Senate Governance and Finance Committee

Sales Tax Exemption for Manufacturing Equipment Wins Unanimous Approval

stock manufacturing

The Senate Governance and Finance Committee voted unanimously June 29 to approve AB 1951 (Grayson), a bill co-sponsored by CalTax and the California Manufacturers and Technology Association (CMTA) to provide a full sales and use tax exemption for manufacturing and research-and-development equipment purchases up to $200 million.

The committee’s bipartisan 5-0 vote sends the bill to the Senate Appropriations Committee.

“AB 1951 seeks to incentivize long-term investment and fuel expansion in California’s manufacturing industry by providing a full sales and use tax exemption,” Assembly Member Tim Grayson told the tax policy committee. “Over the last two years, California has attracted only 1 percent of manufacturing investments. … This bill will make California more attractive to investment.”

Mark Taylor, representing the Boeing Company, testified that the aerospace industry employs nearly 500,000 Californians, but must consider costs when making investment decisions. Taylor said AB 1951 “will reduce the cost of expanding manufacturing facilities in California and help to level the playing field with other lower-cost states.”

Senator Jim Nielsen, the vice chair of the committee, remarked to Grayson: “Assemblyman, there are an awful lot of small- and medium-sized businesses in support, and we often forget them.”

Proponents noted that without the tax exemption,  many businesses will purchase and use manufacturing equipment in other states, so California would not receive sales tax, and also would miss out on the revenue relating to the workers who operate the equipment, the products produced by the equipment, the multiplier effect on other industries, etc.

In other action from the committee:

Housing Authority Measure Rejected. The committee rejected AB 2053 (Lee), a proposal to establish the California Housing Authority with the ability to issue revenue bonds, but allowed the author to bring it back for reconsideration at a future hearing.

Ventura County Tax Proposal Advances. The committee voted 4-1 to approve AB 2453 (Bennett), a CalTax-opposed bill authorizing the Ventura County Transportation Commission to increase its sales tax up to 0.5 percent – putting the local tax rate above the state’s 2 percent cap – to fund countywide transportation programs.