The Freeport Exemption is an exemption on the inventory of Georgia manufacturers, wholesalers, and distributors. This valuable exemption encourages manufacturing and other base industries to locate, invest, and/or stay in Georgia. The citizens of each Georgia County vote on whether the rate of the exemption is 20, 40, 60, 80 or 100 percent of the inventory value. Georgia fiercely competes with states such as Alabama and South Carolina that exempt ALL inventories. Make Georgia earn your tax dollars and your business!
Inventory Eligible for Freeport Exemption
- Raw Materials and work-in-progress inventory of Georgia manufacturers. Raw materials are components that significantly change during manufacturing or processing to create a new product. Raw materials can be grains, minerals, and petroleum or items such as casters, nuts, bolts, or wheels.
- Finished goods inventory of Georgia manufacturers that are held for less than 12 months. Most manufacturers do have some stock inventory on hand longer than 12 months from the manufacturing date. Possible exceptions include companies that manufacture to order or use a just-in-time inventory system.
- Finished goods inventory stored for less than 12 months in a warehouse, dock, or wharf, with a final destination outside of Georgia. Drop shippers, distributors, and wholesalers usually qualify for the exemption based on this stipulation.
- Retail inventory does not qualify for this exemption (yet)! On April 17, 2012, Governor Nathan Deal signed HB 48-Freeport Expansion and Elimination of Local Inventory tax. This created a Level 2 Freeport exemption that applies to ALL business inventories that did not qualify for Level 1 Exemption. In other words, retail inventory may soon be exempt in Georgia. However, local governments must first call for a referendum to approve of the Level 2 Exemption and to determine the exemption rates. Other ineligible items are fuel, packaging supplies, office supplies, spare parts, retailer stock-in-trade, and unrecovered or unextracted natural resources.
Freeport Exemption Process
The first step in qualifying for the exemption is to complete the Freeport Exemption application (PT-50PF). Many Georgia companies lose out on Freeport because they are unaware of the exemption or they miss the deadlines. Please note that the burden of obtaining, completing, and filing the Freeport application form is entirely upon the taxpayer.
An appraiser from the Tax Assessors Office will usually schedule a site visit for first time applicants to confirm the business purpose and location. This necessary second step allows the county appraiser to gather firsthand information about the business. The site visit can be an excellent opportunity to ask questions about the exemption, to clarify any issues, or to have your tax consultant meet with the appraiser.
Lastly, the Tax Assessors Office will notify you once the Freeport application submitted is approved by the Board of Tax Assessors. This approval does not mean that the Freeport return will be accepted as filed. If there are any errors, inconsistencies, or insufficient documentation on the form, the exemption can be reduced or eliminated.
As Georgia recovers from the economic recession, business owners are looking for ways to reinvest in their companies and to minimize taxes. The Freeport Exemption is an incentive that can complement your overall business tax strategy. Don’t leave money on the table!
