Goods in Transit Exemption Enacted in Texas |
Pursuant to House Bill (HB) 621, Texas law will exempt in-transit business inventories from ad valorem taxation.
Key highlights of the Bill include:
- Effective January 1, 2008, for the 2008 property tax year
- To qualify for the exemption, inventories must be stored at a Texas location in which the owner of the goods does not have any direct or indirect ownership interest
- Exemption of inventory that is shipped both in-state and out-of-state
Different than Freeport exemption
Two key differences between HB 621 and the Freeport exemption are:
- No export requirement beyond Texas borders
- Inventory must be held at a separate location owned by a non-related party, cannot be held at a location owned or controlled by the owner of the inventory
Exceptions
Oil, gas, aircraft, and dealer’s special inventories do not qualify for this exemption.
Additionally, inventory that remains, on average, in one location for more than 175 days does not qualify for this exemption.
Personal property taxation considerations by local governments
The exemption is automatically granted by ALL taxing entities unless an entity chooses to opt-out. In order to opt-out, the entity must conduct public hearings and issue an order to tax goods-in-transit before January 1st of the year in which the county plans to tax the goods-in-transit. The Comptroller of Public Accounts is in the process of creating forms and rules to help implement HB 621.
Key benefit
For the first time, businesses whose goods are not shipped out of Texas have an opportunity to exempt their inventory from property tax.
Act now
Contact Toby Toler to discuss how your business may take advantage of this new tax-saving opportunity. An annual application is required in order to obtain this exemption.
Please contact me to see if I qualify for the Goods in Transit Exemption