Legislative Update

Legislature Sends Manufacturing Support Measure to the Governor

stock manufacturing

The Senate and Assembly voted August 25 to approve AB 1951 (Grayson), a bill co-sponsored by CalTax and the California Manufacturers and Technology Association (CMTA) to support California jobs and economic growth by providing a full sales and use tax exemption for manufacturing and research-and-development equipment purchases up to $200 million.

The legislation now goes to Governor Gavin Newsom, who has until September 30 to sign or veto the bill (or choose to let the bill become law without his signature).

“The Legislature’s strong support for this bill illustrates the importance of this change to encourage job growth in our state,” CalTax President Robert Gutierrez said. “Each manufacturing job supports many other jobs in the community, and it is important that we keep this economic activity here in California, where it belongs.”

The Senate voted 30-3 early in the day, and sent the bill to the Assembly for a vote on amendments made in the Senate. The Assembly voted 69-0 to concur in the amendments.

Democratic Senator Robert Hertzberg presented the bill on the Senate floor, noting that many other states do not impose sales tax on manufacturing and R&D equipment (38 states have exemptions, and another five do not have a state sales tax).

“This year and last year, we’ve had an unbelievable surge in revenues,” Hertzberg said. “Those surges in revenues are informed by the IPOs and other economic activity, but the base of what we’re about is manufacturing. We have to deal with manufacturing. And 70 percent of these manufacturing [employers] have less than 20 people. So, what we’re seeking to do here is to conform and to extend this tax exemption that then incentivizes folks to buy machinery for their businesses.”

Hertzberg urged his colleagues to “take a longer-term view” by protecting manufacturing jobs and related economic activity, “as we are clearly going to face a downturn in the economy.”

There was no other discussion or debate on the Senate floor.

The Assembly voted after a brief presentation by Grayson in which he noted that the Senate amendments were technical in nature.

The legislation is supported by a long list of groups representing a broad range of industries in California.