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California: Sales Tax Exemptions to Spark Growth

  • Jul 17, 2013 | Gail Cole

 California Biotech industry will benefit from sales tax exemption.

California Governor Jerry Brown (D) recently signed two bills designed to create "good jobs, middle class jobs, jobs that build communities and rev up our engine of economic growth." A sales tax exemption is central to the job-creating aspects of AB 93 and SB 90.

The new legislation allows a partial "statewide sales tax exemption on all manufacturing equipment and research and development equipment purchases for biotech and manufacturing companies." AB 93 is complemented by SB 90, which extends the biotech and manufacturing equipment exemption an extra year, to 8 years. Both take effect July 1, 2014.

The sales and use tax exemption of 4.1875% (the state rate is 7.5%) is expected to produce savings of over $41 "for every $1,000 in purchases of qualifying equipment."

Will your purchases qualify for the exemption? The California State Board of Equalization has announced it is "Preparing to Help Businesses Determine Whether They Qualify for New Tax Exemptions." Exact rules have not yet been determined, but the BOE is expected to "provide guidance" on the application of the exemption before it takes effect next year.

According to Gov. Brown, the new legislation "will help grow our economy and create good manufacturing jobs." In addition to the sales tax exemption, the bills offer hiring credits for "businesses in areas with the highest unemployment rate and poverty." Businesses may also take advantage of numerous tax credits, "based on the number of jobs to be created and retained…."

AB 93 and SB 90 are supported by such businesses as IBM, California Teamsters Public Affairs Council, International Association of Machinists and Aerospace Workers, and Utility Workers Union of America. However the legislation has been criticized by others, including Long Beach Mayor Bob Foster, who pointed out that "a number of populations … aren't included under the governor's proposal."

How does your business manage sales tax exemptions?

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.