BILL NUMBER: AB 2525 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 25, 2010
INTRODUCED BY Assembly Member Blumenfield
FEBRUARY 19, 2010
An act to add Section 6377 6377.2 to
the Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2525, as amended, Blumenfield. Sales and use taxes: exemption:
manufacturing equipment.
The Sales and Use Tax Law imposes 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. That
law provides various exemptions from those taxes.
The bill would exempt from those taxes, on or after January 1,
2011, the gross receipts from the sale of, and the storage, use, or
other consumption of, tangible personal property purchased by a
qualified person for use in the manufacturing process of clean energy
technology, as specified, and tangible personal property purchased
for use by a contractor for specified purposes.
This bill would establish the conditions that a purchaser must
meet to obtain an exemption certificate from the California Business
Investment Services, 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, transactions and use taxes, and state
sales and use taxes imposed for the purpose of funding the Local
Revenue Fund, the Local Public Safety Fund, and the Fiscal Recovery
Fund.
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. It is the intent of the Legislature to enact a clean
energy and transportation tax incentive program to expand
manufacturing in the state of California by providing for an
exemption of purchases for manufacturing equipment and manufacturing
facilities from the state sales and use taxes.
SEC. 2. Section 6377 is added to the Revenue and Taxation Code, to
read:
6377. (a) (1) On and
6377.2. (a) (1)
On or after January 1, 2011, in accordance with
subdivision (h), 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, either of the following:
(A) 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 property in clean
energy technology, 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 property to its completed
form, including packaging, if required.
(B) Tangible personal property purchased for use by a contractor
purchasing that property either as an agent of a qualified
person or for the contractor's own account and subsequent resale to a
qualified person for use in the performance of a
construction contract for the qualified person who will use the
tangible personal property as an integral part of
the manufacturing, processing, refining, fabricating, or recycling
process, in clean energy technology or as a storage facility for use
in connection with the manufacturing process.
(2) This exemption shall not apply to any tangible personal
property that is used primarily in administration, general
management, or marketing.
(b) For purposes of this section:
(1) "Clean energy technology" means an energy supply or end-use
technology that, over its life cycle and compared to a similar
technology already in commercial use in the United States, meets all
of the following conditions:
(A) Is reliable, affordable, economically viable, socially
acceptable, and compatible with the needs of California and the
United States.
(B) Results in reduced emissions of greenhouse gases,
reduce reduced petroleum fuel consumption, or
energy efficiency.
(C) Substantially lowers emissions of air pollutants and generates
substantially smaller or less hazardous quantities of solid or
liquid waste.
(2) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(3) "Manufacturing" means the activity of converting or
conditioning 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.
(4) "Primarily" means tangible personal property used 50 percent
or more of the time in an activity described in subdivision (a).
(5) "Process" means the period beginning at the point at which any
raw materials are received by the qualified taxpayer and introduced
into the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified taxpayer and ending at the point
at which the manufacturing, processing, refining, fabricating, or
recycling activity of the qualified taxpayer 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 taxpayer's manufacturing, processing,
refining, or recycling activity is conducted. Raw materials that are
stored on premises other than where the qualified taxpayer's
manufacturing, processing, refining, fabricating, or recycling
activity is conducted, shall not be considered to have been
introduced into the manufacturing, processing, refining, fabricating,
or recycling process.
(6) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
(7) "Qualified person" means either any of the following:
(A) A California based person that is engaged in the manufacture
of clean energy technology and engaged in those lines of business
described in Codes 3111 to 3399, inclusive, or 5112 of the North
American Industry Classification System (NAICS) published by the
United States Office of Management and Budget (OMB), 2007 edition.
(B) An affiliate of a person qualified pursuant to subparagraph
(A) shall also be considered a qualified person as long as 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 I
(commencing with Section 25101) of Chapter 17.
(8) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(9) "Tangible personal property" includes, but is not limited to,
all of the following:
(A) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(B) All equipment or devices used or required to operate, control,
regulate, or maintain the machinery, including, without limitation,
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 taxpayer or another party.
(C) Property used in manufacturing that meets standards
established by this state or any local or regional governmental
agency within this state.
(D) Special purpose buildings and foundations used as an integral
part of the manufacturing, processing, refining, or fabricating
process, or that constitute a research or storage facility used
during the manufacturing process. Buildings used solely for
warehousing purposes after completion of the manufacturing process
are not included.
(E) Fuels used or consumed in the manufacturing process.
(10) "Tangible personal property" shall not include any of the
following:
(A) Consumables with a normal useful life of less than one year,
except as provided in subparagraph (E) of paragraph (9).
(B) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(c) No exemption shall be allowed under this section unless the
purchaser furnishes the retailer with an exemption certificate that
is authorized by California Business Investment Services,
the California Business Investment Services provided
the purchaser, completed in accordance with any instructions or
regulations as the board may prescribe, and the retailer
subsequently furnishes the board with a copy of the exemption
certificate. The exemption certificate shall contain the sales price
of the machinery or equipment tangible
personal property , the sale of, or the storage use, or other
consumption of which is exempt pursuant to subdivision (a).
(d) Notwithstanding any provision of the Bradley-Burns Uniform
Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200))
or 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.
(e) (1) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of tangible
personal property which, 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 the
exemption, or used in a manner not qualifying for the exemption.
(2) Notwithstanding subdivision (a), the exemption established by
this section shall not apply with respect to any tax levied pursuant
to Sections 6051.2, 6051.5, 6201.2, or 6201.5, or pursuant to Section
35 of Article XIII of the California Constitution.
(f) If a purchaser certifies in writing to the seller that the
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 (1) removes that property outside
California, (2) converts that property for use in a manner not
qualifying for the exemption, or (3) 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 property at the time the
property is so removed, converted, or used, and the sales price of
the property to the purchaser shall be deemed the gross receipts from
that retail sale.
(g) This section applies to leases of tangible personal property
classified as "continuing sales" and "continuing purchases" in
accordance with Sections 6006.1 and 6010.1. The exemption established
by this section shall apply to the rentals payable pursuant to such
a lease, provided the lessee is a qualified person and the property
is used in an activity described in subdivision (a). Rentals that
meet the foregoing requirements are eligible for the exemption for a
period of six years from the date of commencement of the lease. At
the close of the six-year period from the date of commencement of the
lease, lease receipts are subject to tax without exemption.
(h) (1) California Business Investment Services, or its successor,
working under the Labor and Workforce Development Agency, shall
provide an exemption certificate to purchasers pursuant to this
subdivision, if the purchaser agrees to meet all the following
conditions:
(A) A manufacturing facility will be purchased, developed, or
expanded in the State of California.
(B) The facility to be purchased or developed is the first,
second, or third such facility of its kind in California.
(C) The exemption will lead to increased jobs in California,
including jobs in the upstream and downstream supply chains for the
technology being developed.
(D) The technology being manufactured helps the state reach its
air, water, transportation, greenhouse emission, or energy efficiency
goals.
(2) The Labor and Workforce Development Agency shall promulgate
regulations to carry out the purposes of this section.
SEC. 3. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.