Governor OK’s tax exemption for fulfillment centers

Governor Deal has approved a tax exemption for fulfillment centers in Georgia in jurisdictions that offer freeport exemptions.

In addition to real property taxes, businesses normally pay “personal property taxes” on business inventory. Many communities offer a freeport exemption which reduces personal property taxes the same way a homestead exemption reduces real property taxes. House Bill 935 expands the types of inventory eligible for exemption to include inventory at fulfillment centers. 

This expansion of freeport exemptions is part of a larger economic development strategy for Georgia. The Augusta Chronicle reported on the story behind the HB 935 last month:

…U.S. consumers are increasingly shifting toward e-commerce. That’s prompting retailers to develop distribution centers closer to urban areas to shorten delivery times as more companies promise same-day delivery and free shipping, said Curtis Spencer, president of the IMS Worldwide consulting firm…

“It [HB 935] will definitely make us competitive over other states,” said Jannine Miller, director of the Georgia Center of Innovation for Logistics, which is hosting this week’s [Georgia Logistics Summit] conference.

Commissioner of Economic Development Chris Carr said e-commerce is a targeted segment of the logistics industry.

“If you look as far as the eye can see, e-commerce is critically important,” he said. “We want to be a place companies want to locate and give them every reason to be here. That will help us do that.”… 

HB 935 was signed into law on May 3.

General Assembly adopts tax changes

On the final day of its legislative session, the Georgia General Assembly approved several bills involving taxes.

The most significant was Senate Bill 369, which authorizes up to a ½ percent sales tax increase in Atlanta for MARTA expansion, a ¾ percent sales tax increase in Fulton County for transportation, and up to a ½ percent sales tax increase in Atlanta for transportation improvements and congestion reduction. State Senator Brandon Beach said on the final night of the legislative session that Fulton County and cities outside of Atlanta could authorize an additional ¼ percent sales tax for transit. In other words, both Atlanta and Fulton County could each increase their sales tax rate by 1 percent with differing ratios going toward mass transit and roads.

Narrower bills dealing with ad valorem tax breaks for specific industries also passed. House Bill 769 provides a personal property tax exemption to boat dealers and all-terrain vehicle dealers. HB 769 was sent to the governor on April 1. HB 935 authorizes a freeport property tax exemption to fulfilment centers such as Amazon or Walmart that ship merchandise ordered by consumers online or by phone. HB 937 gives a sales tax break for the new Falcons stadium and other projects of "competitive regional significance."

HB 960 makes several changes to taxes administered by the state. Section 1 of the bill clarifies matters of taxpayer confidentiality. Section 2 changes the interest rate calculation for state-issued tax refunds. Section 3 changes the interest charged on past due state taxes from 1 percent to the annual prime loan bank rate. Section 4 changes the penalties for failing to file a return for taxes held in trust for the state. Section 5 amends procedures for tax tribunals. HB 960 is the result of a study committee that found the interest rates were too high.  Neither SB 369 nor HB 960 have been sent to the governor yet.

The House of Representatives did not approve income tax rate reductions (SB 280 and SR 756) or property tax assessment caps (SB 298 and SB 259) proposed by the Senate.

State House approves tax exemption for fulfillment centers

The Georgia House of Representatives has unanimously approved a bill that would exempt merchandise in stock at fulfillment centers from business inventory taxes in jurisdictions that offer a freeport exemption.  Normally, businesses with inventory are subject to business personal property taxation on tangible items including equipment and inventory.  House Bill 935 excludes goods and wares at fulfillment centers with a freeport exemption from personal property taxes when those items are stored for less than 12 months.  Fulfillment centers are used by companies such as Amazon to fulfill orders placed by customers online or by phone.

The City of Decatur does not offer a freeport exemption, so this would not affect fulfillment centers if we had any.  DeKalb County offers the freeport exemption, and this could expand tax relief to companies operating fulfillment centers in the county.

Doraville offers freeport exemption in 2015

Last month, voters in Doraville approved a freeport tax exemption for personal property (property which usually consists of business inventory). The measure passed was for a “level 1” exemption, meaning that there are still some types of business inventory that would remain taxable. A “level 2” freeport exemption would exempt more types of business inventory. Freeport exemptions for businesses work similarly to homestead exemptions for residents by exempting at least a portion of the property’s value. To some extent, freeport exemptions reduce the commercial share of the tax base relative to the residential share. Decatur does not provide a freeport exemption. 

From the AJC last month:

Doraville voters pass manufacturing tax breaks 

Doraville voters approved three tax breaks for businesses during last week’s election. The initiatives, known as freeport exemptions, are intended to attract and retain manufacturing and logistics industries, according to the city. Voters passed each of the ballot measures by about 2-to-1 margins. The exemptions on local ad valorem taxes apply to: 

• Inventory of goods in the process of being manufactured or produced, including raw materials and partly finished goods. 

• Finished goods produced in Georgia within the last 12 months 

• Finished goods stored in Georgia within the last 12 months and destined for shipment out of state

Residents in the city of Stone Mountain approved a similar tax break, making them the first two DeKalb County cities to do so. The county adopted a version of the freeport exemption in 1977.