CAEATFA Sales and Use Tax Exclusion
Revenue and Taxation Code Section 6010.8
California Revenue and Taxation Code (RTC) section 6010.8 provides an exclusion from sales and use tax for the purchase of tangible personal property by a "participating party" or by a construction contractor (including subcontractors) for use in the performance of a construction contract for a "participating party" for eligible projects involving the following:
- Alternative energy sources
- Advanced transportation technologies
- Advanced manufacturing
- Recycled Feedstock
Persons who wish to obtain this exclusion must apply to the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA).
Senate Bill (SB) 71, enacted in 2010, amended the Public Resources Code (PRC) to allow the exclusion from sales and use tax for eligible projects that promote the utilization of "green technology."
SB 1128, enacted in 2012, amended the PRC to allow the exclusion from sales and use tax for eligible projects that promote the utilization of "advanced manufacturing."
Assembly Bill (AB) 199, enacted in 2015, amended the PRC to allow the exclusion from sales and use tax for eligible projects that promote the utilization of "recycled feedstock."
AB 1547, enacted in 2018, amended the RTC to provide an exclusion from sales and use tax for the purchase of tangible personal property by any contractor for use in the performance of a construction contract for the "participating party" that will use that property as an integral part of the approved project. (RTC § 6010.8, subd. (a)(2).)
The California Recycling Market Development Act, enacted in 2019, extends the sunset date for this program to January 1, 2026.
This program is administered by the CAEATFA. Please visit CAEATFA's website for information on:
- Application materials
- Application process
- SB 71, SB 1128, AB 199, and AB 1547
- Other program information
For additional information, see:
- SB 71 Frequently Asked Questions (CAEATFA)
- Special Notice – New Legislation to Affect Manufacturers of Green Technology
If CAEATFA informs you that you qualify as a participating party, and the equipment you purchase is considered a "project," you should issue your vendor an exclusion certificate.
The following sample certificate is available for your use in documenting the exclusion.
You may find it helpful to inform your vendor of this program by attaching a copy of your Master Agreement with CAEATFA to your exclusion certificate. Providing such additional information will help your vendor understand that they can accept the exclusion certificate in good faith.
May I Purchase Equipment Prior to Being Approved by CAEATFA?
The sales and use tax exclusion applies to any property that is considered a "project." You are allowed to purchase your equipment in anticipation of approval by CAEATFA; however the following conditions apply:
- You will not be granted the exclusion until you are approved by CAEATFA.
- To qualify for the exclusion, it is necessary to be able to establish that there has been no functional use of the property or that the property has not otherwise been placed into service prior to being accepted as a participating party by CAEATFA. Functional use is defined as use for purposes for which the property was designed.
- If you plan to purchase equipment in anticipation of being approved by CAEATFA, and the equipment is not yet considered a "project," you may not issue a valid exclusion certificate because your project has not yet been approved by CAEATFA. Under such circumstances, you must pay tax on purchases you make prior to approval by CAEATFA, and you may not functionally use, or place in service, the equipment prior to being accepted as a participating party by CAEATFA.
- If you paid sales tax reimbursement or use tax on property that ultimately qualifies as a "project" and can establish with proper supporting documentation that the property has not been functionally used or placed in service prior to being accepted as a participating party by CAEATFA, you are entitled to a refund of tax once CAEATFA grants approval of your project.
How Do I Receive a Refund for Tax Already Paid?
- If the tax you paid is considered a use tax (typically use tax applies when you purchase from an out-of-state vendor), you may file a claim for refund directly with the California Department of Tax and Fee Administration (CDTFA). Simply complete form CDTFA-101, Claim for Refund or Credit and mail it to the address provided. Include as the reason for the refund that the property was purchased for subsequent nontaxable transfer to CAEATFA under RTC section 6010.8.
- If the tax you paid is considered a sales tax (typically sales tax applies when you purchase from a California vendor), you must obtain a refund of tax directly from your vendor. An amount paid to the retailer by the purchaser itemized as sales tax is not imposed by the state on the purchaser. It is a tax imposed on the retailer. The purchaser, as a matter of contract, is merely reimbursing the retailer for the tax imposed on the retailer. Thus, the purchaser has no standing to file a claim for the refund with the CDTFA for such amounts since the purchaser made no payments of sales tax to the CDTFA. Instead, the retailer is the only person who may file a claim for refund of sales taxes. When a retailer receives a refund of excess tax reimbursement paid to the state, the retailer is obligated by law to return the excess tax reimbursement to the purchaser who paid it.
A construction contractor (including subcontractors) may use the sales and use tax exclusion provided by RTC 6010.8, when they are furnishing and installing materials and/or fixtures as part of the construction of an approved project, for a participating party (AB 1547). Construction contractors are generally the consumer of materials that they furnish and install in the performance of a construction contract. Therefore, when a construction contractor purchases materials to be used for the construction of the approved project, they should provide their vendors with form CDTFA-192– CAEATFA Exclusion Certificate for Sales and Use Tax, to support that the purchase qualifies for the exclusion provided by RTC section 6010.8.
On the other hand, construction contractors are generally retailers of fixtures and/or machinery and equipment that they furnish and install. As the retailer, a construction contractor may issue a resale certificate when purchasing fixtures and/or machinery and equipment from its vendors. When the construction contractor resells the fixtures and/or machinery and equipment to a participating party or to a prime contractor for use in an approved project, they should obtain form CDTFA-192 – CAEATFA Exclusion Certificate for Sales and Use Tax, to support that the sale qualifies for the exclusion provided by RTC 6010.8.