The Freeport Exemption is a Texas property tax exemption that applies to goods, wares, merchandise, and other tangible personal property that is acquired in or imported into Texas and then transported out of state within a defined timeframe. The exemption removes these goods from local property tax rolls, providing significant savings for businesses that manufacture, assemble, store, process, or distribute goods through Texas before shipping them to out-of-state or international destinations.
How the Freeport Exemption Works
Under the Texas Tax Code, eligible inventory is exempt from property taxes if it is detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing, or fabrication before being shipped out of state. The exemption applies at the local level and must be adopted by each taxing jurisdiction individually.
Not all Texas taxing jurisdictions have adopted the Freeport Exemption. Cities, counties, school districts, and special districts each decide independently whether to offer the exemption. Many major Texas metros and industrial areas have adopted it, but business owners should confirm availability in their specific location.
Who Benefits from the Freeport Exemption
The exemption is most valuable for businesses with significant inventory that passes through Texas before moving to other states or countries. Common beneficiaries include:
- Manufacturers that produce goods in Texas for out-of-state customers
- Distribution centers and warehouses that move goods through Texas
- Oil and gas equipment companies that stage equipment in Texas
- Agricultural processors that package or process products for export
- E-commerce fulfillment centers serving multi-state markets
How to Apply for the Freeport Exemption
- Determine eligibility: Confirm that your inventory qualifies (goods detained 175 days or less and shipped out of state).
- Check local adoption: Contact your county appraisal district to confirm which local taxing jurisdictions have adopted the Freeport Exemption.
- File the application: Submit the Freeport Exemption application to your county appraisal district by the applicable deadline (typically April 30 for most jurisdictions, though late applications may be accepted).
- Provide supporting documentation: Be prepared to show shipping records, inventory tracking, and other evidence that goods leave Texas within the 175-day window.
- Annual renewal: The exemption must be applied for each year.
Potential Savings
The savings from the Freeport Exemption depend on the value of qualifying inventory and the combined property tax rate of the applicable jurisdictions. For businesses with millions of dollars in qualifying inventory, the annual property tax savings can be substantial, often exceeding what the business might receive from other incentive programs.
Common Questions
Does the 175-day rule apply to each item individually?
Yes. Each item or lot of goods must be shipped out of Texas within 175 days of being brought into or acquired in the state.
What if only some of my inventory qualifies?
The exemption applies only to qualifying inventory. You may claim the exemption on the portion of your inventory that meets the requirements while non-qualifying inventory remains on the tax rolls.
Find Programs That May Fit Your Business
The Freeport Exemption is one of several property tax tools available to Texas businesses. Combined with other exemptions, abatements, and incentive programs, it can significantly reduce your operating costs.
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