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Beginning January 1, 2008, tangible personal property
held temporarily in Texas for assembling, storing,
manufacturing, processing, or fabricating purposes is tax
exempt.
HB
621
amends the Texas Tax Code to allow an exemption for goods in
transit, which are sent to another location within a time period
of 175 days.
The goods in transit exemption is similar to the
Freeport exemption. The difference being that the inventory that
transfers within 175 days does not have to transfer out of the
state, but only to another location not owned by the owners of
the inventory.
This may prompt businesses to transfer ownership
of either their inventory or the facilities in which their
inventory is stored, manufactured, etc. to legal entities with
different ownership. These types of paper changes could make the
property exempt. A party claiming this exemption is not entitled
to claim a Freeport exemption on the same goods.
There is a loophole that allows taxing entities
to still tax goods in transit that are exempted by this section.
They must pass a resolution making the goods taxable for the
following year.
The goods in transit tax exemption does not
apply to oil, natural gas, petroleum products, aircraft,
dealers’ motor vehicle inventory, dealers’ vessel and outboard
motor inventory, dealers’ heavy equipment inventory, or retail
manufactured housing inventory.
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