Tampa Bay area manufacturers now pay less for expansion and research and development.
New state measures that went into effect in July greatly reduce manufacturers' sales tax costs in an effort to improve Florida's business climate.
Small and medium-sized manufacturers now can get tax breaks previously only available to large companies with more expansion revenue, said Ann M. Paxton, a CPA and shareholder at Price Donoghue Ridenour in Clearwater.
The potential impact of the new legislation is great. Nearly 75 percent of the state's 16,500 manufacturers are considered small to medium-sized businesses.
The new Florida Manufacturing Global Competitiveness Act eliminates the $50,000 annual sales tax threshold expanding manufacturers previously faced before their equipment purchases or lease payments were exempt. In other words, expanding companies now do not first have to pay $50,000 in sales tax before qualifying for the tax exemption.
Go ahead, spend
Since BryCoat Inc. in Oldsmar develops processes and types of coatings for different applications, the company can use the new tax exemptions, said Michael D. Smith, president.
BryCoat already has used the prior tax measures to expand its facility and number of employees. The company started two new business units, doubled its plant size in a move from Safety Harbor to Oldsmar last year and added 10 employees.
With the more favorable exemptions, more expansion is a possibility, Smith said. The company currently has 37 employees.
"The money we've saved with exemptions in our expansion created 10 new jobs," he said. "We got extra space and were able to hire expert in their fields."
A manufacturer can make less costly equipment and machinery expansion or lease expenditures without paying sales tax under the new measure.
"It's one way for the state to try to expand manufacturers' ability to buy more," Paxton said. "This provides so much more for manufacturers who didn't necessarily have the volume that met the tax threshold."
Expanding manufacturers must show an increase in productive output of not less than 10 percent to qualify for the exemption and must purchase or lease machinery and equipment to manufacture property for sale at a fixed location.
Another new measure eliminates sales tax on machinery and equipment manufacturers use predominantly, which is defined as 50 percent of the time, in research and development.
This could include equipment such as software, Paxton said. She is working with an egg processing plant now to see if it qualifies for an exemption under this measure.
"You get tax credits when you're doing any kind of research," she said. "This used to be hard to get."
Awareness lacking
Paxton, who is treasurer of the Bay Area Manufacturers Association, said she recently issued a manufacturers' alert about the sales tax measures because she suspects many manufacturers are unaware of them and could save money.
Manufacturers associations across the state have tried for three years to get the Legislature to craft and pass tax exemption measures.
Tapping the resource
To qualify for the new tax exemptions on machinery and equipment for expansion, manufacturers must:
• Register with the Florida Department of Revenue
• Purchase or lease qualifying machinery and equipment to manufacture or produce tangible personal property for sale at a fixed location
• File Form DR-1214, an application for a temporary tax exemption permit, with the revenue department
• Show a production output increase of not less than 10 percent to qualify for the exemption
Source: Florida Department of Revenue
