California's Competitiveness

CalTax Cosponsors Sales Tax Exemption Legislation to Spur Growth in Manufacturing

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Assembly Member Tim Grayson introduced legislation February 10 to eliminate the sales tax on most purchases of manufacturing equipment – the “California Manufacturing Attraction and Development Exemption,” or “CA MADE.”

The legislation, AB 1951, is cosponsored by CalTax and the California Manufacturers & Technology Association (CMTA).

“This legislation will help keep manufacturing jobs in California, and will have a ripple effect on other industries throughout the state,” CalTax President Robert Gutierrez said. “A more competitive tax structure helps everyone in this state, because we all benefit when manufacturing jobs are held by Californians.”

Under current law, the partial sales tax exemption for manufacturing or research-and-development equipment purchases is limited to 3.9375 percent. Under AB 1951, taxpayers would receive a complete sales tax exemption for the purchase of manufacturing or R&D equipment. Additionally, the proposal would eliminate the $200 million cap on equipment purchases for a unitary group and would expand eligibility for the exemption so it would be more effective.

“By focusing on reducing the tax burden to expand manufacturing in California, we can increase the state’s domestic cost competitiveness and create a critical tipping point for long-term capital investments that might otherwise scale-up production in other locations,” CMTA President Lance Hastings said. “This is a critical piece of developing our 10-year plan to exponentially grow California manufacturing, and we couldn’t be more excited.”

Thirty-eight states have sales and use tax exemptions on manufacturing equipment or have no sales tax at all, creating a competitive disadvantage for California.

“Manufacturing is what made California a global hub of innovation and technological progress,” said Grayson, a Democrat who represents a district in Concord. “Every Californian wins when manufacturing grows. Opportunities are created for the middle class, our economy gets stronger, and our state revenues reap benefits from an influx of economic activity. AB 1951 is uniquely designed to send a serious signal to companies across the country that are looking for cost-competitive regions to scale up production, that they can compete here.”

The bill was introduced with 10 coauthors, and more are expected to sign on as the bill moves through the legislative process. The original coauthors, all Democrats, are Assembly Members Ken Cooley, Jim Cooper, Tom Daly, Mike Gipson, Cottie Petrie-Norris, Sharon Quirk-Silva, James Ramos, Rudy Salas, Carlos Villapudua, and Jim Wood.