Tax Help for the Manufacturing Industry
Californian's manufacturing sector is vital to our state's job market and economy. It employs more than one million people and adds more than $200 billion to our economy every year. Unfortunately, doing business in California has become increasingly difficult. To be successful, it's important for business owners to know not only their tax obligations but also the tax benefits available to them.
My goal is for all business owners to pay the right amount of tax owed – not too little, but also not too much. The best way to achieve this is through voluntary compliance. Most taxpayers want to do the right thing, but sometimes they need help to understand their obligations.
To better assist manufacturers, this webpage provides helpful information and links to additional resources.
Additionally, I hosted a "Tax Help for Manufacturers" telephone townhall on July 1 with the California Manufacturers and Technology Association to discuss tax issues that affect the manufacturing industry. In case you missed it, here is the audio recording.
Manufacturing/R&D Tax Exemption
New equipment purchases and leases may be eligible for a partial tax exemption. Beginning July 1, 2014, manufacturers and certain types of research and development firms may be exempt from more than half of the state sales tax when buying or leasing certain types of machinery and equipment. Learn more.
Other Sales Tax Exemptions
Not everything in California is taxed. In fact, many types of vehicles and vessels, manufactured homes and buildings, farm equipment, and fuel are partially or totally exempt from sales and use tax when sold under certain circumstances. Learn more.
Alternative Energy or Advanced Transportation Projects
Tax breaks may be available to companies that manufacture or design advanced transportation or alternative energy projects. If approved, a qualified project may receive a sales tax exclusion. The program is overseen by the California Alternative Energy and Advanced Transportation Financing Authority. Learn more.
If your business purchases supplies, equipment, or machinery from outside of California and tax isn't collected, you may owe use tax. Use tax is similar to sales tax and is generally the same rate as the sales tax rate where the items will be used. Use tax may also be due if you give away items or otherwise take them out of your inventory. Learn more.
If you sell items to buyers outside of California, those sales generally are not subject to California sales tax. However, if items sold are first delivered in California or to a California resident, the sale may be subject to tax. Learn more.
Although equipment, machinery, tools, and supplies are taxable, inventory held for sale is not taxable. Generally, all property is subject to property tax unless exempt by law. Learn more.
Get it in Writing
Tax and fee laws can be complex and difficult to understand. If you have specific questions about sales and use tax law, we recommend that you get answers in writing. This will protect you from tax, penalties, and interest in the event you receive erroneous information. Learn more.
- Manufacturing and Research & Development Exemption
- Sales and Use Tax: Exemptions and Exclusions
- California Property Tax: An Overview
- Use Tax Guide for Businesses
- Avoid Tax Traps
- Your Taxpayer Rights
If you have questions or need assistance, please do not hesitate to contact me.