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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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347.0000 Manufacturing Equipment—Regulation 1525.2
Annotation 347.0540
347.0540 Manufacturing Activity. An out-of-state developer and manufacturer of computer disk drives began contracting with various California companies for the manufacture of its finished products. The out-of-state firm provided the manufacturing equipment, raw materials, and the technical specifications for the manufacture of these items by the California companies. The California companies provide manufacturing labor and the facilities necessary to manufacture the finished items.
Based on these facts, the California companies contracting with the out-of-state firm are performing the manufacturing of the finished products. These companies may qualify for the partial exemption if they meet all the requirements of section 6377 and Regulation 1525.2. The out-of-state firm does not qualify for the partial exemption merely by providing equipment, materials and specifications to these companies. That is, the out-of-state firm's operations inside this state do not fall within SIC code operations 2011 through 3999 by way of its contracts with the California companies. 3/10/97.