Initial Discussion Paper Proposed Regulation 1525.4 1525 4IDPweb
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STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0092
1-916-324-1825 FAX 1-916-322-4530
www.boe.ca.gov
BETTY T. YEE
First District, San Francisco
SEN. GEORGE RUNNER (Ret.)
Second District, Lancaster
MICHELLE STEEL
Third District, Orange County
JEROME E. HORTON
Fourth District, Los Angeles
JOHN CHIANG
State Controller
_______
CYNTHIA BRIDGES
Executive Director
September 27, 2013
Dear Interested Party:
Enclosed is the Initial Discussion Paper on proposed Regulation 1525.4, Manufacturing and
Research & Development Equipment. Before the issue is presented at a Board Business Taxes
Committee meeting, staff would like to invite you to discuss the issue and present any additional
suggestions or comments. Accordingly, an interested parties meeting is scheduled as follows:
October 9, 2013
Room 122 at 10:00 a.m.
450 N Street, Sacramento, CA
If you would like to participate by teleconference, call 1-888-636-3807 and enter access code
499201. You are also welcome to submit your comments to me at the address or fax number in
this letterhead or via email at Susanne.Buehler@boe.ca.gov by October 23, 2013. Copies of the
materials you submit may be provided to other interested parties, therefore, ensure your
comments do not contain confidential information. Please feel free to publish this information
on your website or distribute it to others that may be interested in attending the meeting or
presenting their comments.
If you are interested in other Business Taxes Committee topics refer to our webpage at
(http://www.boe.ca.gov/meetings/btcommittee.htm) for copies of discussion or issue papers,
minutes, a procedures manual, and calendars arranged according to subject matter and by month.
Thank you for your consideration. We look forward to your comments and suggestions. Should
you have any questions, please feel free to contact our Business Taxes Committee staff member
Lynn Whitaker at 1-916-324-8483, who will be leading the meeting.
Sincerely,
Susanne Buehler, Chief
Tax Policy Division
Sales and Use Tax Department
SB:llw
Enclosures
Interested Party -2- September 27, 2013
cc: (all with enclosures)
Honorable Jerome E. Horton, Chairman, Fourth District
Honorable Michelle Steel, Vice Chair, Third District
Honorable Betty T. Yee, Member, First District (MIC 71)
Senator George Runner (Ret.), Member, Second District (via email)
Honorable John Chiang, State Controller, c/o Ms. Marcy Jo Mandel
(via email)
Mr. David Hunter, Board Member’s Office, Fourth District
Mr. Neil Shah, Board Member’s Office, Third District
Mr. Tim Treichelt, Board Member’s Office, Third District
Mr. Alan LoFaso, Board Member’s Office, First District
Ms. Mengjun He, Board Member’s Office, First District
Mr. Sean Wallentine, Board Member’s Office, Second District
Mr. James Kuhl, Board Member’s Office, Second District
Mr. Lee Williams, Board Member’s Office, Second District
Mr. Alan Giorgi, Board Member’s Office, Second District
Ms. Lynne Kinst, Board Member’s Office, Second District
Ms. Natasha Ralston Ratcliff, State Controller’s Office
Ms. Cynthia Bridges (MIC 73)
Mr. Randy Ferris (MIC 83)
Mr. Jeffrey L. McGuire (MIC 43)
Mr. Jeff Vest (MIC 85)
Mr. Jeff Angeja (MIC 85)
Mr. David Levine (MIC 85)
Mr. Robert Tucker (MIC 82)
Mr. Bradley Heller (MIC 82)
Mr. Andrew Kwee (MIC 82)
Mr. Lawrence Mendel (MIC 82)
Mr. Todd Gilman (MIC 70)
Ms. Laureen Simpson (MIC 70)
Mr. Joe Fitz (MIC 67)
Mr. Bill Benson (MIC 67)
Mr. Wayne Mashihara (MIC 46)
Mr. Kevin Hanks (MIC 49)
Mr. Bradley Miller (MIC 92)
Ms. Kirsten Stark (MIC 50)
Mr. Clifford Oakes (MIC 50)
Ms. Lynn Whitaker (MIC 50)
Mr. Robert Wilke (MIC 50)
Ms. Trista Gonzalez (MIC 44)
Mr. Jason Parker (MIC 44)
Ms. Tracy McCrite (MIC 44)
Mr. Robert Prasad (MIC 44)
INITIAL DISCUSSION PAPER
Proposed Regulation 1525.4, Manufacturing and Research & Development
Equipment
Page 1 of 4
Issue
Whether the Board should approve proposed Sales and Use Tax Regulation 1525.4,
Manufacturing and Research & Development Equipment, to implement and explain the new
partial exemption from sales and use tax for manufacturing equipment that was established by
Revenue and Taxation Code section 6377.1.
Background
Created by Assembly Bill 93 (AB 93) (Stats. 2013, Ch. 69) and Senate Bill 90 (SB 90) (Stats.
2013, Ch. 70) Revenue and Taxation Code (RTC) section 6377.1 provides a partial exemption
from sales and use tax on certain manufacturing and research and development equipment sales
and purchases. The partial exemption applies to qualifying sales and purchases made on or after
July 1, 2014, and before July 1, 2022. This paper provides a general overview of the exemption;
exhibit 1 includes staff’s proposed regulation including a sample exemption certificate to support
claimed partial exemptions.
The current statewide sales and use tax rate is 7.50%, although the tax rate is higher in cities and
counties that impose additional district taxes. RTC section 6377.1 exempts the purchaser from
the state general fund taxes imposed by RTC sections 6051, 6051.3, 6201, and 6201.3 and the
State’s Education Protection Account tax imposed by Section 36, Article XIII of the State
Constitution. Accordingly, from July 1, 2014, to December 31, 2016, the partial exemption will
be 4.1875%. When the Education Protection Account tax expires on December 31, 2016, the
partial exemption will be 3.9375% from January 1, 2017, to June 30, 2022.
It is not required that equipment purchased under the partial exemption be used in a former
enterprise zone or other designated area. Although this was a requirement in AB 93, the
language of RTC section 6377.1 provided in SB 90 replaced the AB 93 language and the
restriction was removed. Property purchased under the partial exemption may be used anywhere
in California.
To qualify for the partial exemption, the purchase must be for use by a qualified person, the item
purchased must be qualified tangible personal property, and the use must be for a qualifying
purpose.
Discussion – Who is a qualified person?
“Qualified person” is defined in Regulation 1525.4 (b)(6) and includes businesses engaged in:
• Manufacturing: Businesses primarily engaged in those lines of business described in
North American Industry Classification System (NAICS) codes 3111 to 3399. Included
in these codes are a wide range of manufacturers including food product processors,
wineries, mills, and commercial printers. See http://www.naics.com/free-code-
search/sixdigitnaics.html?code=3133 for NAICS descriptions.
INITIAL DISCUSSION PAPER
Proposed Regulation 1525.4, Manufacturing and Research & Development
Equipment
Page 2 of 4
• Biotechnology Research & Development (R&D): Businesses primarily engaged in
conducting biotechnology research and experimental development (NAICS code
541711). This type of R&D involves the study of the use of microorganisms and cellular
and biomolecular processes to develop or alter living or non-living materials. R&D in
biotechnology may result in development of new biotechnology processes or in
prototypes of new or genetically-altered products. See http://www.naics.com/free-code-
search/naicsdescription.php?code=541711 for the description of this NAICS code.
• Physical, Engineering, and Life Sciences R&D (NAICS code 541712): Businesses
primarily engaged in conducting research and experimental development (except
biotechnology research and experimental development) in the physical, engineering, and
life sciences, such as agriculture, electronics, environmental, biology, botany, computers,
chemistry, food, fisheries, forests, geology, health, mathematics, medicine,
oceanography, pharmacy, physics, veterinary and other allied subjects.
See http://www.naics.com/free-code-search/naicsdescription.php?code=541712 for the
description of this NAICS code.
“Qualified person” does not include an apportioning trade or business that is required to
apportion its business income pursuant to subdivision (b) of RTC section 25128, or a trade or
business conducted wholly within California that would be required to apportion its business
income pursuant to this section if it were subject to apportionment pursuant to RTC section
25101. This includes business activity relating to an agricultural business (farming activities
such as raising or harvesting agricultural or horticultural commodities), an extractive business
(the production, refining, or processing of oil, natural gas, or mineral ore), a savings and loan, or
a banking or financial business.
Discussion – What is qualified tangible personal property?
“Qualified tangible personal property” is defined in Regulation 1525.4 (b)(7) and includes:
• Machinery and equipment, including component parts and devices such as belts, shafts,
moving parts, and operating structures.
• Equipment or devices used to operate, control, regulate or maintain the machinery,
including, but not limited to, computers, software, and replacement parts with a useful
life of one or more years.
• Tangible personal property used in pollution control that meets standards established by
California or any local or regional governmental agency within California.
• 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.)
INITIAL DISCUSSION PAPER
Proposed Regulation 1525.4, Manufacturing and Research & Development
Equipment
Page 3 of 4
“Qualified tangible personal property” does not include consumables with a useful life of less
than one year; 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; and tangible personal property used primarily in administration,
general management, or marketing. “Useful life” is defined in Regulation 1525.4 (b)(10) as
tangible personal property that the qualified person treats as having a useful life of one or more
years for state income or franchise tax purposes.
Discussion – What is a qualifying use?
The explanation of uses that qualify for the partial exemption is explained in Regulation
1525.4 (a). In general, the partial exemption applies to qualified tangible personal property
purchased for use by:
(1) A qualified person to be used primarily in any stage of the manufacturing, processing,
refining, fabricating or recycling of tangible personal property;
(2) A qualified person to be used primarily in research and development;
(3) A qualified person to be used primarily to maintain, repair, measure, or test any qualified
tangible personal property described in (1) or (2) above; or
(4) A contractor purchasing that property for use in performance of a construction contract
for the qualified person, that 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.
When a purchase meets all of the requirements for the partial exemption, the purchaser should
provide their vendor with a certificate to document the partial exemption.
Discussion – How to claim the partial exemption
Sellers of property subject to the partial exemption should support their claimed exemption with
a partial exemption certificate completed by the purchaser. Regulation 1525.4 (c) describes the
required elements for the certificate, how long vendors should retain completed certificates, and
when a certificate is considered taken in good faith. A sample certificate is included in the
Appendix of Regulation 1525.4. If the retailer takes the certificate timely and in good faith, the
certificate relieves the retailer from the liability for the sales tax or the duty of collecting the use
tax.
Discussion – When the partial exemption does not apply
The partial exemption does not apply when either of the following occurs:
(1) Any tangible personal property purchased during any calendar year that exceeds $200
million of purchased qualified tangible personal property for which an exemption is
claimed by a qualified person (aggregate purchases from all vendors for the calendar
year).
INITIAL DISCUSSION PAPER
Proposed Regulation 1525.4, Manufacturing and Research & Development
Equipment
Page 4 of 4
(2) The sale or storage, use or other consumption of property that, within one year from the
date of purchase is removed from California, converted from an exempt use under the
partial exemption, or used in a manner not qualifying for exemption.
If a purchaser provides a retailer with a timely partial exemption certificate certifying that the
purchased property qualifies for the partial exemption, and the purchase does not qualify because
either of the situations noted above occur, then the purchaser is liable for the 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 was so purchased, removed, converted, or used. The cost of the
tangible personal property to the purchaser will be considered the gross receipts from that retail
sale. Thus, purchasers will need to keep track of the purchases they make each calendar year
under the partial exemption. If aggregate purchases from all vendors exceed $200 million, the
purchaser will be liable for tax in the amount claimed under the partial exemption.
Summary
General information about the partial exemption is available on the BOE website
at http://www.boe.ca.gov/sutax/manufacturing_exemptions.htm#page=Overview. Staff
welcomes any comments, suggestions, and input from interested parties on this issue. Staff also
invites interested parties to participate in the October 9, 2013, interested parties meeting. The
deadline for interested parties to provide written responses regarding this discussion paper is
October 23, 2013.
Prepared by the Tax Policy Division, Sales and Use Tax Department
Current as of 9/26/2013
Initial Discussion Paper Exhibit 1
Staff Proposed Regulation 1525.4 Page 1 of 7
Regulation 1525.4, Manufacturing and Research & Development Equipment
(a) PARTIAL EXEMPTION FOR PROPERTY PURCHASED FOR USE IN MANUFACTURING
AND RESEARCH AND DEVELOPMENT. Except as provided in subdivision (d), beginning
July 1, 2014, and before July 1, 2022, section 6377.1 of the Revenue and Taxation Code (RTC)
provides a partial exemption from sales and use tax for tangible personal property described in
this regulation.
For the period beginning July 1, 2014, and ending on December 31, 2016, the partial exemption
applies to the taxes imposed or deposited by sections 6051, 6051.3, 6201, and 6201.3 of the
RTC and Section 36 of Article XIII of the California Constitution (4.1875%). The partial
exemption does not apply to the taxes imposed pursuant to sections 6051.2, 6051.5, 6051.15,
6201.2, 6201.5, or 6201.15 of the RTC, the Bradley-Burns Uniform Local Sales and Use Tax
Law, the Transactions and Use Tax Law, or Section 35 of Article XIII of the California
Constitution.
For the period beginning January 1, 2017, and ending on June 30, 2022, the partial exemption
applies to the taxes imposed or deposited by sections 6051, 6051.3, 6201, and 6201.3 of the
RTC (3.9375%). The partial exemption does not apply to the taxes imposed pursuant to
sections, 6051.2, 6051.5, 6051.15, 6201.2, 6201.5, or 6201.15 of the RTC, the Bradley-Burns
Uniform Local Sales and Use Tax Law, the Transactions and Use Tax Law, or Section 35 of
Article XIII of the California Constitution.
Subject to the limitation set forth above, this partial exemption applies to gross receipts from the
sale, storage, use, or other consumption in this state, of the following items:
(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 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 subdivision (a) (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, that 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) DEFINITIONS. For the purposes of this regulation:
(1) “Fabricating” means to make, build, create, produce, or assemble components or
tangible personal property to work in a new or different manner.
Initial Discussion Paper Exhibit 1
Staff Proposed Regulation 1525.4 Page 2 of 7
(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) (A)“Qualified person” means a person that is primarily engaged in those lines of business
described in Codes 3111 to 3399, inclusive, 541711, or 541712 of the North American Industry
Classification System (NAICS) published by the United States Office of Management and
Budget (OMB), 2012 edition.
(B) “Qualified person” does not include:
1. An apportioning trade or business that is required to apportion its business income
pursuant to subdivision (b) of RTC section 25128.
2. A trade or business conducted wholly within this state that would be required to
apportion its business income pursuant to subdivision (b) of RTC section 25128 if it were
subject to apportionment pursuant to RTC section 25101.
(7) (A) “Qualified tangible personal property” includes, but is not limited to, all of the
following:
1. Machinery and equipment, including component parts and contrivances such as
belts, shafts, moving parts, and operating structures.
2. 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.
Initial Discussion Paper Exhibit 1
Staff Proposed Regulation 1525.4 Page 3 of 7
3. Tangible personal property used in pollution control that meets standards
established by this state or any local or regional governmental agency within this state.
4. 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.
(B) “Qualified tangible personal property” does not include any of the following:
1. Consumables with a useful life of less than one year.
2. 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.
3. Tangible personal property used primarily in administration, general management,
or marketing.
(8) “Refining” means the process of converting a natural resource to an intermediate or
finished product.
(9) “Research and development” means those activities that are described in Section 174 of
the Internal Revenue Code or in any regulations thereunder.
(10) “Useful life” for tangible personal property that the qualified person treats as having a
useful life of one or more years for state income or franchise tax purposes shall be deemed to
have a useful life of one or more years for purposes of this regulation. “Useful life” for tangible
personal property that the qualified person treats as having a useful life of less than one year for
state income or franchise tax purposes shall be deemed to have a useful life of less than one
year for purposes of this regulation.
(c) PARTIAL EXEMPTION CERTIFICATE.
(1) IN GENERAL. Qualified persons who purchase or lease qualified tangible personal
property from an in-state retailer, or an out-of-state retailer obligated to collect use tax, must
provide the retailer with a partial exemption certificate in order for the retailer to claim the partial
exemption. If the retailer takes a timely partial exemption certificate in the proper form as set
forth in subdivision (c)(2) and in good faith as defined in subdivision (c)(4), from a qualified
person, the partial exemption certificate relieves the retailer from the liability for the sales tax
subject to exemption under this regulation or the duty of collecting the use tax subject to
exemption under this regulation.
(2) FORM OF PARTIAL EXEMPTION CERTIFICATE. Any document, such as a letter or
purchase order, timely provided by the purchaser to the seller will be regarded as a partial
exemption certificate with respect to the sale or purchase of the tangible personal property
described in the document if it contains all of the following essential elements:
(A) The signature of the purchaser, purchaser's employee, or authorized representative
of the purchaser.
Initial Discussion Paper Exhibit 1
Staff Proposed Regulation 1525.4 Page 4 of 7
(B) The name, address and telephone number of the purchaser.
(C) The number of the seller's permit held by the purchaser. If the purchaser is not
required to hold a permit because the purchaser sells only property of a kind the retail sale of
which is not taxable, e.g., food products for human consumption, or because the purchaser
makes no sales in this state, the purchaser must include on the certificate a sufficient
explanation as to the reason the purchaser is not required to hold a California seller's permit in
lieu of a seller's permit number.
(D) A statement that the property purchased is:
1. To be used primarily for a qualifying activity as described in subdivision (a)(1) –
(3), or
2. For use by a contractor purchasing that property for use in the performance of a
construction contract for the qualified person as described in subdivision (a)(4).
(E) A statement that the purchaser is a person primarily engaged in a manufacturing
business described in NAICS Codes 3111 to 3399 or in research and development activities as
described in NAICS Codes 541711 and 541712 (OMB 2012 edition).
(F) A statement that the property purchased is qualified tangible personal property as
described in subdivision (7)(A).
(G) A description of property purchased.
(H) The date of execution of the document.
A document containing the essential elements described in this subdivision is the minimum form
which will be regarded as a partial exemption certificate. However, in order to preclude potential
controversy, the seller should timely obtain from the purchaser a certificate substantially in the
form shown in the Appendix of this regulation.
(3) RETENTION AND AVAILABILITY OF PARTIAL EXEMPTION CERTIFICATES. A retailer
must retain each partial exemption certificate received from a qualified person for a period of not
less than four years from the date on which the retailer claims a partial exemption based on the
partial exemption certificate.
(4) GOOD FAITH. A seller will be presumed to have taken a partial exemption certificate in
good faith in the absence of evidence to the contrary. A seller, without knowledge to the
contrary, may accept a partial exemption certificate in good faith where a qualified person
provides a certificate meeting the requirements provided in subdivision (c)(2). However, a
partial exemption certificate cannot be accepted in good faith where the seller has knowledge
that the property is not subject to a partial exemption, or will not be otherwise used in a partially
exempt manner.
(d) WHEN THE PARTIAL EXEMPTION DOES NOT APPLY. The exemption provided by this
regulation shall not apply to either of the following:
(1) Any tangible personal property purchased by a qualified persion during any calendar
year that exceeds two hundred million dollars ($200,000,000) of purchases of qualified tangible
Initial Discussion Paper Exhibit 1
Staff Proposed Regulation 1525.4 Page 5 of 7
personal property for which an exemption is claimed by the qualified person under this
regulation. For purposes of this subdivision, in the case of a qualified person that is required to
be included in a combined report under RTC section 25101 or authorized to be included in a
combined report under RTC section 25101.15, the aggregate of all purchases of qualified
personal property for which an exemption is claimed pursuant to this regulation by all persons
that are required or authorized to be included in a combined report shall not exceed two
hundred million dollars ($200,000,000) in any calendar year.
(2) The sale or storage, use, or other consumption of property that, within one year from the
date of purchase, is removed from California or used in a manner not qualifying for exemption.
(e) PURCHASER’S LIABILITY FOR THE PAYMENT OF SALES TAX. 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 the purchase exceeds the two-hundred-million-dollar ($200,000,000)
limitation described in subdivision (d)(1), or within one year from the date of purchase, the
purchaser removes that property from California 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 tangible personal property is so purchased, 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) LEASES. Leases of qualified tangible personal property classified as “continuing sales” and
“continuing purchases” in accordance with Regulation 1660, Leases of Tangible Personal
Property – In General, may qualify for the partial exemption subject to all the limitations and
conditions set forth in this regulation. The partial exemption established by this regulation shall
apply to the rentals payable pursuant to the lease, provided the lessee is a qualified person and
the tangible personal property is used in an activity described in subdivision (a).
Initial Discussion Paper Exhibit 1
Staff Proposed Regulation 1525.4 Page 6 of 7
I hereby certify that the tangible personal property described below and purchased or leased from:
SELLER'S/LESSOR’S NAME
SELLER’S/LESSOR’S ADDRESS (Street, City, State, Zip Code)
is qualified tangible personal property and will be used by me primarily (please check one):
1. for manufacturing, processing, refining, fabricating, or recycling, or
2. for research and development, or
3. to maintain, repair, measure, or test any property being used for (1) or (2) above.
4. Will be used in the performance of a construction contract for a qualified person, that 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.
Description of qualified tangible property purchased or leased*:
*See Regulation 1525.4 (b)(7) for a description of what is included and excluded from “qualified tangible personal
property.”
I, as the undersigned purchaser, hereby certify I am primarily engaged in manufacturing, processing, refining,
fabricating, or recycling as described in Codes 3111 to 3399 of the North American Industry Classification System
(NAICS) or I am primarily engaged in biotechnology, or physical, engineering, and life sciences research and
development as described in Codes 541711 and 541712 of the NAICS.
I understand that if such property is, within one year from the date of purchase or lease, removed from California
or used in a manner not qualifying for the partial exemption that I am required by the Sales and Use Tax Law to
report and pay the state tax measured by the sales price/rentals payable of the property to/by me.
I further understand that the Section 6377.1 partial exemption is limited to $200 million in qualifying purchases per
qualified person per calendar year.
NAME OF PURCHASER
SIGNATURE OF PURCHASER, PURCHASER’S EMPLOYEE, OR AUTHORIZED REPRESENTATIVE
PRINTED NAME OF PERSON SIGNING
TITLE
Appendix
PARTIAL EXEMPTION CERTIFICATE MANUFACTURING EQUIPMENT – SECTION 6377.1
This is a partial exemption from sales and use taxes at the rate of 4.1875% from July 1, 2014 to
December 31, 2016, and from 3.9375% from January 1, 2017 to June 30, 2022. You are not relieved from your
obligations for the remaining state tax and local and district taxes on this transaction. This partial exemption also
applies to lease payments made on or after July 1, 2014, for tangible personal property even if the lease
agreement was entered into prior to July 1, 2014.
Initial Discussion Paper Exhibit 1
Staff Proposed Regulation 1525.4 Page 7 of 7
ADDRESS OF PURCHASER
PERMIT NUMBER (IF YOU ARE NOT REQUIRED TO HOLD A PERMIT, EXPLAIN WHY)
TELEPHONE NUMBER
EMAIL ADDRESS OF PERSON SIGNING
DATE
