Sales and Use Tax: exemptions: manufacturing.

Plain English Breakdown

The official source material does not specify the exact amount of money saved by extending the exemption, nor does it detail specific performance indicators or data collection requirements for future tax expenditures.

Sales and Use Tax Exemption Extension for Manufacturing

AB-856 extends the partial sales and use tax exemption for manufacturing activities until January 1, 2031, removes reporting requirements, and prevents state reimbursement to local agencies for lost revenue.

What This Bill Does

• Extends a partial sales and use tax exemption for manufacturing activities until January 1, 2031.
• Removes the requirement for the California Department of Tax and Fee Administration to report on the total dollar amount of exemptions.
• Prevents state reimbursement to counties and cities for revenue lost due to this tax exemption extension.

Who It Names or Affects

• Manufacturing businesses that qualify for the partial sales and use tax exemption.
• The California Department of Tax and Fee Administration.
• Counties, cities, and other local agencies that impose local sales and use taxes.

Terms To Know

Tangible personal property

Physical items that can be touched or felt, such as machinery or equipment used in manufacturing.

Tax expenditure

The reduction of tax revenue due to exemptions and deductions from the sales and use taxes.

Limits and Unknowns

• Does not specify how much money will be saved by extending the exemption.
• Local agencies may lose revenue without state reimbursement, but it is unclear how this will affect them financially.

Official Summary Text

AB 856, as introduced, Chen.
Sales and Use Tax: exemptions: manufacturing.
Existing sales and use tax laws impose taxes on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes, including a partial exemption from those taxes, on and after July 1, 2014, and before July 1, 2030, for the gross receipts from the sale of, and the storage, use, or other consumption of, among other things, qualified tangible personal property purchased by a qualified person for purchases not exceeding $200,000,000, for use primarily in manufacturing, processing, refining, fabricating, or recycling of tangible personal property, as specified. Existing law requires the California Department of
Tax and Fee Administration to provide a report to the Joint Legislative Budget Committee and the Department of Finance of, among other things, the total dollar amount of exemptions, as specified. Existing law repeals these provisions on January 1, 2031.
This bill would, instead, extend the above-described partial exemption from those taxes until January 1, 2031, and would remove the above-described reporting requirement pertaining to the California Department of Tax and Fee Administration. The bill would make various conforming changes and repeal these provisions on January 1, 2036.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would require the California Department of Tax and
Fee Administration, if requested by the Legislature, to submit a report to the Legislature on the exemption and would provide findings and declarations relating to the goals of the exemption.
The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.
Existing law requires the state to reimburse counties and cities for revenue losses caused by the enactment of sales and use tax exemptions.
This bill would provide that, notwithstanding Section 2230 of the Revenue and
Taxation Code, no appropriation is made and the state shall not reimburse any local agencies for sales and use tax revenues lost by them pursuant to this bill.
This bill would take effect immediately as a tax levy.

Current Bill Text

Download Bill PDF