Texas offers a Freeport exemption that can lead to property tax savings for eligible businesses. The Freeport exemption is a provision allowed under the Texas Constitution that exempts certain types of tangible personal property from ad valorem taxation, which is the tax based on the value of property.
Tangible personal property refers to items that can be moved or touched, such as inventory, goods, or equipment that businesses use to produce or store goods. To qualify for the Freeport exemption in Texas, the following criteria generally apply:
- Eligible Property: The property must be inventory, such as goods, wares, merchandise, or other tangible personal property acquired, manufactured, produced, or stored in Texas for no more than 175 days.
- Business Purpose: The property must be held for the purpose of manufacturing, processing, or fabrication, solely for the purpose of holding the property for assembly, storage, manufacturing, processing, or fabrication.
- Limited Timeframe: The property must not remain in Texas for more than 175 days from the date it was acquired or brought into the state.
By meeting these criteria, businesses can apply for the Freeport exemption with their local appraisal district. If approved, the qualifying inventory or tangible personal property will be exempt from local property taxes, resulting in potential tax savings for the business. The exemption is only applicable to the portion of the property’s value related to the eligible inventory or goods and does not apply to the value of real property or non-qualifying personal property.
It’s important to note that tax laws and regulations are subject to change, so I recommend checking with the Texas Comptroller’s Office or a qualified tax professional for the most up-to-date and accurate information regarding the Freeport exemption and its potential benefits.