by definition, manufacture or distribute products that are shipped outside of Texas. In addition to the freeport exemption, some taxing entities have also adopted HB 621, which eliminates inventory taxes on goods shipped within the State of Texas.

Definition

The freeport exemption exempts certain types of tangible personal property (i.e., inventory) from ad valorem (property) taxation provided the property is:

  • Acquired in or imported into Texas to be forwarded out of state
  • Detained in Texas for assembling, storing, manufacturing, processing, or fabricating purposes by the person who acquired or imported it; and
  • Transported out of state within 175 days after the date the person acquired or imported it into Texas.

Because oil, natural gas, and other petroleum products are not considered freeport goods, they are not eligible for the exemption and therefore remain taxable. Even when goods are sold to an in-state purchaser rather than shipped out of the state, they may qualify for the Freeport exemption - however, the property must qualify under the above requirements as Freeport property and must be transported out of the state within 175 days after it was first acquired in or imported into the state.

Application Process

A company that manufactures or distributes a product from within a jurisdiction which has been designated a freeport will realize a significant savings if it serves national or international markets. This could therefore encourage additional investment in buildings and equipment in the local jurisdiction.

The amount of the goods in transit exemption for each year is normally based on the percentage of inventory made up by such goods last year. A two-page application requests a company to identify property owned on January 1 of each year (or September 1 of the preceding year if the company receives a September 1 inventory appraisal).  A company must apply for the exemption each year from the Smith County Appraisal District between January 1 and May 1.

Download

The State of Texas Attorney General's office produces an annual Economic Development Handbook that provides detailed information about all available funding options available in the State of Texas. The publication is only available online and can be downloaded in PDF format.

Contact Information

For more information regarding the freeport exemption, please contact:

Michael Barnett
Chief Appraiser
Smith County Appraisal District
245 SSE Loop 323
Tyler, Texas 75702
903.510.8600

Thomas G. Mullins
President
Tyler EDC
P.O. Box 2004
Tyler, Texas 75710
800.648.9537