MS 2020-07-D-Miller-May-13-2020-Tax-Exemption-Pursuant-to-Miss-Code-Ann-Section-27-31-53 2020-05-13

Can a Mississippi county exempt a production facility at the same address as a free-port warehouse from ad valorem taxes?

Short answer: Yes, with conditions. The AG concluded that under the 2018 amendments to Miss. Code Ann. § 27-31-53(d), a production or processing facility at the same physical address as a licensed free port warehouse, but in a separate facility, structure, place, or area, qualifies as 'one (1) other location' eligible for ad valorem tax exemption at the discretion of the county board of supervisors. Pre-2018 free port licenses do not automatically extend to production facilities; a new application is required.

Disclaimer: This is an official Mississippi Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed Mississippi attorney for advice on your specific situation.

Plain-English summary

Mississippi's free port warehouse exemption is an ad valorem tax break for personal property in transit. Section 27-31-53 lists four scenarios qualifying for the exemption. Subsection (d), added in 2018, covers property "consigned or transferred to a licensed free port warehouse ... for storage pending transit to not more than one (1) other location in this state for production or processing into a component or part that is then transported to a final destination outside of the State of Mississippi."

Forrest County had a real-world question: a manufacturer's free port warehouse and its production facility shared a physical address but operated as separate buildings. Did that satisfy "one (1) other location"? The AG said yes, in two parts:

Same-address case: A production or processing facility at the same physical address as the warehouse can qualify as "one (1) other location" if it is a "completely separate facility, structure, place or area" from the warehouse. The statute does not require physically distant addresses; what matters is operational separation.
Pre-2018 license case: A free port warehouse license originally granted in 2016 (before subsection (d) was added) does not automatically extend to a production facility that the original license did not contemplate. The Board must consider the production facility under a new application that gives it the chance to make a fresh factual determination on whether to grant the exemption.

The decision is discretionary: the county and municipality may grant the exemption, but they are not required to. The Board should make findings about the separation between facilities and record them on the minutes when extending or denying the exemption.

Currency note

This opinion was issued in 2020. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The free port warehouse exemption sits in Miss. Code Ann. §§ 27-31-51 to 27-31-61. It is a constitutionally authorized exemption for personal property in transit through the state, designed to make Mississippi competitive as a logistics and manufacturing location. Section 27-31-53 enumerates four qualifying scenarios:

(a) Property moving in interstate commerce through Mississippi.
(b) Property consigned to a licensed free port warehouse for storage in transit to a final destination outside Mississippi.
(c) Property manufactured in Mississippi and stored in separate facilities maintained by a manufacturer-licensed free port warehouse.
(d) Property consigned to a free port warehouse for storage pending transit to one other in-state location for production or processing into a component or part that is then transported out of state.

Subsection (d), added in 2018, was the new piece. Before 2018, a manufacturer with raw materials warehoused at a free port site and then processed at a separate in-state facility had no clear path to the exemption. The 2018 amendment closed that gap by recognizing the warehouse-to-processing-to-export sequence as qualifying.

The Forrest County question was a definitional one: does "one (1) other location" require a different street address, or does it just require operational separation? The AG looked to § 27-31-51(2), which defines a manufacturer's free port warehouse as one that "maintains separate facilities, structures, places or areas for the temporary storage and handling of such personal property pending transit to a final destination outside the State of Mississippi." The word "separate" was critical. Black's Law Dictionary defines "separate" as "individual, distinct, particular, disconnected." Operational separation, not address separation, is the test.

The second question was about retroactivity. The Forrest County free port license predated the 2018 amendment by two years. The AG reasoned that when the Board granted the 2016 license, the production facility was not in scope, the statute did not address that scenario. Extending the existing license to cover the production facility, without a new Board decision, would skip the discretionary review step the statute requires. The right path: a new application that asks the Board to consider the production facility on its facts.

The discretion piece deserves emphasis. Section 27-31-53 grants the exemption "in the discretion of" the county board and the municipal authority. It is not automatic. A board can choose to grant it (most do, since it is a competitive economic development tool) or decline. The decision belongs to the local elected body.

Common questions

Q: How do you prove "separate facility, structure, place or area" at the same address?
A: The opinion does not specify but practical evidence would include separate buildings or sealed-off sections of one building, separate inventory tracking, separate access points, separate signage, and separate operations. The Board's factual determination is what counts; the evidence is what supports it.

Q: Why does a new application matter if both subsections (b) and (d) point to the same exemption?
A: Because the Board's discretion attaches to each application. A 2016 application asked the Board to evaluate a different scenario (warehouse only). The 2018 amendment opened a new scenario (warehouse plus processing). The Board never made a discretionary call on whether to extend the exemption to the processing piece. Forcing a new application gives the Board its statutorily-required choice.

Q: Can the Board decline to grant the exemption even if the legal criteria are met?
A: Yes. The "discretion" language in the statute is real. Boards typically grant the exemption to support manufacturing and exports, but a board could decline if it concluded the local fiscal impact was unfavorable.

Q: Does this affect the county or just the city, or both?
A: Both. Each governing authority (the county board of supervisors and any municipal authority) has independent discretion. A taxpayer may need approvals from both.

Q: What about properties acquired or facilities built between the original license and the new application?
A: Those would be addressed in the new application. The opinion's logic is that the Board's review is fact-driven and prospective, so it covers the current state of the facility at the time of the new application.

Citations and references

Statutes:
- Miss. Code Ann. § 27-31-53 (Free port warehouse exemption scenarios)
- Miss. Code Ann. § 27-31-53(d) (2018 amendment: storage to in-state production)
- Miss. Code Ann. § 27-31-51 (Free port warehouse licensing)
- Miss. Code Ann. § 27-31-51(2) (Manufacturer free port warehouse with separate facilities)
- Miss. Code Ann. §§ 27-31-51 to 27-31-61 (Free port warehouse framework)

Source

Original opinion text

May 13, 2020

David B. Miller, Esq.
Attorney for the Forrest County Board of Supervisors
Post Office Box 1310
Hattiesburg, Mississippi 39403-1310

Re: Tax Exemption Pursuant to Miss. Code Ann. Section 27-31-53

Dear Mr. Miller:

The Office of the Attorney General is in receipt of your request for the issuance of an official opinion.

Questions Presented

Under the 2018 amendments to Miss. Code Ann. Section 27-31-53, does a production or processing facility located at the same physical address as a licensed free port warehouse qualify as "one (1) other location in this state?"

If so, to the extent an exemption of personal property qualifying under Section 27-31-53(d) specifically is discretionary, is the Board of Supervisors required to exempt such property pursuant to a free port warehouse exemption granted for a five (5) year term effective January 1, 2016, some two years before the effective date of the 2018 amendments?

Brief Response

A production or processing facility located at the same physical address as a licensed free port warehouse, but located in a completely separate facility, structure, place or area, qualifies for an exemption pursuant to Section 27-31-53(d), at the discretion of the governing authority of the county or municipality where the warehouse or storage facility is located.

The Board of Supervisors is not required to exempt personal property pursuant to a free port warehouse exemption granted for a five (5) year term effective January 1, 2016, some two years before the effective date of the 2018 amendments. A new application should be submitted for a free port warehouse license that includes the production or processing facility that was not previously considered by the Board.

Applicable Law and Discussion

Miss. Code Ann. Sections 27-31-51 through 27-31-61 provide for the licensing of qualified free port warehouses and granting exemptions from ad valorem taxes to certain personal property which is temporarily stored in such warehouses while in transit to another state. Section 27-31-53 states that:

All personal property in transit through this state which is (a) moving in interstate commerce through or over the territory of the State of Mississippi, (b) which was consigned or transferred to a licensed "free port warehouse," public or private, within the State of Mississippi for storage in transit to a final destination outside the State of Mississippi, whether specified when transportation begins or afterward, (c) manufactured in the State of Mississippi and stored in separate facilities, structures, places or areas maintained by a manufacturer, licensed as a free port warehouse, for temporary storage or handling pending transit to a final destination outside the State of Mississippi, or (d) consigned or transferred to a licensed free port warehouse, public or private, within the State of Mississippi, for storage pending transit to not more than one (1) other location in this state for production or processing into a component or part that is then transported to a final destination outside of the State of Mississippi, may, in the discretion of the board of supervisors of the county wherein the warehouse or storage facility is located, and in the discretion of the governing authorities of the municipality wherein the warehouse or storage facility is located, as the case may be, be exempt from all ad valorem taxes imposed by the respective county or municipality and the property exempted therefrom shall not be deemed to have acquired a situs in the State of Mississippi for the purposes of such taxation.

(Emphasis added).

At issue is what qualifies as "one (1) other location in this state." Miss. Code Ann. Section 27-31-51 provides the definition for free port warehouse licensing; however, it does not specifically define what constitutes "more than one (1) other location in this state for production or processing." Section 27-31-51(2) does set forth that the manufacturer of personal property maintain "separate facilities, structure, place or area" for temporary storage of personal property pending transfer of the property to a location outside of Mississippi. Section 27-31-51(2) specifically states as follows:

A manufacturer of personal property that maintains separate facilities, structures, places or areas for the temporary storage and handling of such personal property pending transit to a final destination outside the State of Mississippi shall be eligible for licensing under Sections 27-31-51 through 27-31-61 as a "free port warehouse," and any license issued to such a manufacturer before January 1, 2012, is hereby ratified, approved and confirmed.

Black's Law Dictionary, Fifth Edition, defines "separate" as "individual, distinct, particular, disconnected." Section 27-31-51 clearly and unambiguously allows for an exemption of personal property stored in a warehouse or storage facility if it is maintained separately from the processing or production facility. The statute does not specifically require that the warehouse or storage facility be maintained at a physical address other than that of the processing or production facility. It is, therefore, the opinion of this office that a production or processing facility, though located at the same physical address of the warehouse or storage facility, but determined by the governing authority to be a completely separate facility, structure, place or area from the warehouse or storage facility, may qualify as "not more than one (1) other location in this state" as required by Section 27-31-53. Of course, it is solely within the discretion of the governing authority of the county or municipality wherein the warehouse or storage facility is located to determine whether an exemption will be granted to personal property being stored at such facility pursuant to Section 27-31-53.

In response to your second question, it is clear from your letter that the original free port warehouse license was obtained in 2016, prior to the 2018 addition of subparagraph (d) to Section 27-31-53. The 2018 amendment to Section 27-31-53 authorizes a tax exemption for incoming raw materials and work-in-progress, which are being stored prior to being produced or processed at an in-state facility and then being transported from that facility to a destination out of state. Section 27-31-53(d) specifically states as follows:

All personal property in transit through this state which is . . .

(d) consigned or transferred to a licensed free port warehouse, public or private, within the State of Mississippi, for storage pending transit to not more than one (1) other location in this state for production or processing into a component or part that is then transported to a final destination outside of the State of Mississippi, may, in the discretion of the board of supervisors of the county wherein the warehouse or storage facility is located, and in the discretion of the governing authorities of the municipality wherein the warehouse or storage facility is located, as the case may be, be exempt from all ad valorem taxes imposed by the respective county or municipality and the property exempted therefrom shall not be deemed to have acquired a situs in the State of Mississippi for the purposes of such taxation.

When the Forrest County Board of Supervisors granted the 2016 free port warehouse license, it likely did not consider the production or processing facility when making its determination to grant the license and exemptions for the personal property being stored at the warehouse or storage facility since that language was absent from the statute at the time. Consequently, a new application should be submitted for a free port warehouse license to include the production or processing facility. At that time, the Board may properly consider and make a factual determination as to whether it will grant a tax exemption for the personal property that will be transferred from the warehouse or storage facility to the production or processing facility to be finally transported from that facility to a destination out of state.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Avery Mounger Lee
Avery Mounger Lee
Special Assistant Attorney General