BILL NUMBER: SB 412 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 18, 2013
INTRODUCED BY Senator Knight
FEBRUARY 20, 2013
An act to add and repeal Section 6377.2 of the Revenue and
Taxation Code, relating to taxation, to take effect immediately, tax
levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 412, as amended, Knight. Sales and use taxes: exemption:
aerospace products manufacturing: research and development.
Existing sales and use tax laws impose a tax 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,
and provides various exemptions from those taxes.
This bill would exempt from those taxes, on and after January 1,
2014, and before January 1, 2019, the gross receipts from the sale
of, and the storage, use, or other consumption of, qualified tangible
personal property purchased for use by a qualified person in the
aerospace products and parts manufacturing industry for use primarily
in any stage of manufacturing, processing, refining, fabricating, or
recycling of tangible personal property, as specified, or
for use primarily in research and development, as specified, or to
maintain, repair, measure, or test that property. The bill would also
exempt from those taxes the gross receipts from the sale of, and the
storage, use, or other consumption of, tangible personal property
purchased for use by a contractor, as specified, for a qualified
person. The bill would require the purchaser to furnish the retailer
with an exemption certificate, as specified.
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 law authorizes
districts, as specified, to impose transactions and use taxes in
accordance with the Transactions and Use Tax Law, which conforms to
the Sales and Use Tax Law. Exemptions from state sales and use taxes
are incorporated into these laws.
This bill would specify that this exemption does not apply to
local sales and use taxes, transactions and use taxes, and specified
state taxes from which revenues are deposited into the Local Public
Safety Fund, the Education Protection Account, the Local Revenue
Fund, the Fiscal Recovery Fund, or the Local Revenue Fund 2011.
The bill would remain in effect until January 1, 2019.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6377.2 is added to the Revenue and Taxation
Code, to read:
6377.2. (a) On and after January 1, 2014, and before January 1,
2019, there are exempted from the taxes imposed by this part the
gross receipts from the sale of, and the storage, use, or other
consumption in this state of, any of the following:
(1) Qualified tangible personal property purchased for use by a
qualified person to be used primarily in any stage of the
manufacturing, processing, refining, fabricating, or recycling of
tangible personal property, beginning at the point any raw
materials are received by the qualified person and introduced into
the process and ending at the point at which the manufacturing,
processing, refining, fabricating, or recycling has altered
tangible personal property to its completed form, including
packaging, if required.
(2) Qualified tangible personal property purchased for use by a
qualified person to be used primarily in qualified research and
development.
(3) Qualified tangible personal property purchased for use by a
qualified person to be used primarily to maintain, repair, measure,
or test any qualified tangible personal property described in
paragraph (1) or (2).
(4) Qualified tangible personal property purchased for use by a
contractor purchasing that property for use in the performance of a
construction contract for the qualified person, who will use that
property as an integral part of the manufacturing, processing,
refining, fabricating, or recycling process, or as a research or
storage facility for use in connection with those processes.
(b) For purposes of this section:
(1) "Fabricating" means to make, build, create, produce, or
assemble components or tangible personal property to work
in a new or different manner.
(2) "Manufacturing" means the activity of converting or
conditioning tangible personal property by changing the form,
composition, quality, or character of the property for ultimate sale
at retail or use in the manufacturing of a product to be ultimately
sold at retail. Manufacturing includes any improvements to tangible
personal property that result in a greater service life or greater
functionality than that of the original property.
(3) "Primarily" means 50 percent or more of the time.
(4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified person and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person and ending at the point at
which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified person has altered tangible
personal property to its completed form, including packaging, if
required. Raw materials shall be considered to have been introduced
into the process when the raw materials are stored on the same
premises where the qualified person's manufacturing, processing,
refining, fabricating, or recycling activity is conducted. Raw
materials that are stored on premises other than where the qualified
person's manufacturing, processing, refining, fabricating, or
recycling activity is conducted, conducted
shall not be considered to have been introduced into the
manufacturing, processing, refining, fabricating, or recycling
process.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
tangible personal property.
(6) "Qualified person" means either of the following:
(A) A person who is primarily engaged in those lines of
business described in Code 3364 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2012 edition.
(B) An affiliate of a person who is a qualified person pursuant to
subparagraph (A) if the affiliate is included as a member of that
person's unitary group for which a combined report is required to be
filed under Article 1 (commencing with Section 25101) of Chapter 17
of Part 11.
(7) (A) "Qualified tangible personal property" includes, but is
not limited to, all of the following:
(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(ii) Equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, but not limited to,
computers, data-processing equipment, and computer software, together
with all repair and replacement parts with a useful life of one or
more years therefor, whether purchased separately or in conjunction
with a complete machine and regardless of whether the machine or
component parts are assembled by the qualified person or another
party.
(iii) Tangible personal property used in pollution control that
meets standards established by this state or any local or regional
governmental agency within this state.
(iv) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, fabricating, or
recycling process, or that constitute a research or storage facility
used during those processes. Buildings used solely for warehousing
purposes after completion of those processes are not included.
(v) Fuels used or consumed in the manufacturing, processing,
refining, fabricating, or recycling process.
(B) "Qualified tangible personal property" shall not include any
of the following:
(i) Consumables with a useful life of less than one year, except
as provided in clause (v) of subparagraph (A).
(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing, processing, refining, fabricating, or
recycling process.
(iii) Tangible personal property used primarily in administration,
general management, or marketing.
(8) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulation thereunder.
(9) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(10) "Useful life" for tangible personal property that is
treated as having a useful life of one or more years for state
income or franchise tax purposes shall be deemed to have a useful
life of one or more years for purposes of this section. "Useful life"
for tangible personal property that is treated as having a useful
life of less than one year for state income or franchise tax purposes
shall be deemed to have a useful life of less than one year for
purposes of this section. has the same meaning as
provided for in Part 10 (commencing with Section 17001), or Part 11
(commencing with Section 23001), as applicable.
(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as the
board may prescribe, and the retailer retains the exemption
certificate in its records and furnishes it to the board upon
request. The exemption certificate shall contain the sales price of
the qualified tangible personal property that the sale of, or the
storage, use, or other consumption of, is exempt pursuant to
subdivision (a).
(d) (1) Notwithstanding the Bradley-Burns Uniform Local Sales and
Use Tax Law (Part 1.5 (commencing with Section 7200)) and the
Transactions and Use Tax Law (Part 1.6 (commencing with Section
7251)), the exemption established by this section shall not apply
with respect to any tax levied by a county, city, or district
pursuant to, or in accordance with, either of those laws.
(2) Notwithstanding subdivision (a), the exemption established by
this section shall not apply with respect to any tax levied pursuant
to Section 6051.2, 6051.5, 6201.2, or 6201.5, pursuant to
Sections Section 35 and subdivision (f) of
Section 36 of Article XIII of the California Constitution, or
to any tax levied pursuant to Sections
Section 6051 and or 6201 that is
deposited in the State Treasury to the credit of the Local Revenue
Fund 2011 pursuant to Sections 6051.15 and 6201.15.
(e) (1) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or storage, use, or other
consumption of tangible personal property that, within one
year from the date of purchase, is removed from California,
converted from an exempt use under subdivision (a) to some other use
not qualifying for exemption, or used in a manner not qualifying for
exemption.
(2) If a purchaser certifies in writing to the seller that the
tangible personal property purchased without payment of
the tax will be used in a manner entitling the seller to regard the
gross receipts from the sale as exempt from the sales tax, and within
one year from the date of purchase, the purchaser removes that
property outside California, converts that property for use in a
manner not qualifying for the exemption, or uses that property in a
manner not qualifying for the exemption, the purchaser shall be
liable for payment of sales tax, with applicable interest, as if the
purchaser were a retailer making a retail sale of the tangible
personal property at the time the property is so removed,
converted, or used, and the sales price cost
of the tangible personal property to the purchaser
shall be deemed the gross receipts from that retail sale.
SEC. 2. This act shall remain in effect only until January 1,
2019, and as of that date is repealed.
SEC. 3. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.