O.C.G.A. § 48-5-48.2 (2019)
Level 1 freeport exemption; referendum
(a) This Code section shall be known and may be cited as the “Level 1 Freeport Exemption.” (b) As used in this Code section, the term: (1) “Affiliates” means those entities that are part of an affiliated group of the taxpayer as defined in Section 1504(a) of the Internal
Revenue Code and all other entities that are directly or indirectly owned 50 percent or more by members of the affiliated group. (2) “Destined for shipment to a final destination outside this state” means, for purposes of a level 1 freeport exemption, that portion or percentage of an inventory of finished goods which the taxpayer can establish, through a historical sales or shipment analysis, either of which utilizes information from the preceding calendar year, or other reasonable, documented method, is reasonably anticipated to be shipped to a final destination outside this state. Such other reasonable, documented method may only be utilized in the case of a new business, in the case of a substantial change in scope of an existing business, or in other unusual situations where a historical sales or shipment analysis does not adequately reflect future anticipated shipments to a final destination outside this state. It is not necessary that the actual final destination be known as of January 1 in order to qualify for the exemption. (3) “Finished goods” means, for purposes of a level 1 freeport exemption, goods, wares, and merchandise of every character and kind but shall not include unrecovered, unextracted, or unsevered natural resources or raw materials or goods in the process of manufacture or production or the stock in trade of a retailer. (4) “Foreign merchandise in transit” means, for purposes of a level 1 freeport exemption, any goods which are in international commerce where the title has passed to a foreign purchaser and the goods are temporarily stored in this state while awaiting shipment overseas. (5) “Fulfillment center” means, for purposes of a level 1 freeport exemption, a business location in Georgia which is used to pack, ship, store, or otherwise process tangible personal property sold by electronic, internet, telephonic, or other remote means, provided that such a business location does not allow customers to purchase or receive goods onsite at such business location. (6) “Raw materials” means, for purposes of a level 1 freeport exemption, any material, whether crude or processed, that can be converted by manufacture, processing, or a combination thereof into a new and useful product but shall not include unrecovered, unextracted, or unsevered natural resources. (7) “Stock in trade of a fulfillment center” means, for purposes of a level 1 freeport exemption, goods, wares, and merchandise held by one in the business of making sales of such goods when such goods are held or stored at a fulfillment center. (8) “Stock in trade of a retailer” means, for purposes of a level 1 freeport exemption, finished goods held by one in the business of
making sales of such goods at retail in this state, within the meaning of Chapter 8 of this title, when such goods are held or stored at a business location from which such retail sales are regularly made. Goods stored in a warehouse, dock, or wharf, including a warehouse or distribution center which is part of or adjoins a place of business from which retail sales are regularly made, shall not be considered stock in trade of a retailer to the extent that the taxpayer can establish, through a historical sales or shipment analysis, either of which utilizes information from the preceding calendar year, or other reasonable, documented method, the portion or percentage of such goods which is reasonably anticipated to be shipped outside this state for resale purposes. (c) The governing authority of any county or municipality may, subject to the approval of the electors of such political subdivision, exempt from ad valorem taxation, including all such taxes levied for educational purposes and for state purposes, all or any combination of the following types of tangible personal property: (1) Inventory of goods in the process of manufacture or production which shall include all partly finished goods and raw materials held by the taxpayer, the taxpayer’s affiliate, or the taxpayer’s designated agent for direct use or consumption in the ordinary course of the taxpayer’s manufacturing or production business in this state. The exemption provided for in this paragraph shall apply only to tangible personal property which is substantially modified, altered, combined, or changed in the ordinary course of the taxpayer’s manufacturing, processing, or production operations in this state. For purposes of this paragraph, the following activities shall constitute substantial modification in the ordinary course of manufacturing, processing, or production operations: (A) The cleaning, drying, pest control treatment, or segregation by grade of grain, peanuts or other oil seeds, or cotton; (B) The remanufacture of aircraft engines or aircraft engine parts or components, meaning the substantial overhauling or rebuilding of aircraft engines or aircraft engine parts or components; (C) The blending of fertilizer bulk materials into a custom mixture, whether performed at a commercial fertilizer blending plant, retail outlet, or any application site; (D) The substantial assembly of finished parts; and (E) The remanufacture, which includes repair or modification of goods manufactured, processed, or produced by the taxpayer; (2) Inventory of finished goods manufactured or produced within this state in the ordinary course of the taxpayer’s manufacturing or
production business when held by the original manufacturer or producer of such finished goods. The exemption provided for in this paragraph shall be for a period not exceeding 12 months from the date such property is produced or manufactured; (3) Inventory of finished goods which, on January 1, are stored in a warehouse, dock, or wharf, whether public or private, and which are destined for shipment to a final destination outside this state and inventory of finished goods which are shipped into this state from outside this state and stored for transshipment to a final destination outside this state, including foreign merchandise in transit. The exemption provided for in this paragraph shall be for a period not exceeding 12 months from the date such property is stored in this state. Such period shall be determined based on application of a first-in, first-out method of accounting for the inventory. The official books and records of the warehouse, dock, or wharf where such property is being stored shall contain a full, true, and accurate inventory of all such property, including the date of the receipt of the property, the date of the withdrawal of the property, the point of origin of the property, and the point of final destination of the same, if known. The official books and records of any such warehouse, dock, or wharf, whether public or private, pertaining to any such property for which a freeport exemption has been claimed shall be at all times open to the inspection of all taxing authorities of this state and of any political subdivision of this state; or (4) Stock in trade of a fulfillment center which, on January 1, is stored in a fulfillment center and which is made available to remote purchasers who may make such purchases by electronic, internet, telephonic, or other remote means, and where such stock in trade of a fulfillment center will be shipped from the fulfillment center and delivered to the purchaser at a location other than the location of the fulfillment center. The exemption provided for in this paragraph shall be for a period not exceeding 12 months from the date such property is stored in this state. Such period shall be determined based on application of a first-in, first-out method of accounting for the inventory. The official books and records of the fulfillment center where such property is being stored shall contain a full, true, and accurate inventory of all such property, including the date of the receipt of the property and the date of the withdrawal of the property. The official books and records of any such fulfillment center pertaining to any such property for which a freeport exemption has been claimed shall be at all times open to the inspection of all taxing authorities of this state and of any political subdivision of this state. (d) Whenever the governing authority of any county or municipality wishes to exempt such tangible property from ad valorem taxation, as
provided in this Code section, the governing authority thereof shall notify the election superintendent of such political subdivision, and it shall be the duty of said election superintendent to issue the call for an election for the purpose of submitting to the electors of the political subdivision the question of whether such exemption shall be granted. The referendum ballot shall specify as separate questions the type or types of property as defined in this Code section which are being proposed to be exempted from taxation. The election superintendent shall issue the call and shall conduct the election on a date and in the manner authorized under Code Section 21-2-540. (e) The governing authority of any county or municipality wherein an exemption has been approved by the voters as provided in this Code section may, by appropriate resolution, a copy of which shall be immediately transmitted to the state revenue commissioner, exempt from taxation 20 percent, 40 percent, 60 percent, 80 percent, or all of the value of such tangible personal property as defined in this Code section; provided, however, that once an exemption has been granted, no reduction in the percent of the value of such property to be exempted may be made until and unless such exemption is revoked or repealed as provided in this Code section. An increase in the percent of the value of the property to be exempted may be accomplished by appropriate resolution of the governing authority of such county or municipality, and a copy thereof shall be immediately transmitted to the state revenue commissioner, provided that such increase shall be in increments of 20 percent, 40 percent, 60 percent, or 80 percent of the value of such tangible personal property as defined in this Code section, within the discretion of such governing authority. (f)(1) If more than one-half of the votes cast on such question are in favor of such exemption, then such exemption may be granted by the governing authority commencing on the first day of any ensuing calendar year; otherwise, such exemption may not be granted. This paragraph is intended to clearly provide that following approval of such exemption in such referendum, such exemption may be granted on the first day of any calendar year following the year in which such referendum was conducted. This paragraph shall not be construed to imply that the granting of such exemption could not previously be delayed to any such calendar year. (2) Exemptions may only be revoked by a referendum election called and conducted as provided in this Code section, provided that the call for such referendum shall not be issued within five years from the date such exemptions were first granted and, if the results of said election are in favor of the revocation of such exemptions, then such revocation shall be effective only at the end of a five-year period from the date of such referendum.
(g) Level 1 freeport exemptions effected pursuant to this Code section may be granted either in lieu of or in addition to level 2 freeport exemptions under Code Section 48-5-48.6. (h) The commissioner shall by regulation adopt uniform procedures and forms for the use of local officials in the administration of this Code section.
History
Code 1981, § 48-5-48.2, enacted by Ga. L. 1984, p. 1058, § 4; Ga. L. 1992, p. 2482, § 2; Ga. L. 1996, p. 926, § 1; Ga. L. 1998, p. 295, § 3; Ga. L. 1998, p. 1120, § 2; Ga. L. 2012, p. 249, § 2/HB 48; Ga. L. 2013, p. 83, § 1/HB 304; Ga. L. 2016, p. 731, § 2/HB 935; Ga. L. 2017, p. 774, § 48/HB 323; Ga. L. 2018, p. 986, § 2/HB 888; Ga. L. 2019, p. 763, § 1/HB 405.
Annotations
Editor’s notes. Ga. L. 1984, p. 1058, § 9, not codified by the General Assembly, provides: “In the event of any conflict between this Act and any other Act of the 1984 General Assembly the provisions of such other Act shall control over the provisions of this Act.”
Ga. L. 2012, p. 249, § 5/HB 48, not codified by the General Assembly, provides for severability. Ga. L. 2013, p. 83, § 2/HB 304, not codified by the General Assembly, provided that the amendment to this Code section shall apply to all taxable years beginning on and after January 1, 2014. Law reviews. For article, “Procedure and Problems in Georgia Ad Valorem Tax Appeals,” see 26 Ga. St. B.J. 98 (1990). For article, “Freeport Exemption from Property Taxes for Inventory Stored in Georgia But Destined for Shipment Out-of-State,” see 28 Ga. St. B. J. 108 (1991).
JUDICIAL DECISIONS Purpose of statutory language. - By using the all-encompassing descriptive term “inventory of finished goods,” instead of “tangible property,” the General Assembly intended to include all classes of tangible property under the constitution without enumerating each so that there would be equal treatment to avoid constitutional implications as to equal protection, rational purpose, and disparate treatment. Fulton County Tax Comm’r v. GMC, 234 Ga. App. 459, 507 S.E.2d 772. “For resale purposes” as used in O.C.G.A. § 48-5-48.2(a)(4), expressly excludes from the freeport exemption any merchandise sold at retail, regardless of whether the sale is made to a resident or nonresident of Georgia. Aircraft Spruce & Specialty Co. v. Fayette County Bd. of Tax Assessors, 294 Ga. App. 241, 669 S.E.2d 417, 2008 Ga. App. LEXIS 1149 (2008), overruled in part, Gilmer County Bd. of Tax Assessors v. Spence, 309 Ga. App. 482, 711 S.E.2d 51, 2011 Ga. App. LEXIS 371 (2011).
O.C.G.A. § 48-5-48.2 gives county discretion as to: (1) whether to submit the exemption issue to a voter referendum; (2) what types of inventory will be submitted to the voters for exemption; and (3) the percentage of the value of goods to be exempted. Levetan v. Lanier Worldwide, Inc., 265 Ga. 323, 454 S.E.2d 504, 1995 Ga. LEXIS 134 (1995). Accounting methods. - O.C.G.A. § 48-5-48.2(b)(1) and (2) (now paragraphs (b)(2) and (b)(3)) did not require a particular accounting method to be used for valuation, so it was arbitrary and capricious to apply a particular accounting method to a taxpayer’s freeport exemption application, because the application did not disclose a particular accounting method. William L. Bonnell Co. v. Coweta County Bd. of Tax Assessors, 252 Ga. App. 151, 556 S.E.2d 159, 2001 Ga. App. LEXIS 1221 (2001). Grain merchandising and storage. - Under its pre-1998 version, O.C.G.A. § 48-5-48.2 did not apply to farm products stored for a grain merchandising and
storage business. Board of Assessors v. McCoy Grain Exch., Inc., 234 Ga. App. 98, 505 S.E.2d 832. Evidence to show timely filing. - Without evidence of a United States post office postmark date to prove an application for freeport exemption was mailed timely, or other evidence to show compliance with an internal policy, the taxpayer was unable to prove the taxpayer’s return was timely filed. DeKalb County Bd. of Tax Assessors v. Lanier Worldwide, Inc., 208 Ga. App. 435, 430 S.E.2d 595 (1993). Charge on risk of using mail system needed. - Because the instruction sheet for the application for freeport exemption makes it clear that the taxpayer bears the responsibility for ensuring that the postmark date is the same as the mailing date, the charge that one who selects the United States mail takes all the risks that are usually incident was relevant. DeKalb County Bd. of Tax Assessors v. Lanier Worldwide, Inc., 208 Ga. App. 435, 430 S.E.2d 595 (1993). Packaging materials are not “raw materials.” Murray Bakery Prods., Inc. v. Board of Tax Assessors, 186 Ga. App. 559, 367 S.E.2d 852, 1988 Ga. App. LEXIS 387, aff’d, 258 Ga. 484, 371 S.E.2d 393, 1988 Ga. LEXIS 356 (1988). Merely assembling purchased packaging materials was not a substantial change of personal property in the ordinary course of a cookie maker’s manufacturing business, and such materials did not qualify for the freeport exemption. Murray Bakery Prods., Inc. v. Board of Tax Assessors, 258 Ga. 484, 371 S.E.2d 393, 1988 Ga. LEXIS 356 (1988). Business involving both transportation and manufacture. - Fact that a company is in the transportation business is not fatal to the company’s claim for a freeport exemption because the company functions as a manufacturer of aircraft parts and a remanufacturer of aircraft engines in the regular course of the company’s business and those operations are located in this state. Delta Air Lines, Inc. v. Clayton County Bd. of Tax Assessors, 246 Ga. App. 225, 539 S.E.2d 905, 2000 Ga. App. LEXIS
1200 (2000), cert. denied, No. S01C0204, 2001 Ga. LEXIS 370 (Ga. Apr. 30, 2001). Inventory sold from a taxpayer to a purchaser. - Under O.C.G.A. § 48-5-48.1(a), the entity seeking the freeport exemption is required to file a written application and schedule of the property for which the exemption is sought; thus, the statutory scheme looks to the property, that is, the inventory, held by the taxpayer, and what becomes of the inventory in the hands of a purchaser from the taxpayer is not relevant to the determination of the availability of the freeport exemption. Muscogee County Bd. of Tax Assessors v. Pace Indus., 307 Ga. App. 532, 705 S.E.2d 678, 2011 Ga. App. LEXIS 3 (2011). Inventory being held for leasing purposes. - Computers owned by taxpayer and held in storage until leased to travel agencies, after the period of which lease the computers are returned to the taxpayer, were not “finished goods” being held for “final destination outside this state” within the meaning of O.C.G.A. § 48-5-48.2, and therefore did not meet the requirements to qualify for the exemption under § 48-5-48.2. Apollo Travel Servs. v. Gwinnett County Bd. of Supvrs., 230 Ga. App. 790, 498 S.E.2d 297. Inventory of finished goods. - Aircraft parts stored at the company and destined for shipment to airport stations outside Georgia qualified for the freeport exemption. The company was not required to prove that the parts were intended for resale. Delta Air Lines, Inc. v. Clayton County Bd. of Tax Assessors, 246 Ga. App. 225, 539 S.E.2d 905, 2000 Ga. App. LEXIS 1200 (2000), cert. denied, No. S01C0204, 2001 Ga. LEXIS 370 (Ga. Apr. 30, 2001). Inventory included in freeport exemption. - Component parts of self-checkout systems purchased by a retailer and which were held in Georgia for shipment to retail stores in other states were exempt from ad valorem tax under the freeport exemption in O.C.G.A. § 48-5-48.2(c)(3), which included inventory; the fact that the components required installation did not render the components “in the process of manufacture or production.” Fayette Cty.
Bd. of Tax Assess. v. WalMart Stores, Inc., 354 Ga. App. 584, 841 S.E.2d 104, 2020 Ga. App. LEXIS 196 (2020). Freeport exemption did not apply. - Freeport exemption from ad valorem taxes did not apply to a taxpayer’s inventory of barbecue grill bodies because the taxpayer’s involvement with the grill bodies ended when the taxpayer sold the grill bodies to a producer of barbecue grills, and the final destination of the grill bodies was the producer’s plant; the producer incorporated the grill bodies into finished barbecue grills, and it was the completed barbecue grills that the producer eventually shipped out of state. Muscogee County Bd. of Tax Assessors v. Pace Indus., 307 Ga. App. 532, 705 S.E.2d 678, 2011 Ga. App. LEXIS 3 (2011). Res judicata and collateral estoppel as to exemption. - Following a final consent judgment, the factual and legal basis for freeport exemption for several previous years became res judicata as to what had been litigated, and collateral estoppel would apply on the exemption issue on future applications unless there was a substantial factual change. Fulton County Tax Comm’r v. GMC, 234 Ga. App. 459, 507 S.E.2d 772. Doctrine of collateral estoppel applied to preclude the county board of tax assessors from relitigating a taxpayer’s eligibility for the freeport exemption since there had been no change or development in the law. Gwinnett County Bd. of Tax Assessors v. GE Capital Computer Servs., 273 Ga. 175, 538 S.E.2d 746, 2000 Ga. LEXIS 866 (2000). Role of superior court. - It is initially the county board of tax assessors and, in the event of continued disagreement, the superior court, that must consider the taxpayer’s showing and make an appropriate grant of freeport exemption if all conditions are satisfied. Fulton County Tax Comm’r v. GMC, 234 Ga. App. 459, 507 S.E.2d 772. Motor vehicles and mobile homes. - While motor vehicles and mobile homes are classified as separate classes of tangible property for ad valorem
purposes, the General Assembly did not intend to exclude this class of tangible property from the ambit of O.C.G.A. § 48-5-48.2 for purposes of freeport exemption. Fulton County Tax Comm’r v. GMC, 234 Ga. App. 459, 507 S.E.2d 772. Aircraft engines in the process of remanufacture. - Process of “heavy maintenance,” constituting the disassembly of the engine, the replacement of a number of expendable parts, the machine working of other parts to specification, its reassembly and testing over an approximate six to eight week period, is “substantial” for purposes of the exemption under O.C.G.A. § 48-5-48.2. Delta Air Lines, Inc. v. Clayton County Bd. of Tax Assessors, 246 Ga. App. 225, 539 S.E.2d 905, 2000 Ga. App. LEXIS 1200 (2000), cert. denied, No. S01C0204, 2001 Ga. LEXIS 370 (Ga. Apr. 30, 2001). Whether aircraft engines undergoing “light” maintenance were undergoing “substantial overhauling or rebuilding” for purpose of the exemption under O.C.G.A. § 48-5-48.2 is an issue meriting submission to a jury. Delta Air Lines, Inc. v. Clayton County Bd. of Tax Assessors, 246 Ga. App. 225, 539 S.E.2d 905, 2000 Ga. App. LEXIS 1200 (2000), cert. denied, No. S01C0204, 2001 Ga. LEXIS 370 (Ga. Apr. 30, 2001). Out of state retail sales via telephone or Internet. - There was no merit to a taxpayer’s argument that retail sales made via the telephone or Internet to out-of-state customers were not sales that occurred in Georgia. In determining whether a retail sale was made in Georgia, the court had to look to the location and conduct of the seller, rather than the location of the buyer, and here, all aspects of the retail sales made from the taxpayer’s Georgia warehouse to Internet and telephone customers occurred in Georgia. Aircraft Spruce & Specialty Co. v. Fayette County Bd. of Tax Assessors, 294 Ga. App. 241, 669 S.E.2d 417, 2008 Ga. App. LEXIS 1149 (2008), overruled in part, Gilmer County Bd. of Tax Assessors v. Spence, 309 Ga. App. 482, 711 S.E.2d 51, 2011 Ga. App. LEXIS 371 (2011).
RESEARCH REFERENCES ALR. Validity, construction, and application of sales, use, and utility taxes on retail
transactions of internet sellers and internet access providers, 30 A.L.R.6th 341.