Bill Text: CA SB1053 | 2009-2010 | Regular Session | Introduced
Bill Title: Sales and use taxes: exemption: manufacturing equipment.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2010-04-29 - Placed on REV. & TAX. suspense file. [SB1053 Detail]
Download: California-2009-SB1053-Introduced.html
BILL NUMBER: SB 1053 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Runner
(Coauthor: Senator Dutton)
FEBRUARY 16, 2010
An act to add Section 6377 to the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 1053, as introduced, Runner. 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 partially 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
or for use in research and development, as specified or to maintain,
repair, measure, or test that property. This bill would also
partially exempt from those taxes the gross receipts from the sale
of, and storage, use, or other consumption of, tangible personal
property purchased for use by a contractor for specified purposes.
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 sales and use taxes imposed for the purpose of finding locally
provided services.
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 is added to the Revenue and Taxation Code,
to read:
6377. (a) (1) On and after January 1, 2011, 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:
(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,
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 qualified
person to be used primarily in research and development.
(C) Tangible personal property purchased for use by a qualified
person to be used primarily to maintain, repair, measure, or test any
property described in subparagraph (A) or (B).
(D) 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, 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) "Fabricating" means to make, build, create, produce, or
assemble components or property to work in a new or different manner.
(2) "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.
(3) "Primarily" means tangible personal property used 50 percent
or more of the time in an activity described in subdivision (a).
(4) "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.
(5) "Processing" means the physical application of the materials
and labor necessary to modify or change the characteristics of
property.
(6) "Qualified person" means either of the following:
(A) A person who is 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.
(7) "Refining" means the process of converting a natural resource
to an intermediate or finished product.
(8) "Research and development" means those activities that are
described in Section 174 of the Internal Revenue Code or in any
regulations thereunder.
(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 pollution control 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.
(F) Property used in recycling.
(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,
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 price of the machinery or equipment
whose sale, or storage, use, or other consumption is exempt pursuant
to subdivision (a).
(d) (1) 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.
(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.
(e) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of 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.
(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.
SEC. 2. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
