Renewable Energy, R&D and Manufacturing Companies Take Note:Reduced Sales-and-Use Tax May Now Be Available to You in California
The California Department of Tax and Fee Administration has provided a reduced-sales and use tax rate to certain qualified manufacturers and R&D companies. The lower rate applies to qualified purchases of assets used in their businesses. Qualified multi-state operators doing business in California are allowed the lower state rate of 3.3125% plus any applicable local or district taxes for qualified purchases of equipment.
As of January 1, 2018, “qualified persons” include “businesses primarily engaged in operating solar, wind, geothermal, biomass, and certain other electric power generation facilities as described in the North American Industry Classification System (NAICS) under NAICS codes 22111 to 221118, inclusive, or businesses primarily engaged in electric power distribution as described in NAICS code 221122,”iIncluding storage and distribution through the electric grid, but not the transmission of electric power to consumers.
In addition, the definition of “qualified tangible personal property” was expanded to include special purpose buildings and foundations used as an integral part of the generation, production or storage and distribution of electric power.
No application is needed to receive the reduced rate, but the taxpayer must provide the seller with a completed and signed “partial exemption certificate” to receive the reduced tax rate.
The exemption certificates are found here.
The exemption does not apply to any tangible personal property purchased during any calendar year that exceeds $200 million worth of purchases of qualified tangible personal property. For purposes of this limitation, in the case of any qualified person that is required or authorized to be included in a combined report, the aggregate of all purchases of qualified tangible personal property for which an exemption is claimed may not exceed $200 million. Additionally, the exemption does not apply to the sale or use of property that, within one year from the date of purchase, is removed from California or converted to a non-qualifying use
With solar development in California continuing to grow and the capital outlay for any solar project significant, this exemption may result material savings to any developer initiating new projects.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. 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 specific to, among other things, your individual facts, circumstances and jurisdiction. 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 partners, 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.