Resource Recycling News

California Legislature passes sales tax exemption for recycling equipment

California lawmakers have approved a bill allowing MRF operators and recycling companies to receive tax exemptions for equipment purchases.

Assembly Bill 199 would allow state government to exempt projects and equipment purchases from the state and local portions of the sales and use tax. The bill, supported by advocacy group Californians Against Waste, has the potential to result in millions of dollars in tax breaks.

California’s state and local sales taxes can range from as low as 7.5 percent to as high as 10 percent, depending on local government sales tax add-ons, according to the state Board of Equalization.

The bill was authored by Assemblymember Susan Talamantes Eggman, a Democrat from Stockton.

“This legislation can help us make the most of the materials we too often discard or ship overseas,” Eggman stated in a press release. “I’ve seen dozens of local companies turn trash into treasure by recycling discards into new products. This not only eliminates the need for extracting new raw materials, it helps create manufacturing jobs.”

Various companies involved in recycling could apply for tax exemptions, including MRFs seeking new sorting equipment to improve the quality of bales and manufacturers using recycled feedstock to make products. Composters could also apply for tax exemptions.

CalRecycle, the state agency overseeing recycling, estimates California has about 160 recycling centers. It also estimates the state exports about 20 million tons of recyclable materials per year.

“If all of the reported material from processing facilities for glass, paper and plastics went to manufacturing facilities in California, the supply would exceed the manufacturing capacity by more than 300 percent,” according to a bill analysis.

The bill aims to spur investments in domestic recycling infrastructure, according to a bill analysis.

Under the bill, recycling companies could apply to the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA), part of the state treasurer’s office, for a tax exemption. To approve an exemption, the agency would have to determine the economic benefits of the exemption outweigh the loss to revenues.

The CAEATFA is restricted by law to approving no more than $100 million in tax exemptions each calendar year. Between November 2010 and July 2015, companies only claimed about $81.8 million in exemptions total.

The legislation sunsets on Jan. 1, 2021.

The bill passed with unanimous votes in favor in both the Senate and Assembly on Friday, Sept. 11. It now heads to the desk of Gov. Jerry Brown.

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