Summary: Manufacturing and technology strength is essential to a strong California economy. Historically, our state has been a world leader in these industries which include electronics, biotechnology, aerospace, and the production of goods of every description. A strong manufacturing base brings high paying jobs and produces an enormous positive ripple effect in the state’s economy. A sales tax exemption would quickly stimulate this sector.

Problem: California taxes the purchase of Manufacturing equipment while 46 states do not. Many of the 46 also provide tax credits to entice manufacturing expansion to their states. While existing Manufacturers Investment Tax Credit law provides some companies a partial offset against sales tax liability, California’s tax burden in this regard is one of the worst four in the country and much heavier than that of any other industrial state. With respect to telecom equipment, 20 states provide more favorable treatment.

Proposal: Institute a sales tax exemption for purchases of equipment relating to manufacturing processes, research and development and to telecommunications expansion.

Benefits: Such an exemption would greatly enhance California’s attractiveness as a choice for building a new facility, expanding an existing site or engaging in R&D. It would accelerate the growth of broadband access to underdeveloped parts of the state. It would bring a direct and immediate incentive for expansion to all companies in the manufacturing and telecom sectors.