Senator Gaines Announces Unanimous Board Of Equalization Support Of Manufacturing Exemption Bill

Wednesday, March 29, 2017

SACRAMENTO – Senator Ted Gaines (R-El Dorado) announced the California State Board of Equalization (BOE) has voted unanimously to support his Senate Bill 13, a measure that would provide much-needed tax relief to the manufacturing, research and development, agricultural and software industries by expanding an existing sales and use tax exemption.

“I’m pleased to have the BOE’s full support on this important tax-relief bill,” said Senator Gaines. “Businesses should be rewarded for their contributions to our state, not continually penalized at every turn. I’m going to let them keep more of their money so they can reinvest it back into their businesses, create more jobs and boost the economy, instead of handing it over to the government.”

Existing law allows manufacturers and research and development companies a sales and use tax exemption for their qualifying tangible personal property purchases up to $200 million a year. This includes property such as machinery and equipment used for manufacturing activities. Property that is considered to have a useful life of less than one year is excluded.

Senate Bill 13 seeks to define property as having a useful life of one or more years if the property includes a warranty for one or more years. It will also expand the definition of businesses eligible to receive this exemption by including software publishers and others who conduct agricultural business activities. Finally, it will increase the annual property purchase limit from $200 to $500 million a year.

Senator Gaines introduced this bill on the heels of recent reports indicating that the existing tax exemption has been severely underutilized. Since its inception on July 1, 2014 through September 30, 2016, businesses utilizing the exemption were only 21 percent of the original estimates made by the Department of Finance and Board of Equalization.

“For many manufacturers, it’s become increasingly difficult to do business in California,” said Board of Equalization Vice Chair George Runner. “Expanding this underutilized exemption to include more industries would be a much-welcomed boost for taxpayers, our job market and the economy.