Chamber Supports HB 48 - Reducing Inventory Taxes

Wednesday, February 01, 2012

The Georgia Chamber of Commerce supports improving Georgia’s economic competitiveness by reducing inventory taxes. The Chamber has designated HB 48 as a scorecard issue for 2012.

Georgia’s Current Inventory Tax

• In 2010, Georgia voters agreed in a statewide referendum to do away with the inventory tax that the state charged businesses.
• However, the larger share of inventory taxes are still levied and collected by local governments, including cities, counties, schools and special districts. These taxes are a component of the total property tax imposed on a company.
• The rate varies throughout the state and is calculated by applying a company’s county-specific property tax rate to 40% of the value of its existing inventory.
• Georgia currently allows a freeport exemption to the inventory tax as a local option. Localities may exempt three categories of goods from up to 100 percent of taxation: inventory in the process of production, finished goods produced in Georgia and finished goods awaiting out-of-state shipment.
• In addition, dealers of heavy equipment, farm equipment, automobiles and boats are all exempt from local inventory tax.

Why We Need to Reduce Inventory Taxes

• Georgia is one of only 14 states nationwide that levy some form of inventory tax. None of Georgia’s neighbors -- Alabama, Florida, North Carolina, South Carolina and Tennessee -- collect property taxes on business inventories.
• The inventory tax, which is paid without regard to profitability, makes Georgia less appealing to businesses and may be incentive for relocation throughout the Southeast.
• The inventory tax creates a strong incentive for larger companies to locate their inventory in other states to avoid the tax and hurts locally owned, small businesses that typically maintain their inventories on site -- businesses that provide billions of dollars in sales tax revenue, employ one in five working Georgians and are expected to help lead the state out of its current economic recession.
• Further, inconsistencies in the interpretation and administration of the inventory tax can result in inflated tax assessments, which force taxpayers to choose between overpaying or pursuing costly litigation to correct the assessment.

Solution - HB 48

• HB 48, sponsored by Rep. Jay Powell (Camilla), would expand the existing local freeport option to exempt, in part or whole, business inventory from taxation. 
• The legislation would allow local governments to expand the current freeport exemption and authorize a call for a referendum to approve the creation of a level two freeport exemption.
• The level two freeport exemption would include the exemption of any business inventory or real property not covered in the current freeport exemption from local property tax. 
• Counties would have the ability to implement the level two freeport exemption at the 20%, 40%, 60%, 80% or 100% level.
• This would provide an appropriate option for local governments to remove this burdensome tax, attracting new business and helping existing business grow throughout the state.