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Tesla Giga Texas a Tax Free Zone

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Tesla’s new factory project in Texas is on its way to saving the company about $270,000 USD in taxes as they apply for foreign trade zone status in Travis County. The effort was supported by local officials who approved of the application during a meeting with the company.

Texas is already one of the US’s most business friendly states, ranking 3rd on a pacific research analysis for Burdens from state regulatory structures. It also has the most foreign trade zones out of any other state with 32 existing tax free areas. 

Tesla Strikes Gold in Texas

Although headquartered in California, Tesla’s latest Factory is currently being constructed in Bat City (Austin) where taxes are lower and regulations are more loose. The 2,100 acres plot of land initially purchased by the company for $97 Million. It was one of the cheaper land grabs, costing less than the German and Chinese land on which other Tesla plants are being built.

Applying for a foreign trade zone area would only add to the benefits of operating in the state, as it eliminates most import and export duties. It also heavily reduces taxes at every stage of the company’s operation, from production and manufacturing to the transport and sales of its vehicles.

The factory will produce Tesla Model 3, Model y, and Cybertrucks, which are supposed to begin production by the end of this year. It will provide 15,000 jobs for the state which will definitely help it rebound from the devastating effects of the pandemic.

Musk-Silicon Valley Feud

Musk moved to Texas from California back in the December of last year. Ever since California blocked Elon Musk from opening his factories during the pandemic. Elon heavily criticised the state and its officials, and the cracks in their relationship began to grow.

Personal income taxes also undeniably played a part in the move, as Texas collects no personal income tax compared to California which has the highest tax rates in the US. The growth of Tesla, similar to other big companies, caused it to seek out expansion outside of its initial base of operations, both to maximize profit and to expand its influence on the international stage.

But even with an outward looking Musk seeking out better deals in different states, many of his companies are still working in California, with projects like the Las Vegas Center tunnel construction and similar works in Los Angeles making up a large part of the Boring Company’s operations.  

Tesla Giga Texas, however solidifies the state one of Tesla’s main points of interest, and further benefits given to the company will undoubtedly pay off in terms of jobs and financial activity both in the current project and future company endeavours.

Factory Expansion Already on the Horizon?

In a letter to the federal Foreign-Trade Zones Board, Travis County Judge Andy Brown said Tesla’s project covers more than 2,500 acres with the ability to expand it to 3,500 acres, a lot more than the initial land purchase papers indicated. 

This suggests the company wants to expand its Austin factory in the future. Although documents filed with the Travis Central Appraisal District say that Tesla currently owns about 2,500 acres east of Austin. With the support from local officials and tax relief provided by the foreign trade zone designation can encourage the company to buy more land. 

As soon as Del Valle Independent School District provides a letter of approval, and the U.S Department of Commerce Foreign-Trade Zones Board finalizes the decision regarding the zone designation, a boost to both Tesla’s potential profits and the state’s employment numbers could open the door for further negotiations for factory expansion.

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