Manufacturing industry tax credit deductions
On July 1, 2014, California manufacturers and certain research and developers qualified for a partial exemption of sales and use tax on the purchase and/or lease of specified manufacturing and research and development equipment. To be eligible for these manufacturing tax credits, three conditions needed to be met:
- The taxpayer must be a “qualified person” who is primarily engaged (50% or more of the time) in all forms of manufacturing, R and D in biotechnology, physical, engineering, and life sciences.
- Purchase “qualified tangible personal property” which includes machinery and equipment as well as their components and parts.
- Use the qualified tangible personal property in a qualified manner.
As of 2018, California Assembly Bill 398 extended the partial sales and use tax exemption for purchases and/or leases of certain tangible property that are used in manufacturing and R & D activities at the current rate of 3.3125% vs the standard rate of 7.25%.
This exemption was expanded to include agricultural processing and electric power generation, storage, and distribution. The bill also amends the definition of “useful life” to state that tangible personal property has a useful life of one or more years. This provision of the California Assembly Bill 398 applies retroactively to property that was purchased and/or leased on or after July 1, 2014.
Every line item counts
With these changes to tax credits and deductions for the California manufacturing industry, taxpayers who paid tax or were assessed unpaid tax on tangible personal property are entitled to a refund of any taxes paid.
At GYL we provide our clients with a full range of accounting, tax, and consulting services to help you maximize the value of this and other important tax incentives. GYL is a full-service accounting and business consulting firm that is designed to meet all the financial needs of your business. Our firm strives to keep current and up-to-date on all new tax laws and legislation in order to identify tax planning opportunities that minimize your current as well as future tax liabilities.
If you’re looking to outsource your accounting, GYL can provide your business with quarterly as well as annual accounting services whether it be a short-term or long-term situation.
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There are many tax incentives that tax laws can provide for manufacturers and research developers if you know where to look for them. GYL provides accounting services for manufacturing companies in California, including uncovering substantial tax-credit deductions.
The professionals at GYL have worked with hundreds of manufacturing businesses and have a deep knowledge and understanding of the industry. Call our offices to schedule your free consultation.