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Individual State Listing, State Manufacturing Exemptions

Incentive Programs: Deferrals, Exemptions, and Tax Credits

New and existing manufacturers, research and development firms, and certain high technology companies can benefit from several tax incentives offered by states and various taxing authorities throughout the US State sales and use tax exemptions are available to taxpayers who manufacture, fabricate or process tangible personal property for sale.

Texas sales and use tax exempts tangible personal property that becomes an ingredient or component of an item manufactured for sale, as well as taxable services performed on a manufactured product to make it more marketable.

Most state sales and use tax laws provide specific exemptions for tangible personal property used or consumed in industrial processing or manufacturing. The exemption may include the ingredients and consumable supplies as well as the machinery and equipment, including maintenance and repair parts. Some states exempt engineering, research, quality control, waste removal, packaging, and other ancillary activities. Manufacturers often find it difficult to benefit from the available exemptions because to fully realize the tax savings takes an unusual combination of knowledge of the law and more importantly, knowledge of the manufacturing process.

SMART TAX USA researches into the specific state statute providing for the exemption. Because some state statutes are vague, we also research the appropriate rules, regulations, letter rulings and case law. Much of the knowledge in the industrial processing/manufacturing area is so specific that it may not be published. Therefore we have an ongoing dialogue with the state tax authorities as well as our network of tax and legal professionals who specialize in this area.