The Interim Revenue and Taxation Legislative Committee reviewed potential legislation at it's October 4 meeting that would expand the current sales tax exemption on the purchase of manufacturing related equipment.  Currently, manufacturing equipment is exempt from sales tax unless that equipment has a "useful life" of less than three years.  Those purchases that are used up in the manufacturing process or otherwise last less than three years are still fully taxable.  This unfortunate distinction was put in place when the original exemption was legislated solely for economic reasons regarding fiscal impact to the State rather than on sound tax policy.  The policy of "taxing outputs rather than inputs" of production has long been shown to promote investment and prudent economic expansion.

For several years, the legislature has had this proposal before it in some form or another.  In fact, the removal of the three year useful life penalty has passed both houses of the legislature but not in the same years.  The Interim Committee is considering a slightly altered approach to push this over the finish line.  One significant objection has come from cities who would lose sales tax revenue if these purchases were exempted.  Ideas are being floated to ameliorate the negative impacts to local governments.  UPA has supported this effort in years past and will continue in the future as we assist in promoting good tax policy.  Last year's legislation to expand this exemption for tier 3 fuels related refinery purchases was a tremendously positive step for our industry in this regard.  Stay tuned as this bill becomes available for review.