Submitted report

The Greater San Marcos Partnership (GSMP) announced Tuesday that the Hays County Commissioners Court voted to exempt the Freeport tax liability of qualified businesses in the county. 

The Freeport tax is a property tax on goods and materials used in the manufacturing process for products that will be shipped out of state within 175 days.

According to a release, Buda, Hays, Kyle, Mountain City, San Marcos, Uhland and Wimberley have passed similar Freeport exemptions. 

With Hays County’s approval, each one of the five counties in the Austin Metropolitan Statistical Area (MSA) are Freeport exempt. 

The San Marcos Consolidated Independent School District (SMCISD) and Dripping Springs Independent School District (DSIDS) Board of Trustees had previously voted to approve the Freeport exemption, contingent upon approval by Hays County.  

With the Hays County Commissioners approval of the Freeport exemption, the portion of the City of San Marcos that includes SMCISD can now claim triple Freeport status.

Adriana Cruz, president of the Greater San Marcos Partnership, said in a statement that Hays County has taken an “important step to ensure we are more competitive for quality job creation” with approval of the tax exemption. 

“Prospects have eliminated our communities from consideration based on this one criterion in the past. This puts us on equal footing to other communities in the Austin-San Antonio corridor who have triple Freeport status,” Cruz said in a statement. 

Cruz added that there have been Requests for Information (RFIs) that GSMP was unable to respond to previously because triple Freeport was a requirement.

What is Freeport tax exemption?

The Freeport tax exemption provides an exemption from ad valorem taxation on certain types of inventory. 

Cities, counties and school districts in Texas have granted this exemption since 1990 to benefit manufacturers and stimulate economic development. 

When the city, county and school district offer the exemption, it is generally referred to as a “triple freeport” community. 

Most communities surrounding Hays County have “triple freeport” status. That includes the communities of Lockhart, Luling, Cedar Park, Leander, Pflugerville, Round Rock and New Braunfels. 

Freeport goods are inventories acquired or brought into the state by businesses and held for no more than 175 days before being shipped out of state and include goods, wares, merchandise, ores, and certain aircraft and aircraft parts.

This exemption is only applied to inventory for assembly, storage, manufacturing, processing, or fabricating. It does not include offices, retail or other companies that may have inventories.

Freeport Companies in Hays County and SMCISD

There are 19 companies in Hays County that utilize their respective city’s Freeport exemption. 

In order to ensure the county did not experience a revenue drop in the short term, the Greater San Marcos Partnership worked with 10 of the 19 companies who would owe more than $1,000 prior to the exemption to enter into Payment in Lieu of Taxes (PILOT) Agreements. 

These 10 companies agreed to continue to pay the Freeport tax during a five-year phase-in of the Hays County Freeport Tax exemption.

The SMCISD Board of Trustees had previously approved the Freeport Exemption contingent upon Hays County’s approval. 

Similarly, to ensure the school district did not experience a revenue drop, the three companies in the school district signed similar PILOT Agreements with the School District. Those companies, who would owe more than $1,000 prior to the exemption, will continue to pay the tax during a five-year phase-in of the SMCISD Freeport tax exemption.

What is the Freeport Tax?

The Freeport tax is a property tax on goods and materials used in the manufacturing process for products that will be shipped out-of-state within 175 days.