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California Manufacturing Exemption

In an effort to drum up business development in the Golden State, California sales and use tax will be exempted from the gross receipts of businesses that sell, use, or consume tangible personal property (TPP) via manufacturing, processing, refining, fabricating, research and development, certain contracting usage, and sale or purchase of bio-technology equipment. The exemption aims to eliminate the 7.5% California state sales and use rate for taxpayers and promote business development for the next near-decade.  It’s important to mention that other taxes may still apply on these transactions.  These sales are not exempt from local California sales and use obligations or any use taxes. Also, state taxation where the revenue of tax dollars is directed towards any of these taxes is still applicable: Local Public Safety Fund, Education Protection Account, Local Revenue Fund, Fiscal Recovery Fund, and Local Revenue Fund 2011.

Passed with a two-thirds vote, the new tax exemption will begin on July 1 2014, and will now come to a close on July 1, 2021, (previously January 1, 2019) courtesy of the exemption provision amendment L. 2013 S90. The amendment also, after January 1, 2019, allows for TPP purchased by a qualified purchaser for the above mentioned uses to utilize the purchases in areas outside of a former enterprise zone or designated census tract. The California State Board of Equalization has yet to determine the specifics of which purchases will apply, though a regulatory exemption certificate form and instructions for usage and exemption will be released prior to the effective date.  

While much about Assembly Bill 93 is up in the air, the board estimates that it will result in savings of nearly $42 for every $1000 in qualified purchases of supplies and equipment.  With a cap of a whopping $750,000,000 of potential tax benefit for California taxpayers who specialize in research, manufacturing, contracting, or any of the other processes listed by the bill, the economic development initiative is sure to bring more business to the state of California.

How Can We Help?
Your current tax operation may be diligent, but it’s hard to split your focus between monthly compliance and in-depth research as well as other projects.  You may not have the resources or the time to afford such reviews.  Allyn’s tax team is staffed with seasoned tax professionals experienced in multi-state tax compliance and consulting for large US and global corporations.  We can use that experience to your advantage.  Contact us and we can create a customized cost-effective solution to meet your company’s needs in California or any other state. 

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