Potential investors have a new reason to give California a careful look. Beginning July 1, manufacturers and certain research and development operations can enjoy a generous exclusion from the state sales tax for purchasing or leasing new equipment.
Enacted in 2013 as part of the deal that phased out the long-time enterprise zone program, the new incentive will give manufacturers and scientific research and development a total exclusion from the state portion of the sales and use tax—which means an instant savings of 4.19 percentage points. The exclusion applies to the first $200 million in annual equipment purchases by each taxpayerBefore this month, this exemption was available only to businesses that located in enterprise zones. Now, it’s a statewide incentive.
California has the eighth-highest combined average state/local sales tax rate in the country, at 8.42%, and the second-highest in the west, which means a manufacturer’s or researcher’s sales tax burden would be cut almost in half. Local rates vary, depending on local add-ons, but some county rates, such as Los Angeles, Alameda, and San Mateo are as high as nine percent, while Santa Clara and San Francisco are 8.75%. Sales tax rate for Fullerton is currently 8%.
Source: Fullerton Chamber of Commerce