Monday, September 26, 2016

Clean Manufacturers Can Qualify for Sales Tax Exclusion

Tesla used it.  So has Karma Automotive, fuel cell manufacturer Bloom Energy, biofuel producer CleanWorld and many other clean technology, alternative energy and recycled product manufacturers.

What they used is a little-known state of California program that allows certain manufacturers to avoid paying sales tax on manufacturing equipment.

With sales taxes running as high as 9% in many areas, the savings can be quite substantial.  Tesla, for example, has already received many millions of dollar in benefits.  For a relatively small manufacturers buying around $2 million in equipment, the benefit can approach $200,000.  This can make a huge difference for a new or growing company.

The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) administers the program.  CAEATFA, chaired by state Treasurer John Chiang, can allocate up to $100 million in exclusions per year to qualified manufactures.

This tax benefit can be used by many types of manufacturers, including:
  • alternative energy such as solar photovoltaic, biogas, biomass, landfill gas, and renewable fuels;
  • advanced transportation such as electric vehicles; 
  • recycled feedstock users such as composters; and
  • advanced manufacturers, as defined

"We were successful last year to have the continuation of the sales tax exclusion program," says Treasurer Chiang in a recently posted video about the program.  "We think this is an important element in partnering with alternative energy and advanced transportation companies ... to make sure that we continue to spur innovation .. to spur growth in these advanced fields through the 21st century."

California State Treasurer John Chiang

Since it is a tax exclusion, companies receiving the benefit do not receive a check or a tax deduction.  Instead, they are authorized to avoid paying sales tax on qualified equipment.  The benefit doesn't come to them unless and until they actually buy manufacturing equipment.  CAEATFA Executive Director Deana Carrillo is quoted in a Los Angeles Times article  late last year explaining the basic mechanics of the program:

"We're not writing anyone a check.  We're the last dollar in. These guys have got to get their financing together, make their decision, buy their property, get ready to buy the equipment, and then we're giving them a benefit at the margin."  (Source:  here)
Some of the companies that have benefitted from CAEATFA Sales Tax Exclusion
(Note:  Tesla has benefitted from the exclusion under additional applications)  Source:  here


In 2016,CAEATFA reached the $100 million benefit cap early in the year and they are expected to reach the 2017 cap within the fist few months of the year.  They do, however, accept applications on a rolling basis, per the schedule posted on their website here.  Their next application deadline is October 14.  Applications are scored and the highest scoring applications will have the advantage when the 2017 exclusions are given out.

For more information, including application materials, FAQs, fee schedules and more, see the CAEATFA Sales Tax Exclusion website at:  http://www.treasurer.ca.gov/caeatfa/ste/index.asp.

2 comments:

  1. I think that it's great that the government is using tax incentives and finance perks to push the industries towards more clean initiatives! It'll be good to see the change this creates in a few years!

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