A new law beginning on July 1, 2014 allows California based manufacturers to obtain a “partial exemption of sales and use tax” certificate for certain manufacturing equipment purchases. The certificate is much like the current resale certificates that most manufacturers have. To be eligible under this law, you must meet all three of these conditions:
- Be engaged in certain types of business, also known as a “qualified person.”
- Purchase “qualified property.”
- Use that qualified property for the uses allowed by this law.
A common scenario to easily meet these three conditions are when:
- A shop owner or purchasing agent
- Buys any tooling or equipment
- To be used in the process of producing products
There is no need to apply to the California BOE for the exemption. When you make qualifying purchases or leases, you must simply provide the seller with a “partial exemption certificate” to obtain the reduced tax rate. Once this partial exemption certificate is on file with your supplier, all your qualified purchases are taxed at a rate of 3.3125% until July 1, 2022.
For more details visit the CA Board of Equalization page at http://www.boe.ca.gov/sutax/manufacturing_exemptions.htm.