Accounting Services for Manufacturers
Manufacturers are the backbone of industrial economies, involved in the production of goods ranging from electronics to machinery. Managing finances in the manufacturing sector involves navigating complex supply chains, production costs, and regulatory compliance.
Tax and Accounting Services for Manufacturers
Accurate and detailed bookkeeping is essential for manufacturing businesses to track production costs, manage inventory, and monitor expenses. Manufacturing involves intricate processes with various cost components, such as raw materials, labor, and overhead. A robust accounting system ensures precise cost accounting and financial reporting.
In addition to production-related accounting, manufacturers must handle other financial aspects, including payroll, supplier payments, and equipment depreciation. Implementing efficient bookkeeping practices allows businesses to streamline financial operations and make informed strategic decisions.
Tax planning in manufacturing involves optimizing deductions related to production expenses, managing depreciation for machinery and equipment, and navigating tax incentives for the industry. Understanding the tax implications of different business structures and strategies for managing income and expenses is crucial for manufacturers.
Manufacturers may also benefit from research and development (R&D) tax credits, which can offset some of the costs associated with innovation and product development. Strategic tax planning helps manufacturers minimize tax liabilities and reinvest in their operations.
Taxation Laws in Oklahoma
Tax law in Oklahoma provides an exemption for qualified manufacturers on sales tax for construction materials used in building or expanding manufacturing facilities. To qualify for the exemption, the manufacturer must spend a minimum amount on construction costs and add a certain number of new full-time jobs based on the total construction costs. The manufacturer can apply for initial approval and later certification once requirements are met, and unapproved claims can be appealed through a statutory process.
710:65-13-153 – Exemption for “qualified manufacturers”
(a)Qualification. Sales of construction materials to a qualified manufacturer to be consumed or incorporated in a new manufacturing facility or to expand an existing manufacturing facility are exempt from sales and use tax. For purposes of this exemption, sales made to a contractor or sub-contractor who has previously entered into a contractual relationship with a qualified manufacturer for construction or expansion of a manufacturing facility shall be considered sales made to the qualified manufacturer.
(1)”Manufacturing facility” for purposes of this exemption, means buildings and land improvements used in manufacturing as defined in Section 1352 of Title 68 of the Oklahoma Statutes, except that up to ten percent (10%) of the square feet of such building may be devoted to office to provide clerical support for the manufacturing operation and shall also mean building and land improvements used for the purpose of packing, packaging, repackaging, labeling or assembling for distribution to market, if at least seventy percent (70%) of the product is made in Oklahoma by the same company but at an off-site in-state manufacturing facility or facilities. Retail outlets will be included only if the retail outlet is operated in conjunction with and on the same site or premises as the manufacturing facility.
(2)”Qualified manufacturer” for purposes of this exemption, means:
(A) Any enterprise whose total cost of construction of a new or expanded facility exceeds the sum of Five Million Dollars ($5,000,000.00) and the new or expanded facility adds at least One Hundred (100) new full-time-equivalent employees, as certified by the Employment Security Commission, and such employees are maintained for a period of at least thirty-six (36) months, upon completion of the facility.
(B) If the cost of construction exceeds Ten Million Dollars ($10,000,000.00) and the combined cost of construction material, machinery, equipment, and other tangible personal property exceeds Fifty Million Dollars ($50,000,000.00), the required number of new full-time-equivalent employees to be added and maintained to be a “Qualified manufacturer” is Seventy-five (75).
(C) If the total cost of construction exceeds the sum of Three Hundred Million Dollars ($300,000,000.00) the “Qualified manufacturer” must maintain an employment level of a least 1,750 full time equivalent employees.
(3)”Total costs of construction” defined. For purposes of this Section, “total cost of construction” means and includes building and construction materials, and engineering and architectural fees or charges directly associated with the construction of a new or expanded facility, but shall not include attorney fees. For purposes of (a)(2)(C) of this Section the “total cost of construction” shall also include the cost of qualified depreciable property, as defined by Section 2357.4 of Title 68 of the Oklahoma Statutes, and labor services performed in the construction of a new or expanded facility.
(4)The employment requirement. The employment requirement described in this Section can be satisfied by a portion of the required new full-time-equivalent employees being employed at a manufacturing facility related to or supported by the new or expanded business, so long as both or all facilities are owned by the same person.
(1) The exemption pertains only to sales of tangible personal property consumed or incorporated in the construction of a new manufacturing facility or the expansion of an existing facility made after June 1, 1988. The exemption applies to sales made to a contractor or sub-contractor to be consumed or incorporated in the construction of a new or expanded manufacturing facility pursuant to a contract with a qualified manufacturer as well as to sales made to a qualified manufacturer.
(2) The exemption applies only to tangible personal property that becomes a part of the facility or that is directly consumed in the construction process.
(3) No exemption shall be granted if the qualified manufacturer fails to file both the documentation required in (e)(1) of this Section and the required certification issued by the Employment Security Commission with the Commission.
(c)Administration. Pursuant to statute, the exemption for sales to a qualified manufacturer outlined in this Section will be administered as a refund for state and local taxes paid by the qualified manufacturer to the vendor or, in the case of use tax, self-remitted to the state of Oklahoma.
(1)Application. All persons who believe that they fall within the exemption provided shall file an Application/Intent to Qualify with the Commission. The Application/Intent to Qualify shall be on forms provided by the Commission and shall include, as attachments, specification of the new or expanded manufacturing facility a complete description of the product to be manufactured, and other information requested by the Commission.
(2)Review. Upon receipt of the Application, the Application will be reviewed by the Commission for completeness and compliance with the exemption. A copy of the application will be forwarded to the Employment Security Commission for establishment of the entities base line employment. The applicant will be notified of any action taken regarding the Application by the Commission.
(1)Records required for claim.
(A) For each purchase made, the entity who believes that it will be certified as a qualified manufacturer shall file the following documentation with the Commission on forms provided for that purpose by the Commission:
(i) Invoice indicating the amount of state and local taxes billed to the qualified manufacturer;
(ii) Affidavit of the vendor of the construction materials reflected on the invoice that state and local sales tax reflected on that invoice has not been audited, rebated, or refunded to the qualified manufacturer but rather the sales tax charge has been collected to the vendor and remitted to the Commission. Any number of invoices from the same vendor may be attached to one affidavit so long as the affidavit covers all invoices attached;
(iii) All additional documentation required to be submitted by the Commission.
(B) In cases where the state and local sales tax was paid by a contractor or sub-contractor who has previously entered into a contract with a qualified manufacturer, the qualified manufacturer shall file with the Commission the following:
(i) Invoices indicating the amount of state and local sales taxes billed;
(ii) An affidavit from the contractor or sub-contractor who made the purchase of construction materials reflected on the invoice stating that the sales tax reflected on the attached invoice and claimed by the qualified manufacturer is based on state and local sales tax paid by the contractor or sub-contractor on construction materials to be consumed or incorporated in a construction of new or expanded manufacturing facility and that the amount of state and local sales tax claimed was paid by the contractor or sub-contractor to the vendor and no credit, refund or rebate has been claimed by the contractor or sub-contractor. Any number of invoices can be attached to an affidavit of a contractor or sub-contractor provided that all invoices attached reflect purchases made by that contractor or sub-contractor and are reflected in the affidavit;
(iii) Additional documentation required by the Commission.
(2)Filing claims. At the option of the entity who believes it will be certified as a qualified manufacturer, the documentation can be filed monthly, quarterly, semi-annually, or annually. Certification issued by the Employment Security Commission must be filed within thirty-six (36) months of the date of first purchase.
(3)Review. The Commission will review the documentation submitted and determine within thirty (30) days whether the refund claimed will be allowed. In the event that the claim is denied, the person who submitted the documentation will be notified by the Commission as to the reason for denial. The person who submitted the documentation will similarly be notified that a claim has been approved.
(f)Fiscal procedure. Each month, the Commission shall transfer from sales tax collected the estimated amount of claims approved by the Commission the previous month.
(1)Application review. Upon completion of the new or expanded facility and the addition of the employees as required by statute, the person who believes he falls within the exemption shall apply for certification on forms provided by the Commission. Each application for certification shall be reviewed by the Commission for the purpose of determining that the thresholds required by law have been met. During such time that the Commission is reviewing the application for certification, the Commission will forward a copy of the application for certification to the Employment Security Commission who will review employees hired. Upon completion of the review by the Commission and the Employment Securities Commission, the Commission will notify the applicant of the approval or denial of the certification requested.
(2)Approval. The applicant whose certification has been approved shall receive a refund in the amount not to exceed the total amount of state and local sales taxes paid and previously approved by the Commission. The applicant will also receive accrued interest upon the principal amount of the refund made. [ See: 68 O.S. § 1359.1(C) ]
(3)Assessment. If at any time within thirty-six (36) months of the date certification is issued by the Oklahoma Employment Security Commission the number of full-time-equivalent employees drops below one hundred (100) such employees, any use or sales tax and interest previously refunded to the taxpayer will be assessed against the taxpayer receiving such refund and interest.
(4)Denial of certification; protest procedure.
(A) Any applicant whose request for certification is denied may, within sixty (60) days after the mailing of the denial by the Commission, file with the Commission a protest under oath, signed by the applicant or his duly authorized agent setting out:
(i) a statement of denial as determined by the Commission;
(ii) a statement of the applicant’s disagreement with such denial; and
(iii) supporting documentation relied on by the taxpayer in support of certification.
(B) If an applicant fails to file a written protest within the sixty (60) days, then the denial, without further action of the Commission shall become final and no appeal will be entertained.
(C) Applicants filing a protest to the denial of certification by the Commission shall be scheduled for a hearing en banc before the Commission for a date, time and place set by the Commission. Notice of the date, time and place will be given by mail at least ten (10) days prior to the hearing.
(D) The burden of proving that the denial of certification was erroneous is on the applicants. The applicant can present testimony, evidence and argument in support of the requested certification.
(E) The Commission will issue an order in each case. That order is directly appealable to the Supreme Court. The appeal must be perfected within thirty (30) days of the mailing of the order by filing a Petition in Error with the clerk of the Supreme Court of the State of Oklahoma and by filing a designation of the record with the Secretary of the Commission at the same time the Petition in Error is filed. [ See: 68 O.S. § 225 ]
(F) For further information the applicant should refer to the Rules of Practice and Procedure before the Office of the Administrative Law Judges(710:1-5-21 through 710:1-5-49 ). [ See: 68 O.S. §§ 1359.1, 1404.1 ]
Okla. Admin. Code § 710:65-13-153
Amended at 10 Ok Reg 3847, eff 7-12-93; Amended at 11 Ok Reg 3521, eff 6-26-94; Amended at 12 Ok Reg 2635, eff 6-26-95; Amended at 14 Ok Reg 2711, eff 6-26-97; Amended at 18 Ok Reg 2823, eff 6-25-01; Amended at 21 Ok Reg 2581, eff 6-25-04; Amended at 24 Ok Reg 2397, eff 6-25-07; Amended at 25 Ok Reg 2070, eff 7-1-08
Amended by Oklahoma Register, Volume 32, Issue 23, August 17, 2015, eff. 8/27/2015
Hire a CPA
The complexity of manufacturing operations and tax considerations makes the expertise of a Certified Public Accountant (CPA) invaluable. A CPA with experience in manufacturing brings insights into industry-specific tax strategies, financial management, and compliance with regulatory requirements.
CPAs assist manufacturers in optimizing their tax position, ensuring adherence to tax laws, and implementing effective accounting systems. Their role extends beyond traditional accounting, providing strategic financial advice to enhance overall business performance.
Why Choose Epsilon Accounting Solutions, CPA in Edmond, OK?
Epsilon Accounting Solutions understands the unique financial challenges faced by manufacturing businesses. With a commitment to personalized service and expertise in manufacturing accounting, Epsilon is the trusted partner for manufacturers seeking financial efficiency and compliance.
Disclaimer: This article does not constitute tax advice. Please consult Ahmed Baqir, CPA at Epsilon Accounting Solutions PLLC, before making any tax-related decisions or taking any actions based on the information provided in this article. Ahmed Baqir, CPA, has the expertise and knowledge to provide personalized advice tailored to your specific financial situation and goals.