Starting July 1, 2014, a meaningful new partial sales and use tax exemption for California businesses engaged in manufacturing and/or R&D activities became available. Businesses engaged in these qualified activities may purchase or lease “qualified property” at a reduced state-level sales and use tax rate. In general, qualified property is machinery, equipment and other fixed assets used predominantly in manufacturing or research and development.
For eligible businesses, qualified property purchased between 7/1/2014 – 12/31/2016 may have been purchased or leased with a 4.1875% tax rate reduction. Qualified property purchased on or after 1/1/2017 may be purchased or leased with a 3.9375% tax rate reduction. In essence, and depending on where in California a business operates—the partial sales and use tax exemption can reduce a business’ sales and use tax expense on qualified property by roughly 50 percent.
On top of prospective cash taxes to be saved, businesses that were unaware or those that did not take full advantage of this program in the past may qualify for refunds on overpayments of California sales and use tax.
Our team of experts have worked with a broad range of clients from all over California to secure millions in benefits from this relatively new program. Please contact us with any questions on how CALincentives can assist you in this area.