Manufacturing Tax Exemption Critical for Economic Growth and Diversification Efforts

TALLAHASSEE, Fla. – An expiring sales tax exemption could have a devastating impact on the state economy, according to a new analysis by Florida TaxWatch. Florida manufacturers are exempt from paying taxes on machinery and equipment purchases, but unless lawmakers take action this spring that exemption will disappear, threatening the state’s manufacturing sector.

“Florida’s manufacturing sector is vital to diversifying the state economy, and provides high wage jobs and a stable income stream,” said Dominic M. Calabro, President and CEO of Florida TaxWatch. “The manufacturing machinery and equipment sales tax exemption incentivizes the growth of the manufacturing industry and helps make Florida competitive with other states.”

Nearly all southern states provide incentives to manufacturers, but Florida is noticeably behind in manufacturing output. The Sunshine State’s per capita manufacturing expenditures are lowest among the 12 southern states, and total less than one-third of average expenditures.TaxWatch notes extending the exemption could significantly improve Florida’s manufacturing industry in relation to other southern states and result in higher economic output. If the exemption expires, Florida manufacturers will pay higher sales tax rates than nearly every other southern state.

“The manufacturing sales tax exemption is working to boost the state’s manufacturing sector,” said Steve Petty, Chief Economist for Florida TaxWatch. “Allowing the exemption to expire would put Florida further behind in manufacturing and could hinder our state’s efforts to diversify the economy and ensure Floridians have access to high-skill, high-wage jobs.”

Since implementing the sales tax exemption on manufacturing equipment, average monthly taxable sales in Florida’s manufacturing industry jumped 11.2 percent to $756 million per month.

“We should be encouraging the manufacturing sector to grow their businesses here in Florida,” said Senator Dorothy Hukill, Chairman of the Senate Finance & Tax Committee. “The elimination of this sales tax will afford a competitive advantage for manufacturers, creating more opportunities and jobs in the process.”

The report is available at http://www.floridataxwatch.org/library/manufacturingste.aspx