Navigating the Benefits: Understanding Freeport Tax Exemption in Texas

by Vann Shank, on Mar 6, 2024 9:00:00 AM

Texas, known for its business-friendly environment, has implemented various measures to attract and retain industries within the state. One such initiative that has gained prominence is a tax benefit known as the Freeport Exemption. This tax incentive, established to bolster economic growth and job creation, particularly targets companies involved in the movement of goods through the state. In this blog post, we will delve into the intricacies of the Freeport Exemption in Texas, exploring its benefits and how businesses can leverage this incentive to their advantage.

Understanding Freeport Exemption

The Texas Freeport Exemption relieves businesses from ad valorem property taxes on certain types of tangible personal property that pass through the state within a designated period. Tangible personal property includes goods, wares, merchandise and other tangible items held in Texas distribution centers for assembling, processing, manufacturing or fabrication before being transported out of the state.

Eligible properties

To qualify for the Freeport Exemption, the tangible personal property must fall into one of three categories: goods in transit, goods stored for assembling, manufacturing, processing or fabricating, and goods destined for out-of-state markets.

1.  Goods in transit
If the property is stored in Texas for 175 days or less for transportation, it is considered eligible for the Freeport Exemption. This category is particularly beneficial for businesses engaged in logistics and distribution.

2.  Goods stored for processing
Tangible personal property stored in Texas for assembly, manufacturing, processing or fabrication before being shipped out of state may also qualify for the exemption. This provision encourages companies to engage in value-added activities within the state.

3.  Goods destined for out-of-state markets
Businesses in goods production intended for out-of-state markets can enjoy the Freeport Tax Exemption. This encourages companies to use Texas as a strategic hub for manufacturing or processing operations.

Benefits of Freeport Exemption

1.  Cost savings
Businesses can significantly reduce operational costs by exempting certain types of tangible personal property from ad valorem property taxes.

2.  Encourages economic activity
The Freeport Exemption stimulates economic growth by attracting businesses engaged in the movement and processing of goods. This, in turn, creates job opportunities and contributes to the state's overall prosperity.

3.  Competitive advantage
Texas, already known for its business-friendly environment, becomes an even more attractive location for companies looking to establish or expand their operations.


The Texas Freeport Exemption is a powerful tool to promote economic development and foster a vibrant business ecosystem. Businesses engaged in the movement of goods can leverage this incentive to reduce their tax burden, enhance their competitive position, and contribute to the state's economic vitality. For a more comprehensive analysis of each state’s tax climate, please refer to our prior blog: A Review of the 2024 State Business Tax Climate Index. As always, businesses should consult with tax professionals to ensure compliance and maximize the benefits offered by the Freeport Exemption.

Topics:Corporate Real Estate



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