BILL NUMBER: SB 686	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Padilla

                        FEBRUARY 18, 2011

   An act to add Section 6377.1 to the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 686, as introduced, Padilla. Sales and use taxes: exemption:
biotechnology manufacturing.
   The Sales and Use Tax Law imposes a tax on retailers measured by
the gross receipts from the sale of tangible personal property sold
at retail in this state, or on the storage, use, or other consumption
in this state of tangible personal property purchased from a
retailer for storage, use, or other consumption in this state, and
provides various exemptions from the taxes imposed by that law
   This bill would exempt from those taxes, on and after January 1,
2012, the gross receipts from the sale of, and the storage, use, or
other consumption of, tangible personal property purchased by a
qualified person for use primarily in the biotechnology manufacturing
process.
   The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes
counties and cities to impose local sales and use taxes in conformity
with the Sales and Use Tax Law, and existing law authorizes
districts, as specified, to impose transactions and use taxes in
accordance with the Transactions and Use Tax Law, which conforms to
the Sales and Use Tax Law. Exemptions from state sales and use taxes
are incorporated into these laws.
   Section 2230 of the Revenue and Taxation Code provides that the
state will reimburse counties and cities for revenue losses caused by
the enactment of sales and use tax exemptions.
   This bill would provide that, notwithstanding Section 2230 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse local agencies for sales and use tax revenues
lost by them pursuant to this bill.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 6377.1 is added to the Revenue and Taxation
Code, to read:
   6377.1.  (a) On and after January 1, 2012, there are exempted from
the taxes imposed by this part the gross receipts from the sale of,
and the storage, use, or other consumption in this state of, any of
tangible personal property purchased for use in biotechnology
manufacturing by a qualified person to be used primarily in any stage
of manufacturing of property, beginning at the point any raw
materials are received by the qualified person and introduced into
the process and ending at the point at which the manufacturing, has
altered property to its completed form, including packaging, if
required.
   (b) For purposes of this section:
   (1) "Biotechnology manufacturing" means manufacturing in the lines
of business described in Codes 325411, 325412, 325413, 325414,
334510, 541711, 541720, and 541910 of the North American Industry
Classification System (NAICS) published by the United States Office
of Management and Budget (OMB), 2007 edition, including medicinal and
botanical manufacturing, pharmaceutical preparation manufacturing,
in-vitro diagnostic substance manufacturing, biological product
manufacturing, research and development in biotechnology, research
and development in the social sciences and humanities, and marketing
research and public opinion polling.
   (2) "Manufacturing" means the activity of converting or
conditioning property by changing the form, composition, quality, or
character of the property for ultimate sale at retail or use in the
manufacturing of a product to be ultimately sold at retail.
Manufacturing includes any improvements to tangible personal property
that result in a greater service life or greater functionality than
that of the original property.
   (3) "Primarily" means tangible personal property used 50 percent
or more of the time in an activity described in subdivision (a).
   (4) "Process" means the period beginning at the point at which any
raw materials are received by the qualified taxpayer and introduced
into the manufacturing activity of the qualified person and ending at
the point at which the manufacturing activity of the qualified
person has altered tangible personal property to its completed form,
including packaging, if required. Raw materials shall be considered
to have been introduced into the process when the raw materials are
stored on the same premises where the qualified person's
manufacturing activity is conducted. Raw materials that are stored on
premises other than where the qualified person's manufacturing
activity is conducted, shall not be considered to have been
introduced into the manufacturing process.
   (5) "Qualified person" means a person who is engaged in
biotechnology manufacturing.
   (6) (A) "Tangible personal property," as used in this section,
includes, but is not limited to, all of the following:
   (i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
   (ii) All equipment or devices used or required to operate,
control, regulate, or maintain the machinery, including, without
limitation, computers, data processing equipment, and computer
software, together with all repair and replacement parts with a
useful life of one or more years, whether purchased separately or in
conjunction with a complete machine and regardless of whether the
machine or component parts are assembled by the taxpayer or another
party.
   (iii) Property used in pollution control that meets standards
established by this state or any local or regional governmental
agency within this state.
   (iv) Fuels used or consumed in the manufacturing process.
   (B) "Tangible personal property" shall not include any of the
following:
   (i) Consumables with a normal useful life of less than one year,
except as provided in clause (iv) of subparagraph (A).
   (ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
   (iii) Tangible personal property used primarily in administration,
general management, or marketing.
   (c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as the
board may prescribe, and the retailer subsequently furnishes the
board with a copy of the exemption certificate. The exemption
certificate shall contain the sales price of the machinery or
equipment, the sale of, or the storage, use, or other consumption of
which is exempt pursuant to subdivision (a).
   (d) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of property which,
within one year from the date of purchase, is removed from
California, converted from an exempt use under subdivision (a) to
some other use not qualifying for the exemption, or used in a manner
not qualifying for the exemption.
   (e) If a purchaser certifies in writing to the seller that the
property purchased without payment of the tax will be used in a
manner entitling the seller to regard the gross receipts from the
sale as exempt from the sales tax, and within one year from the date
of purchase, the purchaser removes that property outside California,
converts that property for use in a manner not qualifying for the
exemption, or uses that property in a manner not qualifying for the
exemption, the purchaser shall be liable for payment of sales tax,
with applicable interest, as if the purchaser were a retailer making
a retail sale of the property at the time the property is so removed,
converted, or used, and the sales price of the property to the
purchaser shall be deemed the gross receipts from that retail sale.
  SEC. 2.  Notwithstanding Section 2230 of the Revenue and Taxation
Code, no appropriation is made by this act and the state shall not
reimburse any county or city for any sales and use tax revenues lost
by it under this act.
  SEC. 3.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.