For tax purposes, Tesla is attempting to have its Giga Texas manufacturing facility classified as a foreign trade zone. Tesla would save $270,000 a year in all jurisdictions, if accepted by Travis County, Texas commissioners and the Federal Trade Zones Board.
Tesla’s proposal was debated at a meeting with the Travis County Commission on February 23rd, who backed the effort by supporting a letter of no opposition to the automaker’s request. Ultimately, the local authorities’ support vote bodes well for Tesla, who expects to begin development later this year at the new Texas plant.
The benefits of being classified as a foreign trade region, according to the International Trade Administration website, include duty exemptions that remove charges on re-exports, duty deferral, which defers federal excise taxes on imports, and logistical benefits, among others.
If Giga Texas is eventually classified as a Foreign Trade Zone, Tesla is set to save money.
The Austin Business Journal writes:
“Through the program, imported inventory and inventory held for export in the foreign trade zone would be exempt from ad valorem tax. The designation could save Tesla $270,000 a year across all taxing jurisdictions, including $53,000 on Travis County taxes, according to county documents.”
On the Q2 2020 Earnings Call, Tesla CEO Elon Musk revealed that the automaker’s newest plant in the United States will be based in Austin. After beating out Tulsa, Oklahoma, Austin became the destination of choice for many Tesla executives, including Musk. Despite popular belief, the company’s headquarters are still in Palo Alto, California, and its largest manufacturing plant is still in Fremont, California.
This year, Tesla plans to open several new production facilities. Tesla will start production at its first European Gigafactory, known as Giga Berlin, later this year, in addition to the Texas facility. The company also has plans to start operations in India, as documents released early in 2021 revealed that the company had applied in the country for several business licenses. These have been approved, and Tesla is taking preliminary measures to get things in motion.
Giga Texas will be responsible for the production of the Tesla Cybertruck for customers in the eastern half of North America, along with Model 3 and Model Y production. The plant is projected to generate about 15,000 new jobs in Austin and the surrounding areas, giving those impacted by the COVID-19 pandemic a steady source of income.