Manufacturing Tax Exemption: Get in the Know

During the last legislative session, state leaders took a giant step toward supporting the ‘Arizona Comeback’ by passing legislation to update Arizona’s sales tax code to be more competitive with our neighboring states in terms of tax policy. Effective August 1, 2014, Arizona will no longer tax the sales of electricity or natural gas used for manufacturing or smelting purposes.

The removal of the sales tax on the electricity and natural gas used in manufacturing gives Arizona another tool to use in business attraction, expansion and retention.

In 2011, manufacturing accounted for 8.4 percent of Arizona’s Gross Domestic Product according to Arizona Indicators, a project through the Morrison Institute for Public Policy at ASU. While this is a small portion of our GDP, the manufacturing industry creates 86 percent of Arizona’s exports, according to the Arizona Sonora Manufacturing Initiative. There are more than 4,500 manufacturers of all sizes in the state today and according to the Arizona Commerce Authority, one manufacturing job in our state supports another 1.29 jobs.

Manufacturing is a value-added industry whose jobs are transforming Arizona into a creator and exporter of goods across the nation and the globe.

Arizona’s existing manufacturers include large companies such as Honeywell International, food makers such as Bluebell Ice Cream and home-grown producers like Valley Machine Works, which has been doing business in Phoenix since 1909.

Manufacturing is experiencing a comeback in the United States, and Arizona is business climate is now even more welcoming to manufacturers of all sizes.

Get informed and learn if your business is eligible for this tax exemption.

For the purposes of this tax exemption ‘Manufacturing’ refers to businesses that, through a series of operations, transform a tangible personal property in form, composition or character into a different product with a distinctive name, character or use. Manufacturing does not include processing, fabricating, job printing, mining, generating electricity or operating a restaurant. In order to receive the exemption manufacturers must be principally engaged, which means that at least 51 percent of the business is a manufacturing operation.

Visit the Arizona Department of Revenue Website for more information. For more specific information about qualifying for the exemption, please see the exemption certificate application.

If you have questions or concerns please contact the Chamber’s Public Affairs team at publicaffairs@phoenixchamber.com.

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