The Texas Freeport tax exemption removes local property tax from inventory that arrives in Texas, is handled or processed here, and ships out of state within 175 days. It exists under Article VIII, Section 1-j of the Texas Constitution and Tax Code Section 11.251, but it only applies where local taxing units have chosen to offer it, and businesses must reapply every year on Form 50-113 between January 1 and April 30. Miss that window and a penalty attaches; miss the certification of the appraisal roll and the exemption is gone for the year.
What Qualifies as Freeport Property
Freeport goods are tangible personal property brought into Texas, or acquired in Texas, with the intent of being shipped to a destination outside the state.1State of Texas. Texas Constitution Article VIII Section 1-j While the goods sit in Texas, you can assemble, store, manufacture, process, fabricate, or repair them without losing the exemption. That is the point of the rule: value can be added to inventory here as long as it ultimately leaves.
Covered property includes raw materials, component parts, finished merchandise, and ores. Oil, natural gas, and other petroleum products are excluded.2State of Texas. Texas Tax Code 11.251 – Tangible Personal Property Exempt Aircraft parts and aircraft engine parts used in repair or maintenance for a certified air carrier also qualify, on a different timeline.
The 175-Day Rule
Every item claimed under the exemption has to leave Texas within 175 days of the date the owner acquired it or brought it into the state.1State of Texas. Texas Constitution Article VIII Section 1-j Goods still in a Texas warehouse on day 176 become taxable for that year, whether or not they eventually ship out. The rule targets actual supply-chain movement, not long-term storage or local retail stock.
Aircraft parts, aircraft engines, and aircraft engine parts can qualify for up to 730 days, but only if the taxing unit has affirmatively adopted the extension.2State of Texas. Texas Tax Code 11.251 – Tangible Personal Property Exempt Adoption before June 1 takes effect that same tax year; adoption on or after June 1 waits until the following year. Once adopted, it stays in place until revoked.
Whether Your Local Taxing Units Offer It
The Constitution authorizes the exemption, but participation is a local decision. A single business address in Texas can be taxed by up to four separate entities: the county, the city, the school district, and the junior college district.3Harris Central Appraisal District. Freeport Exemptions Each entity decides independently whether to offer the exemption, so a warehouse might receive it from the school district and not the county, or from three units and not the fourth.
Many taxing units voted decades ago to continue taxing freeport-eligible property to protect their revenue base, and the Constitution allows them to keep doing so unless voters approve a repeal or the governing body votes by a two-thirds majority to end it.1State of Texas. Texas Constitution Article VIII Section 1-j Before signing a warehouse lease or expanding operations, call the appraisal district in the county where the property will sit. The district can tell you which local units offer the exemption and what your effective savings would look like. Harris County, for example, has taxing units that do not offer the exemption, so businesses there may see only partial relief.3Harris Central Appraisal District. Freeport Exemptions
How to Apply
The application is Texas Comptroller Form 50-113, “Application for Exemption of Goods Exported from Texas.”4Texas Comptroller of Public Accounts. Application for Exemption of Goods Exported from Texas (Freeport Exemption) Form 50-113 The form asks for the financial figures the chief appraiser uses to calculate your freeport percentage: the total cost of all goods sold during the preceding calendar year and the total cost of goods shipped out of Texas within the holding period. That ratio is applied to your current inventory value.
Documentation is what carries an application through. Keep records that show when each batch of inventory arrived in Texas, what was done to it while stored here, and when and where it shipped out. Shipping logs, bills of lading, commercial invoices, and carrier receipts all count. Inventory software that timestamps arrivals, activities, and departures makes the recordkeeping far easier, especially if the appraisal district audits specific line items later.
File the completed form and supporting documents with the appraisal district in each county where the inventory is located.4Texas Comptroller of Public Accounts. Application for Exemption of Goods Exported from Texas (Freeport Exemption) Form 50-113 Inventory spread across counties means a separate filing in each one.
Deadline and Late Penalty
The filing window is January 1 through April 30 of the current tax year.3Harris Central Appraisal District. Freeport Exemptions The exemption does not renew on its own. A new Form 50-113 with updated financial data is required every year, even if nothing about the operation has changed.
A late application filed after April 30 but before the appraisal roll is certified triggers a penalty of 10 percent of the tax you would have saved.5Texas Public Law. Texas Tax Code Section 11.4391 – Late Application for Freeport Exemption On a large inventory, that penalty compounds quickly. Once the appraisal roll is certified for the year, the exemption is unavailable for that tax cycle. The chief appraiser can grant an extension of up to 60 days for good cause, but the request has to be in writing and backed by a real reason.
If Your Exemption Is Denied
A denial, in whole or in part, can be protested to the appraisal review board. Section 41.41 of the Tax Code lists denial of a partial exemption as a valid ground for protest, and you can also contest the appraised value of the inventory or the freeport percentage the appraiser used.6State of Texas. Texas Tax Code 41.41 – Right of Protest
The protest deadline is generally May 15, or 30 days from the date the appraisal district mailed the notice of denial, whichever is later.7Texas Comptroller of Public Accounts. Appraisal Protests and Appeals Bring shipping records, inventory reports, and financial documentation to the hearing to show the goods met the export timeline. Missing the protest deadline forfeits the right to challenge the denial for that tax year.
Freeport vs. Goods-in-Transit
Inventory that ships to another location inside Texas does not qualify for Freeport, which requires the goods to leave the state. Texas offers a separate Goods-in-Transit exemption for that situation, using the same 175-day holding limit.8Texas Comptroller of Public Accounts. The Freeport and Goods in Transit Exemptions Goods-in-Transit carries a restriction Freeport does not: the owner of the goods cannot have any direct or indirect ownership interest in the storage facility. Some businesses qualify for both exemptions on different portions of their inventory, depending on where each shipment ends up.