Does Your State Tax Manufacturing Machinery?

February 15, 2019

Manufacturing machinery is a necessary piece of industrialization, and it ensures the timely production of consumer goods. This means that a business wishing to manufacture products must obtain manufacturing equipment in order to compete against other corporations. Therefore, as an essential piece of equipment, is this machinery taxed or not? That depends, while the majority of states understand the necessity and exempt the purchase of manufacturing machines, some states still tax the equipment. However, as Encino Tax Advisors will tell you, California does not tax this equipment.

Sales and Use Tax Exemption

All Encino Tax Consultants should be familiar with the sales and use tax exemption offered in California and other states. This exemption mandates that qualifying machinery, used in the research and development or manufacturing operations of a manufacturer, including testing, will not be taxed. However, to receive this exemption status, your company will likely require certification.

Tax Pyramiding

The goal of manufacturing exemptions is to limit the possibility of tax pyramiding, the process of taxing inputs which inevitably increases the costs of production and final sale prices of consumer goods. With pyramiding, state economies can suffer from slow economic growth, fewer job opportunities, and high retail prices. For more information on the benefits of manufacturing exemptions and your eligibility contact Encino Tax Advisors.

Preparation Services

As stated manufacturing equipment exemptions likely require that your business receive exemption status. You can reach out to Los Angeles Tax Preparation services for further information on exemption status, as well as information on filing as a corporate or industrial entity.

While many Encino Tax Advisors can offer insight into industrial and manufacturing tax codes, it is essential to find a preparer who knows and specializes in your business. There are firms that specialize in manufacturing and production that can help guide you through your filing concerns. Reach out to a local Encino branch and get your questions answered today.