California – Introduced Bill Would Provide an Exemption for Unmanned Aerial Vehicle Manufacturing

SALT Report 2440 – The California General Assembly introduced a bill that if passed, would provide an exemption from sales and use taxes for the sale of, and the storage, use, or consumption of, tangible personal property purchased by a qualified person for use in unmanned aerial vehicle manufacturing.

The bill would also provide an exemption for the sale of, and the storage, use, or consumption of, tangible personal property purchased for use by a contractor. If the property is purchased pursuant to construction contract and will be used as an integral part of the manufacturing process, or in a facility used in connection with the manufacturing process of unmanned aerial vehicles.

The Bill defines manufacturing as the activity of converting or conditioning 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.

A qualified person is a person who is engaged in the line of business described in Industry Group 336411 of the North American Industry Classification System (NAICS), 2012 edition that manufactures unmanned aerial vehicles.

To qualify for the exemption the purchaser must provide the retailer with an exemption certificate, and the retailer must provide the Board with a copy of the exemption certificate. The exemption certificate must include the sales price of the machinery or equipment, and how the items will be stored, used, or consumed.

The exemptions in this Bill would apply to purchases on or after January 1, 2014, and will expire on January 1, 2024.

For Further Information

California State Legislature – Assembly Bill 1326