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S.F. No. 78 - Phased In Exemption for Capital Equipment Purchases
 
Author: Senator Ann H. Rest
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: January 30, 2013



 

Under current law, capital equipment purchases are exempt from sales tax, but purchasers must pay sales tax upfront and apply for a refund.  This bill would provide an upfront exemption for purchases by eligible businesses beginning in July 2013, then allow an upfront exemption for purchases by all businesses beginning in July 2015. 

Section 1 allows an upfront sales tax exemption for capital equipment purchases for certain purchasers.  A purchaser qualifies for the upfront exemption if, during calendar year 2012:

  • the purchaser employed 80 or fewer full-time equivalent employees; and
  • if another business owns at least 20 percent of the purchaser, the total number of full-time equivalent employees employed by the purchaser and the owning business is not more than 80 full-time equivalent employees.  This provision is applicable for any business that owns at least 20 percent of the purchaser.

The upfront exemption would be effective for sales and purchases made after June 30, 2013, and before July 1, 2015.  During this time, purchasers that do not meet these qualifications must still pay the sales tax on capital equipment and apply for a refund as specified in current law.  

Section 2 repeals the requirement to collect sales tax upfront for capital equipment purchases, effective for sales and purchases made after June 30, 2015.

Sections 3 and 4 amends application requirements for refunds for capital equipment purchases to reflect the repeal provision in section 2.

NBP:dv

 
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