Partial Sales & Use Tax Exemption for R&D Property

Information about the partial exemption, the requirements for eligibility and the process for claiming the exemption.

The partial sales and use tax exemption for R&D equipment became effective on July 1, 2014. In general, to be eligible for the exemption, three conditions must be met: the purchaser must be a “qualified person,” the equipment purchased must be “qualified property,” and the equipment must be used for R&D in a specified research area.

Qualified Person Requirement

  • The account to which the equipment cost is charged must be a “qualified account”:
    • Research accounts beginning with the digits “44” are qualified accounts.
    • On an exception basis, some non-44 accounts have been established as “qualified”.

 

Qualified Property and Use Requirements

  • The equipment must have a life of over one year, and must be used more than 50% of the time to conduct original research in a qualified area.
    • Qualified research areas are generally the hard sciences and include Biotechnology, Agriculture, Electronics, Environmental, Biology, Botany, Computers, Chemistry, Food, Fisheries, Forests, Geology, Health, Mathematics, Medicine, Oceanography, Pharmacy, Physics, Veterinary and allied subjects.
  • The equipment must be used for research in California.

 

Partial Exemption Tax Rate

  • For qualifying equipment, 3.9375% of the regular sales and use tax rate is exempt. This means that the applicable rate for partially exempt equipment purchased for the UCLA Westwood campus is 4.8125% (8.75% LA County rate minus 3.9375%).
    • The LA County sales and use tax rate is scheduled to increase on July 1, and therefore the applicable partial rate will also increase. The updated rates will be posted closer to the July 1 date.

Tax Services determines whether the partial exemption applies to a particular purchase. If you believe your R&D equipment purchase may qualify, please complete the Partial Exemption Checklist and send it with the quote and a screenshot of the requisition, to Tax Services.