Title
Conduct a Public Hearing to Consider/Discuss/Act on the Continued Taxation of “Goods-In-Transit”
Summary
MEETING DATE: December 6, 2011
DEPARTMENT: Finance
CONTACT: Rodney Rhoades, Finance Director
RECOMMENDED CITY COUNCIL ACTION:
· Elect to continue to opt-out of “Goods-In-Transit” Exemption
ITEM SUMMARY:
· Recent legislative changes to “goods-in-transit” (GIT) tax laws require a public hearing and council action by December 31, 2011 for those taxing jurisdictions choosing to “opt out” of the GIT exemption.
· If no action is taken, the goods will be subject to automatic exemption for 2012. The City may later elect to tax such goods for subsequent years if it fails to act this year.
BACKGROUND INFORMATION:
· In 2007, the Legislature passed Tax Code Section 11.253 creating the “Goods-in-Transit” exemption. Recent changes clarified certain aspects of the exemption to include goods that are shipped inside or outside the state within 175 days and where goods are stored within the state.
· Like the original exemption, this revised GIT exemption is automatic unless the governing body adopts an ordinance that specifically taxes the property. To the best of our knowledge, all Collin County taxing entities except for Frisco, elected to ‘opt-out’, or tax, GIT in 2007 including the City of McKinney.
FINANCIAL SUMMARY:
· The Collin Central Appraisal District (CCAD) has not prepared an estimate of potential lost revenue if the City of McKinney did not choose to opt out the exemption. CCAD has indicated that currently, no property qualifies for the exemption under the existing Section 11.253 of the Tax Code. Furthermore, no “goods-in-transit” applications have been filed with the District.
· CCAD predicts the initial impact would be limited as many businesses store goods in their own facilities. However, there is a possibility that a business may transfer their goods to a 3rd party warehouse to take advantage of the exemption.
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