Assembly Revenue and Taxation Committee

Sales Tax Exemption for Manufacturing Equipment Scheduled for May 5 Vote

stock manufacturing

Legislation to promote job growth by fully exempting most California manufacturing and research-and-development equipment from sales tax (AB 1951, Grayson, co-sponsored by CalTax and the California Manufacturing and Technology Association [CMTA]) is scheduled for a May 5 vote in the Assembly Revenue and Taxation Committee.

Along with expanding the current partial exemption to be a full exemption from state and local sales and use taxes, AB 1951 would eliminate – from 2023 through 2028 – the cap that limits the current partial exemption to equipment purchases under $200 million.

“If we make California more competitive for manufacturing operations, we will get more manufacturing jobs and investments – it’s just that simple,” CalTax President Robert Gutierrez said. “The result is a win-win, with more economic growth and long-term revenue for state and local government, and more in-state job opportunities for Californians.”

The committee took testimony on the bill during its April 25 hearing.

“AB 1951 seeks to incentivize long-term investments in California’s manufacturing industry …,” Assembly Member Tim Grayson testified. “This will facilitate the growth, hiring, and training of a skilled workforce for the future.”

Grayson was joined by CMTA President Lance Hastings and CalTax Sales Tax Consultant Joan Armenta-Roberts.

“This bill would spur economic activity and growth immediately because it would demonstrate the state of California has skin in the game,” Hastings testified.

Armenta-Roberts told the committee that her experience working with California-based businesses indicates that the partial exemption is not enough to make California competitive with lower-cost states.

The California Tax Reform Association, which has no employees, sent a contract lobbyist to testify against the bill. The association opposes nearly every tax incentive, using a static analysis to argue that incentives result in lost revenue for the state – and less funding for the state employee unions that comprise the bulk of its membership.