New Sales Tax Exemption for Manufacturers, R&D

If you are purchasing equipment for your manufacturing / R&D company or selling equipment to others, California’s new Manufacturing Exemption can reduce the sales tax by more than half, starting July 1, 2014. Construction contractors are also eligible to receive the exemption for certain equipment used in the construction of manufacturing or R&D facilities.

The exemption reduces the state portion of the sales tax by 4.1875%, taking it from 7.5% to just 3.3125% for qualified purchases. You can use it for up to $200 million in qualified purchases during a calendar year. Qualified purchases include equipment used for manufacturing, processing, refining, fabricating, recycling, and research and development. Leased equipment may also qualify.

Manufacturers do not have to apply to Board of Equalization (BOE); however, you must have an Exemption Certificate to provide to your vendor at the time of sale. It is a one-page form available on the BOE website below.

The key is qualified “person” and qualified purchase. Please read the qualifications requirements on the BOE website prior to completing your Exemption Certification for vendors. You may email or call BOE representatives with further questions.

Don’t miss out on this savings opportunity for any new equipment purchases from July 1, 2014 to July 1, 2022. Full details and forms are on the BOE website.

More Information:

CA Board of Equalization – Manufacturing Exemption

http://www.boe.ca.gov/sutax/manufacturing_exemptions.htm#Overview

Form – Partial Exemption Certificate (PDF)

http://www.boe.ca.gov/pdf/boe230m.pdf