California Partial Sales Tax Exemption - Manufacturing or R&D Equipment - July 20, 2016

The state of California has provided a partial exemption from sales taxes on purchases of equipment used in manufacturing or research and development activities for years 2014 through 2022.  This partial exemption is at a rate of 4.1875% from July 1, 2014 to December 31, 2016 and 3.9375% from January 1, 2017 to June 30, 2022.

The qualifications to take advantage of this partial sales tax exemption are straightforward and rather lenient.  To qualify a company must meet three conditions:


I.    Be engaged in a qualifying business:

  • any form of manufacturing; or
  • research and development in biotechnology, physical sciences, engineering or life sciences;

II.    Purchase “qualified property”

  • machinery or equipment;
  • devices used to operate, control, regulate or maintain machinery or equipment;
  • (Note: consumable supplies with a useful life of less than one year are excluded);

III.    Use the qualified property for allowable uses

  • manufacturing; or
  • research and development

There is no need to apply for an exemption. Instead, companies simply need to provide a partial exemption certificate to each seller from whom they purchase equipment.  Here is a link to the certificate:


For any equipment that qualified under the exemption, for which full sales tax has already been paid, a company may issue a partial exemption certificate along with supporting documentation to the appropriate vendor, who can issue a refund (the vendor will in turn need to file a claim for a refund for itself from the BOE). If the transaction was subject to use tax (typically in an out-of-state purchase), a company may file a claim directly with the BOE using this form:

The California Board of Equalization ("BOE") - (what a name!) - provides information about this partial sales tax exemption on its website: