Does your state tax manufacturing machinery?

The Tax Foundation released a new report on states’ taxing policies on manufacturing machinery …

State sales tax bases are both too narrow and too broad. States provide exemptions for many final consumption products, such as groceries and prescription drugs, and do not tax services in a notable way, both working to narrow their tax bases. Sales taxes ideally should apply to all final consumption. At the same time, states don’t always provide the necessary exemptions for business inputs, which should be exempted from the sales tax, making their tax bases overly broad.

Taxing inputs in a sales tax leads to “tax pyramiding.” Throughout the production cycle, the tax can be assessed multiple times. This leads to higher prices for consumers, fewer job opportunities for workers, or limits the business’s ability to expand. If too many business inputs are taxed, a state’s sales tax could actually start to function as a gross receipts tax.

This week’s map looks at just one of the many business inputs that states tax in their sales tax bases: manufacturing machinery.

More at the Tax Foundation