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California: Sales Tax Exemption Expanded to Include “Advanced Manufacturing”


 

3/11/2013
 
Synopsis:
 
Starting in 2013, California expanded an existing sales and use tax exemption to include purchases made by manufacturers in the fields of science, engineering, and information technology for use in “advanced manufacturing.” This exemption is valid until July 1, 2016.
 
Suggested Action:
 
Contact a CohnReznick tax professional to determine how this expanded exemption can help your business.
 
Issue:
 
In 2010, California created a sales and use tax exclusion for property purchased for use in the design, manufacture, production, or assembly of either “advanced transportation technologies” or “alternative energy source products, components or systems.” Eligible advanced transportation technology purchases are purchases of tangible personal property used to build projects such as intelligent vehicle highway systems, electric vehicles, components of public transit systems, and fuel cells. Eligible alternative energy source products are purchases of tangible personal property used in the construction or renovation of alternative-source energy installations (such as solar, biomass, wind, or other energy types).
 
Effective January 1, 2013, California adopted legislation adding a sales tax exemption for “advanced manufacturing.” Advanced manufacturing means manufacturing processes that either create new or improve existing materials, products, and processes. Advanced manufacturing uses science, engineering, and information technology. The law cites a number of specific technology areas, such as nanotechnology and industrial biotechnology, that qualify as “advanced.” Advanced manufacturing also includes advancements in manufacturing systems used to produce materials and products. To qualify, these system advancements must increase sustainability and efficiency. The California Alternative Energy and Advanced Transportation Financing Authority (“CAEATFA”) is responsible for implementing this exemption (and the other exemptions noted above) which, when combined with the already existing exemptions, allows CAEATFA to issue $100 million of sales tax exemptions each year. 
 
Taxpayers wishing to use one of these exemptions must apply to the CAEATFA, but application forms for the “advanced manufacturing” exemption are not yet available. Taxpayers should keep detailed records of all potentially qualifying purchases.  Additional information on the “advanced manufacturing” exemption can be found at the CAEATFA webpage.
 
Contact:
 
For more information, please visit our State and Local Tax webpage and contact Patrick Duffany, Partner and National Director of State and Local Tax Services, at 860-368-3607.

 

 
Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.
 
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
 
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