Bill Text: CA SB412 | 2013-2014 | Regular Session | Amended
Bill Title: Sales and use taxes: exemption: aerospace products manufacturing: research and development.
Sponsorship: Partisan Bill (Republican 1)
Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB412 Detail]
Download: California-2013-SB412-Amended.html
BILL NUMBER: SB 412 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 14, 2013
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. This bill would
require the Legislative Analyst's Office, by January 1, 2018, to
report on the effect of the exemption on employment in the aerospace
and related industries, 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 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" 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 Section 35
and subdivision (f) of Section 36 of Article XIII of the California
Constitution, or to any tax levied pursuant to Section 6051 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 cost of the
tangible personal property to the purchaser shall be deemed the gross
receipts from that retail sale.
(f) By January 1, 2018, the Legislative Analyst's Office shall
report on the effect of the exemption established in this section on
employment in aerospace and related industries, using data,
including, but not limited to, the data produced by the Employment
Development Department Labor Market Information Division.
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.
