AB 1090, as introduced, O'Donnell. Sales and use taxes: exemption: reshoring jobs.
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. Existing law provides various exemptions from the taxes imposed by those laws, including an exemption until July 1, 2022, or as provided, of the gross receipts from the sale of, and the storage, use, or other consumption of, qualified tangible personal property purchased by a qualified person for use primarily in manufacturing, processing, refining, fabricating, or recycling of property, as specified; qualified tangible personal property purchased for use by a contractor for specified purposes, as provided; and qualified tangible personal property purchased for use by a qualified person to be used primarily in research and development, as provided.
This bill would exempt from those taxes, on and after January 1, 2016, 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 to be used primarily in any stage of reshoring jobs by qualified businesses engaged in manufacturing, research and development, and construction, as specified; qualified tangible personal property purchased for reshoring by a qualified person to be used primarily in research and development; qualified tangible personal property purchased for use by a qualified person to be used primarily for the reshoring of jobs by qualified businesses engaged in manufacturing, research and development, and construction; and qualified tangible personal property purchased for use by a contractor purchasing that tangible personal property for use in the performance of a construction contract for the qualified person, who will use that tangible personal property as an integral part of reshoring jobs by qualified businesses engaged in manufacturing, research and development, and construction for use in connection with those processes, as provided. 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 conformity 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 and transactions and use taxes.
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 6377.2 is added to the Revenue and
2Taxation Code, to read:
(a) On and after January 1, 2016, there are exempted
4from the taxes imposed by this part the gross receipts from the sale
5of, and the storage, use, or other consumption in this state of, any
6of the following:
7(1) Qualified tangible personal property purchased for use by
8a qualified person to be used primarily in any stage of reshoring
9jobs by qualified businesses engaged in manufacturing, research
10and development, and construction beginning at the point any raw
11materials are received by the qualified person and introduced into
P3 1the process and ending at the point at which the manufacturing,
2processing, refining, fabricating, or recycling has altered tangible
3personal property to its completed form, including packaging, if
4required.
5(2) Qualified tangible personal property purchased for reshoring
6by a qualified person to be used primarily in research and
7development.
8(3) Qualified tangible personal property purchased for use by
9a qualified person to be used primarily for the reshoring of jobs
10by qualified businesses engaged in manufacturing, research and
11development, and construction described in paragraph (1) or (2).
12(4) Qualified tangible personal property purchased for use by
13a contractor purchasing that tangible personal property for use in
14the performance of a construction contract for the qualified person,
15who will use that tangible personal property as an integral part of
16reshoring jobs by qualified businesses engaged in manufacturing,
17research and development, and construction for use in connection
18with those processes.
19(b) For purposes of this section:
20(1) “Fabricating” means to make, build, create, produce, or
21assemble components or tangible personal property to work in a
22new or different manner.
23(2) “Manufacturing” means the activity of converting or
24conditioning tangible personal property by changing the form,
25composition, quality, or character of the tangible personal property
26for ultimate sale at retail or use in the manufacturing of a product
27to be ultimately sold at retail. Manufacturing includes any
28improvements to tangible personal property that result in a greater
29service life or greater functionality than that of the original tangible
30personal property.
31(3) “Primarily” means 50 percent or more of the time.
32(4) “Process” means the period beginning at the point at which
33any raw materials are received by the qualified person and
34introduced into the manufacturing, processing, refining, fabricating,
35or recycling activity of the qualified person and ending at the point
36at which the manufacturing, processing, refining, fabricating, or
37recycling activity of the qualified person has altered tangible
38personal property to its completed form, including packaging, if
39required. Raw materials shall be considered to have been
40introduced into the process when the raw materials are stored on
P4 1the same premises where the qualified person’s manufacturing,
2processing, refining, fabricating, or recycling activity is conducted.
3Raw materials that are stored on premises other than where the
4qualified person’s manufacturing, processing, refining, fabricating,
5or recycling activity is conducted, shall not be considered to have
6been introduced into the manufacturing, processing, refining,
7fabricating, or recycling
process.
8(5) “Processing” means the physical application of the materials
9and labor necessary to modify or change the characteristics of
10tangible personal property.
11(6) “Reshoring” means ____.
12(7) “Qualified business” means ____.
13(8) “Qualified person” means a person that is primarily engaged
14in those lines of business described in Codes 3111 to 3399,
15inclusive, or 5112 of the North American Industry Classification
16System (NAICS) published by the United States Office of
17Management and Budget (OMB), 2012 edition.
18(9) (A) “Qualified tangible personal property” includes, but is
19not limited to, all of the following:
20(i) Machinery
and equipment, including component parts and
21contrivances such as belts, shafts, moving parts, and operating
22structures.
23(ii) Equipment or devices used or required to operate, control,
24regulate, or maintain the machinery, including, but not limited to,
25computers, data processing equipment, and computer software,
26together with all repair and replacement parts with a useful life of
27one or more years therefor, whether purchased separately or in
28conjunction with a complete machine and regardless of whether
29the machine or component parts are assembled by the qualified
30person or another party.
31(iii) Tangible personal property used in pollution control that
32meets standards established by this state or any local or regional
33governmental agency within this state.
34(iv) Special purpose buildings and foundations used as an
35
integral part of the manufacturing, processing, refining, fabricating,
36or recycling process, or that constitute a research or storage facility
37used during those processes. Buildings used solely for warehousing
38purposes after completion of those processes are not included.
39(B) “Qualified tangible personal property” shall not include any
40of the following:
P5 1(i) Consumables with a useful life of less than one year.
2(ii) Furniture, inventory, and equipment used in the extraction
3process, or equipment used to store finished products that have
4completed the manufacturing, processing, refining, fabricating, or
5recycling process.
6(iii) Tangible personal property used primarily in administration,
7general management, or marketing.
8(10) “Research and development” means those activities that
9are described in Section 174 of the Internal Revenue Code or in
10any regulations thereunder.
11(11) “Refining” means the process of converting a natural
12resource to an intermediate or finished product.
13(12) “Useful life” has the same meaning as provided for in Part
1410 (commencing with Section 17001), or Part 11 (commencing
15with Section 23001), as applicable.
16(c) An exemption shall not be allowed under this section unless
17the purchaser furnishes the retailer with an exemption certificate,
18completed in accordance with any instructions or regulations as
19the board may prescribe, and the retailer retains the exemption
20certificate in its records and furnishes it to the board upon request.
21The exemption
certificate shall contain the cost of the qualified
22tangible personal property that the sale of, or the storage, use, or
23other consumption of, is exempt pursuant to subdivision (a).
24(d) Notwithstanding the Bradley-Burns Uniform Local Sales
25and Use Tax Law (Part 1.5 (commencing with Section 7200)) and
26the Transactions and Use Tax Law (Part 1.6 (commencing with
27Section 7251)), the exemption established by this section shall not
28apply with respect to any tax levied by a county, city, or district
29pursuant to, or in accordance with, either of those laws.
30(e) (1) Notwithstanding subdivision (a), the exemption provided
31by this section shall not apply to any sale or storage, use, or other
32consumption of tangible personal property that, within one year
33from the date of purchase, is removed from California, converted
34from an exempt use under subdivision (a) to some other use not
35qualifying
for exemption, or used in a manner not qualifying for
36exemption.
37(2) If a purchaser certifies in writing to the seller that the tangible
38personal property purchased without payment of the tax will be
39used in a manner entitling the seller to regard the gross receipts
40from the sale as exempt from the sales tax, and within one year
P6 1from the date of purchase, the purchaser removes that tangible
2personal property outside California, converts that tangible personal
3property for use in a manner not qualifying for the exemption, or
4uses that tangible personal property in a manner not qualifying for
5the exemption, the purchaser shall be liable for payment of sales
6tax, with applicable interest, as if the purchaser were a retailer
7making a retail sale of the tangible personal property at the time
8the tangible personal property is so removed, converted, or used,
9and the cost of the tangible personal property to the purchaser shall
10be deemed the gross
receipts from that retail sale.
This act provides for a tax levy within the meaning of
12Article IV of the Constitution and shall go into immediate effect.
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