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Excerpt from the California State Board of Equalization publication
338 Beginning
on July 1, 2014, and extending until June 30, 2022, “qualified”
purchasers of manufacturing, and research and development equipment
will be eligible to obtain a partial exemption of the sales and use
tax rate. This partial tax exemption is the result of the passing of
Assembly Bill 93 as amended by Senate Bill 90 that were signed by
the Governor on July 11, 2013. (Visit our Industry Guide on the
Manufacturer’s Exemption for details.) For the
period beginning July 1, 2014, through December 31, 2016, the
exemption will reduce the state sales and use tax rate by 4.1875
percent. For the period beginning January 1, 2017, through June 30,
2022, the exemption reduces the state sales and use tax rate by
3.9375 percent to coincide with the 0.25 percent state rate
reduction. The exemption applies to the state tax portion only. It
does not apply to any local, city, county, or district tax. The
exemption on qualifying purchases is limited to $200 million per
year per qualified person. A
“qualified person” means a person who is primarily engaged (50
percent or more of the time) in those lines of business described in
the North American Industry Classification System (NAICS) Codes 3111
to 3399, inclusive, 541711, or 541712 published by the United States
Office of Management and Budget (OMB), 2012
edition. In order
to qualify for the exemption, the property must be used primarily in
manufacturing, processing, refining, fabricating, recycling of
tangible personal property; research and development; maintaining,
repairing, measuring, or testing any qualified tangible personal
property; or used by a contractor in the performance of a
construction contract for a qualified person that will use the
property as an integral part of the process as described above or as
a research and storage facility in connection with those
processes. Qualified
property includes: Tangible
personal property used in pollution control that meets established
state or local government agency standards. Machinery
and equipment, including component parts and contrivances; equipment
or devices used or required to operate, control, regulate, or
maintain the machinery. Special
purpose buildings and foundations used as an integral part of the
manufacturing process, or that constitute a research or storage
facility. Qualified
property does not include: Buildings
used solely for warehousing. Consumable
property with a useful life of less than one year.
Furniture,
inventory, and equipment used in the extraction process or storage
of finished products that have completed the manufacturing,
processing, refining, fabricating, or recycling process.
Property
used primarily in administration, general management, or marketing.
Property
used in any other aspect of the business other than those qualifying
uses. Leases regarded as “continuing sales and purchases” of
“qualified property” by “qualified” lessees also qualify for the
exemption. The
California Board of Equalization (BOE) is currently drafting
Regulation 1525.4, Manufacturing and Research & Development. For
further information, see our Business Taxes Committee calendar for a
link to the issue paper and Interested Party meeting
dates. Download this article here . Visit the California State Board of
Equalization web site for additional details. http://www.boe.ca.gov/
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