Manufacturing Business Tax Attorneys | Roseville, CA

Tax Challenges for California Manufacturers

California manufacturers operate under one of the most complex state tax environments in the nation. In addition to federal income tax obligations, manufacturers must navigate California income and franchise tax, sales and use tax on equipment and materials, payroll tax, and potential property tax issues related to manufacturing equipment and facilities.

At NewPoint Law Group, our tax attorneys work with manufacturers in Roseville and across Northern California to manage these obligations efficiently and defend against audits.

Sales Tax Exemptions for Manufacturing

California provides a partial sales and use tax exemption for qualifying purchases of manufacturing and research-and-development equipment under Revenue and Taxation Code § 6377.1. The exemption reduces the applicable state sales tax rate on qualifying equipment purchases.

To qualify, the manufacturer must be primarily engaged in manufacturing, processing, or fabricating tangible personal property intended for sale. Qualifying equipment must be used at least 50% of the time in manufacturing activities. Proper documentation and timely application of the exemption are essential — errors can result in the exemption being disallowed during a CDTFA audit.

Common Audit Issues for Manufacturers

• Misapplication of the manufacturing equipment sales tax exemption

• Use tax on equipment or supplies purchased from out-of-state vendors

• Worker classification issues for production and contractor workers

• Payroll tax compliance across multiple facilities

• Income apportionment for manufacturers with multi-state operations

• Research and development credits under California and federal law

Legal Representation for Manufacturing Tax Disputes

When a California manufacturer faces a CDTFA audit, IRS examination, or FTB inquiry, having tax attorneys who understand the manufacturing industry's specific exemptions, credits, and compliance requirements is essential. We represent manufacturers through audits, protests, and appeals, advocating for correct application of the law.