MANATEE -- Local manufacturers were upbeat Wednesday about Gov. Rick Scott's announcement that he will propose eliminating the sales tax on new equipment in the upcoming legislative session.
"We are committed to building up Florida manufacturing jobs by eliminating the tax barriers on companies who purchase equipment," Scott said. "Florida's current policy puts our state at a competitive disadvantage because most states do not force manufacturers to pay taxes on the purchase of equipment or require them to adhere to regulations for tax exemptions."
Peter Straw, president of the Sarasota Area Manufacturers Association, called it "a step in the right direction."
Straw has been pushing for sales and tangible tax reform for years. He helped push through a referendum in Sarasota County in 2010 that waives up to 100 percent of businesses' property taxes for up to 10 years if they meet job creation and pay requirements.
"In a perfect world, Florida manufacturers would not be penalized for investing in expensive equipment to be globally competitive," he said. "We would not be the only state in the Sunbelt charging tangible tax on manufacturing infrastructure."
Business groups across Florida swiftly endorsed Scott's proposal Wednesday.
"This tax has clearly been and remains an impediment to capital investment and the related job creation in Florida," said Dominic Calabro, president and CEO of Florida Tax Watch. Others supporting the move include the Florida Trucking Association, Small Business Development Council, Associated
Industries of Florida, Florida Port Council, National Federation of Independent Businesses and the Florida Chamber.
The organization had recommended eliminating tangible property tax, but a constitutional amendment would be needed, Calabro said.
Ron Van Ostenbridge with Cavanaugh Co., a Sarasota-based manufacturer that produces musical accessories like bow strings for violins and cellos, recently purchased a $300,000 piece of equipment and paid about $21,000 in sales tax.
"That is a lot of money for a small company like us," he said. "That is money we could have spent on an employee or more equipment."
But Van Ostenbridge agrees with Straw that elimination of the tangible property tax would be even better.
"That's a tax that never goes away," he said.
Manufacturers are taxed on their assets like equipment, and some, like Jeff Benson, president of Dulond Tool and Engineering in Manatee, don't think it's fairly assessed.
"We pay about $5,000 each year and it's not a one-time deal -- we pay each year," Benson said. "We'll go out and buy a good used machine, pay $25,000 for it but I don't get charged tax on $25,000. I get charged on what they think the machine is worth."
The tax does depreciate as the equipment ages, but Benson estimates that over the lifetime of the machine, he pays more taxes than he paid for the machine.
Years ago, the Legislature eliminated the sales tax on certain equipment purchases that could be tied to research and development or increased production. But it is not automatic and companies are required to go through a complicated approval process.
Scott will propose eliminating the "productive output" requirement, currently at 5 percent, required for businesses to receive a sales tax exemption on equipment. The original requirement was a 10 percent productivity, but was reduced to 5 percent in the 2012 legislative session.
As part of the governor's proposal, Quick Response Training funds would double to $12 million. Those monies are used to train workers to transition from other industries into manufacturing.
Straw points out that manufacturing is now 5 percent of Florida's Gross Domestic Product, estimating that it should be 10 percent or more.