Research Equipment Partial Sales Tax Rate Exemption
Learn about the reduced sales/use tax rate on equipment purchased for research.
The University of California system is subject to a $200 million annual cap (per calendar year) on the partial sales and use tax exemption for qualified R&D equipment purchases. Once the cap is reached, invoices will no longer receive the partial tax exemption, and the full sales/use tax rate will apply. To avoid unexpected tax charges, departments are encouraged to submit orders early in the year. This page will be updated when the cap is reached, and a communication will be sent at that time.
Effective July 1, 2014 through June 1, 2030, the California State Board of Equalization (SBOE) is offering a reduced sales/use tax rate on equipment purchased for research.
Effective January 2019 the reduced sales/use tax rate will only be applied to new purchase orders for qualifying inventorial equipment (equipment $5,000 and over) and fabrications.
The reduced rate applies to:
- Machinery and equipment that will be used at least 50% of the time, and for over one year, in research and development anywhere in California.
- The exemption includes leased equipment, special purpose buildings, and non-inventorial equipment such as computers that are subject to the same requirements stated above.
Please note that UC San Diego must have taken title to the equipment on or after July 1, 2014 in order for the purchase to qualify.
The SBOE has limited the partial rate exemption to a specific purchase amount over the calendar year, which will be monitored by Business & Financial Services (BFS).
The exemption reduces the current sales tax rate by 3.9375%, resulting in an effective rate of 3.8125% for research equipment delivered to San Diego. The effective rate may change if equipment is delivered to a different city in California.
Note: Suppliers need to be aware of the exemption at the time the order is placed and a separate exemption certificate needs to be obtained for each qualifying purchase
Qualified equipment does not include:
- Consumables with a useful life of less than 1 year
- Tangible personal property used for instruction, administration, or general management
- Furniture, inventory, and equipment used in the extraction process
- Equipment used to store finished products that have completed the manufacturing, processing, refining, fabricating or recycling process
For Oracle Procurement Orders
During checkout, locate the qualifying research equipment line items. Each qualifying line item will need to be edited independently.
Click the line item you would like to edit, and scroll down to the Billing section. Scroll to the very right of the section and check the Research Equipment checkbox. All orders that have the checkbox selected will be routed to a Professional Buyer in Strategic Procurement for review. The Professional Buyer will conduct the necessary steps in order to utilize the reduced sales/use tax rate. All invoices related to POs that have the checkbox selected will route to the Tax Advisory Services Group in Disbursements for review prior to payment.
Please note that any PO revisions for sales/use tax do not update Oracle.
For Procurement Card Purchases
For suppliers that are collecting California sales tax:
- Departments are to submit detailed information about the qualifying research equipment via Services and Support to request an exemption certificate prior to placing the order with the supplier
- Include the supplier's name, a description of the equipment, type of research it will be used in, and a quote or invoice
- If the purchase qualifies, the Procurement Card team will reply back with an exemption certificate
- Send the exemption certificate via fax or email to your supplier contact
- Upload the exemption certificate to the transaction in Concur
For Bookstore Recharges
Alert the Bookstore to qualifying purchases prior to making the purchase. The Bookstore is working closely with the Tax Advisory Services Group to obtain the exemption certificates they need to honor the reduced rate.
Retroactive claims
The SBOE allows for a retroactive refund of tax if UC San Diego identifies qualifying equipment after the time of payment. Again, this applies only to qualifying equipment that UC San Diego took title to on or after July 1, 2014.