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State’s use tax rate hike can be offset by city’s rebate program

Posted: January 13, 2013 2:00 a.m.
Updated: January 13, 2013 2:00 a.m.

William Barritt, chief financial officer of Aerospace Dynamics International Inc., said he uses the city's Use Tax Incentive to build a stronger company and community.

With the latest statewide increase in the use tax rate, the city of Santa Clarita’s Use Tax Rebate Program can be a boon to local businesses gearing up to buy machinery, according to a spokesman for the city.

The use tax was increased, along with the sales tax, to 7.50 percent on Jan. 1 as a result of the passage of proposition 30 to help fund state schools.

And although the bump in rate was only a quarter of a percent, that can add up for a company investing in expensive equipment and machinery.

As the use tax increase remains in place at least through December 2016, Santa Clarita businesses can take advantage of a rebate program enacted in 2009 to help and stimulate local business.

“The program is ideal for any type of manufacturing, aerospace, biomedical company; or any business that spends a considerable amount of money on equipment,” said Jason Crawford, marketing and economic development manager for the city.

Unlike the sales tax program, in which 1 percent of all sales taxes are automatically routed back to local cities by the state, there is no process in place for routing use taxes by to local municipalities when a company pays a use tax.

Use taxes are paid to the state of California when companies purchase equipment from out-of-state manufacturers.

But none of that tax comes back to the city, Crawford said.

So the city acted upon an idea of William Barritt, chief financial officer for Valencia-based Aerospace Dynamic International. The city set up a plan whereby local companies designate a return of a portion of the tax payments they pay on any out-of-state purchases back to the city.

A business must notify the state that they want the city of Santa Clarita to receive its share of the taxes collected, Jessica Jackson, city communications specialist said in July 2012.

As an incentive to make that declaration, the city rewards businesses by giving them a rebate from the amount of tax collected by the city.

A company can opt to receive a cash rebate, equal to 25 percent of the use tax returned to the city, Crawford said.

Or a company can choose to get 45 percent credit for expansion-related city permit fees, said Andrea Walper, economic development associate for the city.

“Collecting use tax is essentially all new money we wouldn’t have gotten anyway so we have an incentive for businesses to help the city get its fair share,” Crawford said.


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