Gov. Rick Scott is asking the Legislature to make a manufacturing sales tax exemption proposed in his 2015-16 budget a permanent measure to give Florida businesses a real opportunity for growth.
“Any time the company has an opportunity to grow, machinery purchases are a huge part of that,” said Terry Ellis, vice president of business development at WestPoint Home in Chipley.
Manufacturing employs more than 317,000 Floridians. The sales tax exemption covering manufacturing machinery and equipment was first implemented on a limited basis in 2012. In 2013, the Legislature extended the exemption for three years to last from 2014 through April 30, 2017.
“Getting a sales tax exemption just makes it easier to grow and reach out to buy new equipment,” Ellis said.
An analysis by Florida TaxWatch, a nonprofit taxpayer research institute and government watchdog, estimates the exemption would save qualifying businesses across the state $142.5 million in taxes on machinery and equipment purchases annually.
The scope of industries covered by the bill is expansive and touches nearly every conceivable product or service offered by Florida businesses. The exemption applies to a broad range of manufacturing types, including food production, tobacco, textiles, clothing and footwear, wood, paper products, printing services, petroleum products, chemicals, pharmaceuticals, plastics, rubber, metal fabrication, glass, concrete, HVAC, communications technology, aircraft and motor vehicles, medical supplies, jewelry, household goods, furniture and more.
Ellis said WestPoint has machinery performing various sewing tasks that costs anywhere from $150,000 to $400,000. Without the exemption, the factory would pay the standard 7 percent sales tax exemption.
“At the end of the day, if you have companies buying new equipment, that’s going to equate to jobs,” he said.
On a smaller scale, the manufacturing sales tax exemption benefits those in agriculture around Holmes and Washington counties, but it can also hurt if shoppers are savvy about where the tax incentives are more advantageous.
“I do lose customers to Alabama because of that tax,” said Greg Cloud of Cloud Auto Parts in Bonifay. “When you’re getting a $7,000 or $8,000 mower [in Florida], you’re talking a $500 difference.”
Alabama offers a similar exemption to help encourage economic growth in depressed areas. According to Cloud, customers there aren’t required to fill out a form at the time of purchase declaring the equipment will be used for commercial purposes. Customers in the know about the tax exemption in Alabama had been able to use that point to negotiate the price down on the same equipment sold by Cloud.
“That takes away from my profits,” Cloud said.
For instance, Cloud produced an invoice for a rotary cutter that retails for $3,850 in his store. Taxes on the sale would be $269.50, enough to motivate shoppers to travel to Alabama to save hundreds of dollars.
“My issue is 20 miles up the road; they can buy it with no tax, no questions asked,” Cloud said. “It’s worth the drive for them.”
Knowing which incentives are available is a key strategy for any business owner to get a leg up as new tax exemptions are being added to give Florida a better business climate.
“It’s just another step,” Ellis said. “Anything we can do to make the State of Florida more competitive and recruiting and getting businesses to come here is a win.”