Partial Exemption May Be Available to Manufacturing Businesses


Beginning July 1, 2014, California businesses conducting manufacturing and certain research and development may qualify for a partial exemption of sales and use tax on certain equipment purchases and leases. To be eligible for this partial exemption, the business must meet all three of these conditions:

  1. Be engaged in certain types of businesses, also known as a "qualified person." These businesses include certain manufacturers and those involved in research and development in biotechnology, physical engineering, and life sciences.
  2. Purchase "qualified property." Qualified property includes machinery and equipment, including computers and software used to operate the machinery and equipment.
  3. Use that qualified property for the uses allowed under the law. Qualified uses includes the manufacturing, processing, refining, fabricating or recycling of tangible property and research, and development activities.

The partial sales and use tax exemption may result in significant tax savings - currently over 4% (reduced to approximately 3.5% after January 1, 2017).

For more detailed information of the exemption and definitions of these terms, issued by the California State Board of Equalization.

To determine if this provision may be applicable to your business and how to take advantage of this opportunity, contact your BPM Tax Advisor, call (415) 421-5757, or email bpm@bpmcpa.com.