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California gives Tesla $34.735-million sales and use tax break, its second

19 December 2013

The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) has given Tesla Motors a $34.735 million tax break from sales and use taxes on $415-million worth of new manufacturing equipment for its Fremont factory. CAEATFA’s charter is to provide a sales and use tax exclusion (STE) for advanced manufacturers and manufacturers of alternative source and advanced transportation products, components or systems.

This marks the largest alternative source and advanced transportation STE tax break CAEATFA has yet awarded, exceeding even an earlier CAEATFA STE award to Tesla for $23.652 million in 2011. (CAEATFA has made 46 such awards, including the most recent to Tesla.)

The STE Program was originally authorized by Senate Bill 71 (Padilla, 2010), which allowed CAEATFA to provide a sales tax exclusion for manufactures of alternative source and advanced transportation products.

The STE Program was recently expanded by Senate Bill 1128 (Padilla, 2012) to include advanced manufacturing projects.

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This is very typical of every state and is only of interest as a news story since it's California and Tesla, whose names typically attract a certain set of haters. However, as I have already stated, this is a very common practice for all US states and for all industries. States give sales tax credits for people installing manufacturing. It's a good investment since it produces more in future revenues, including income and sales taxes associated with the increased economic activity. It's particularly nice when you can support a growing industry rather than a dying one, and one that reduces our ecological impacts (does not eliminate, but improves- so we're always getting better, not wallowing in a pit of greasy dispare with the dying industries clinging to their politically stabilized markets and federal government destruction of competition).

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