While some business owners may discount California due to common perceptions about taxes and its business climate, savvy entrepreneurs recognize the potential the state holds. Employers in the state can leverage California’s well-educated and hard-working population to fill out its workforce. Moreover, wealthy individuals and prosperous businesses serve as a built-in local market for companies that call California home. Finally, direct access to global markets through California’s ports means that supply lines are kept short and business transportation costs are minimized.
Manufacturing companies in California and throughout the United States must handle all tax obligations in a timely manner or face fines, penalties, and the additional consequences a tax enforcement action can bring. The lawyers of NewPoint Law Group can assist manufacturing businesses with handling state and local tax obligations strategically. If you work with our team of tax lawyers, we will not only strive to ensure full compliance with all tax laws, but also tactically seek out applicable tax deductions and tax credits.
Tax Lawyers Handle Employment Tax, Sales Tax and Use Tax Obligations
Businesses throughout the United States are generally subject to sales tax, use tax, and employment tax obligations. In California, the Board of Equalization is responsible for administering sales and use tax obligations. The Employment Development Department (EDD) handles the state aspect of the employment tax and the IRS handles the federal portion of employment taxes.
As for sales and use tax obligations, businesses in California must collect tax and remit payments in a timely manner. Generally, sales tax is due on products sold in the state to consumers or other non-tax exempt parties. By contrast, use tax covers products that are purchased outside of California but used within the state. Sales and use tax issues are often technical and best left to the experienced guidance of a tax professional.
Businesses with employees must also be sure to satisfy payroll tax obligations. There is both a federal and state component to payroll taxes and both must be satisfied. The failure to comply with payroll tax obligations can and often does trigger aggressive tax enforcement actions. If you are facing an audit due to alleged payroll tax mistakes, agents may engage in a combative or accusatory manner. This is because payroll taxes are actually “trust fund taxes.” This means that the money always belongs to the government; the business owner is merely holding the funds “in trust” for the government. Thus, many business owners who made payroll mistakes have characterized the enforcement process as “innocent until proven guilty.” Working with an attorney who can set ground rules and protect your rights throughout the process often leads to a more favorable resolution.
California Tax Relief for Manufacturing Businesses
Businesses in California are also required to pay income tax or a franchise tax. However, certain manufacturing businesses with operations in California are eligible for tax breaks and other tax benefits. Tax breaks specifically designed to promote manufacturing ventures in California include:
- Partial Sales Tax Exemption for Manufacturing and R&D – Businesses engaged in certain types of manufacturing and research work can qualify for a complete or partial exemption from sales and use tax. To qualify, one generally must be engaged in certain manufacturing-related work, purchase ‘qualified property,’ and use that qualified property as prescribed by the law.
- CAEATFA Full Sales and Use Tax Exclusion — The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) can provide certain covered businesses – including manufacturers and advanced manufacturers – with full sales and use tax exclusion. Needless to say, an exclusion of this type can greatly aid company’s ability to compete and thrive.
- California Competes – Companies that are looking to expand to California or build-out their already existing California operations may be able to qualify for a California Competes tax credit. One-quarter of the available tax credit is reserved for small businesses
- New Employment and job training tax credits – California offer incentives to companies that invest in their workforce. Companies that hire full-time workers within certain designated geographic areas can qualify for tax credits. Similarly, employers can leverage funding initiatives for providing its workers with targeted training and education.
The above lists only some of the state-based tax credits that may be available to your manufacturing firm. Additional tax-saving opportunities may be available at the federal level. The attorneys of NewPoint Law Group can assist your business in leveraging these and other appropriate tax relief provisions.
Tax Lawyers Provide Guidance for California Manufacturing Firms
If you are seeking guidance regarding getting a manufacturing start-up off the ground or tax advice for an already-established firm, the lawyers of NewPoint Law Group can help. To schedule a free and confidential consultation, please call 1-800-358-0305 today.