An MMA Priority Bill During the 2018 Legislative Session
April 25, 2018
Under current law, a local governing authority may grant eligible warehouses a license to operate as a free port warehouse. A free port warehouse is exempt from all ad valorem taxes on personal property shipped out of state. For years, this has encouraged warehousing in Mississippi as opposed to our neighboring states who do not have an inventory tax. It has also saved our Mississippi manufacturers untold dollars on storage of their finished products until they are ready to be shipped out of state. This falls in line with the economic belief that goods that are meant for interstate commerce should not be subject to intrastate taxes. However, manufacturers still have to pay costly taxes on warehousing the parts and raw materials used to make their finished product.
With the rise of “just-in-time” manufacturing, companies are looking to increase their efficiency and cut down on costs by receiving raw materials as they are needed in the production process. This works best when there is a stock of the needed materials nearby. The burden of Mississippi’s inventory tax has not always made just-in-time manufacturing practical for our companies or, depending on location, has driven them to warehouse their raw materials across state lines.
“This important change to the free port warehouse exemption will allow Mississippi companies to compete on a level playing field. Given manufacturers demand for just-in-time components, the ability to exempt local inventory taxes will create additional opportunities for warehousing and logistics companies in our state. With this additional tool at our disposal, suppliers will no longer have to look to our neighboring states for this critical supply chain infrastructure.”
— Cayce Washington, Valley Tool, Inc.
During the 2018 session, the Mississippi Manufacturers Association made it a top priority to pass Senate Bill 2097, a clarification to the free port warehouse exemption that would account for just-in-time supply chains. This legislation allows for the exemption to apply to the storage of materials that will be transported “to not more than one other location in this state for production or processing into a component or part that is then transported to a final destination outside the State of Mississippi.” Beginning on July 1, Mississippi manufacturers can store their materials nearby, transport them to their facility for processing and then ship them out of state to their final destination without these additional taxes.
The passage of SB 2097 is a win for everyone. Designation of the free port warehouse exemption status remains at the sole discretion of the local governing authority. In those areas that opt to take advantage, however, manufacturers will save on production costs, potentially using those savings to reinvest, expand and hire more Mississippians. This will also have the added benefit of reducing production costs, thereby making goods more affordable for consumer and making our manufacturers more competitive.
MMA would like to thank Sen. Gray Tollison and Rep. Tommy Reynolds for their tireless advocacy for this legislation, as well as House and Senate leadership for supporting this sensible, pro-business measure.