Manufacturing

California is home to a highly skilled manufacturing workforce, producing goods on a large scale and supporting the state’s strategic sectors. The manufacturing economy generated approximately $397 billion in annual gross domestic product output in 2023 and accounted for about 7% of California’s workforce ^1.

From general mass-market production to advanced and precision manufacturing, California is building on its strengths to support many of the strategic sectors.

To support this growth, California offers programs such as the manufacturing partial sales and use tax exemption and the California Energy Commission’s Manufacturing Grants ^{2 3} . With its diverse manufacturing base and strong focus on innovation, the state is ensuring its role as a leader in the nation’s manufacturing future.

California Competes Tax Credit

The California Competes Tax Credit is an income tax credit available to businesses who want to relocate, stay, or grow in California. Our team provides no-cost consultations to see if your business qualifies.

Sales and Use Tax Exemption for Manufacturing

This program, administered by the California Department of Tax and Fee Administration, provides a sales tax exemption of 3.9375% for basic manufacturing equipment. In addition, equipment for food processing, research and development, and biotechnology are also eligible for the exemption. Tenant improvements for manufacturing or research and development may also be eligible. The partial exemption applies only to the state sales and use tax rate portion. The exemption does not apply to any local, city, county, or district taxes.

Advanced Transportation and Manufacturing Sales and Use Tax Exclusion

The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) provides a full sales and use tax exclusion for advanced manufacturers and manufacturers of alternative source and advanced transportation products, components or systems. The program was expanded to include advanced manufacturing projects and projects using recycled feedstock.

References

1. Employment estimate may include manufacturing related to or included in other sectors, Lightcast
2. Sales Tax Exclusion (STE) Program, California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA), State Treasurer’s Office
3. Tax Guide for Manufacturing, and Research & Development, and Electric Power Equipment & Buildings Exemption, California Department of Tax and Fee Administration