Exemptions Archives - McClellan Davis, LLC

California Sales and Use Tax Exemption for PPE and Related Supplies

Hopefully you are all staying safe, healthy and sane during this unprecedented time. We want to make you aware of a new, limited-duration, sales and use tax exemption in California for items such as personal protection equipment (PPE) and the like, when these items are sold to the State during this emergency declaration period.

Additional details are included below, but in short, sales to the State of California of PPE and related items are exempt from sales and use tax until Governor Gavin Newsom amends or resends the current State of Emergency order (N-46-20) he issued in response to the current […]

The Complexities of California Law for Construction Contractors

By Lucian Khan, Of Counsel to McClellan Davis

This article discusses some of the complexities of the California sales and use tax law, as it applies to construction contractors. Pursuant to California Code of Regulations, title 18, section 1521, Construction Contractors, a construction contract is a contract to erect, construct, alter or repair any building or structure, project, development, or other improvement to realty. However, the tax consequences can vary depending on the type of property installed, how the property is installed, the type of contract you have, how the contract is billed, whether the contractor does any further processing before […]

Jesse McClellan Obtains another Favorable Decision before the California Board of Equalization

Jesse W. McClellan, Esq., Principal, obtained another favorable decision on behalf of his client at the Board hearings held in Culver City on February 24, 2016. His second victory at the Board level hearings, which are held monthly, in the last three months.

The case involved an audit of a California based manufacturer of ink and related products used in the textile industry. The Board’s auditor disallowed numerous claimed exempt sales for resale for a variety of different reasons. Most of the disallowed transactions were resolved prior to the hearing, but the audit […]

What’s the Difference Between a Seller’s Permit Issued by the California Board of Equalization and a Resale Certificate?

When making a sale for resale, a common mistake that businesses make is accepting a copy of the purchaser’s seller’s permit, instead of a timely, valid, resale certificate. Businesses are frequently unaware of the difference between a seller’s permit and a resale certificate, and if they are, they often fail to put adequate controls in place to make sure a proper resale certificate is accepted. Understanding the difference is actually very important, especially for manufacturers, wholesalers and other business that commonly make sales for resale. Although sales for resale are one of the most fundamental exempt sales a business can […]

Tax Update for California’s Wine Industry

As a result of a very recent change to a legal interpretation that dates back to 1961, viable yeast used in the production of wine is no longer considered to be subject to sales or use tax in California. The Board of Equalization has historically considered wine yeast to be taxable because it doesn’t all remain in the final product. Therefore, yeast was considered to be consumed by the wine producer in the production process. That interpretation, however, was inconsistent with rulings that considered beer yeast to be exempt, and it overlooked the fact that the presence of wine yeast during the fermentation process is instrumental […]

Qualifying factors for California’s Manufacturing Exemption

California recently joined the majority of states when it enacted a partial sales and use tax exemption for property purchased for use in manufacturing and research and development. The exemption is established under Revenue and Code section 6377.1, as further explained under Sales and Use Tax Regulation 1525.4 with an effective date of July 1, 2014. The exemption is subject to a two hundred million annual cap, and it effectively reduces the tax rate by approximately four percent (4%) to the otherwise applicable rate. It actually applies to a rather broad scope of industries and even extends to real property […]

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