Sales and use taxes: exemption: research and development: design: digital interactive media.
This bill specifically amends Section 6378.5 of the Revenue and Taxation Code, exempting qualified businesses from paying sales taxes on their purchases related to R&D and design efforts. However, the bill clearly states that local sales and use taxes will not be exempt, preserving local revenue collection. The rationale is to foster a conducive environment for tech companies by lowering operational costs associated with equipment acquisition. This might stimulate job growth and economic activity in the sector, as well as attract new businesses to California, leveraging its position as a tech hub.
Assembly Bill 2574, introduced by Assembly Member Bloom, aims to promote the digital interactive media industry in California by providing a temporary exemption from state sales and use tax for certain tangible personal property used in research and development and design of digital interactive media. This exemption will apply to purchases made by qualified persons between January 1, 2019, and January 1, 2024, and includes equipment and materials necessary for the creation and testing of digital media products like video games and interactive software. The intention is to support innovation and growth in the technology sector, particularly as digital interactive media has become a significant aspect of the economy.
Overall, the sentiment surrounding AB 2574 appears to be supportive, particularly among industry stakeholders who see it as a positive move to invigorate the digital media sector. Advocates argue that providing tax exemptions on essential equipment will encourage more companies to invest in research and development. However, some critics have raised concerns that such exemptions, while beneficial for technological advancement, might lead to significant losses in tax revenue that could affect public services funded by these taxes.
The notable points of contention center around the potential impact of reduced state tax revenue and the ongoing need for local governments to maintain their tax bases. While proponents emphasize economic benefits and job creation, detractors worry about the sustainability of this approach and its implications for local government funding. The bill includes specific definitions of 'qualified persons' and the types of 'digital interactive media' that qualify for the exemption, which may also bring up discussions regarding enforcement and compliance in the industry.