Why do Most Businesses Miss Tax Savings?

Wiki Article

Most businesses assume sales & use tax is a fixed cost on equipment purchases—especially when it comes to machinery, production systems, or replacement parts.

But in reality, capital equipment is one of the biggest missed opportunities for tax refunds and ongoing exemptions.

In our last blog, we explored how overlooked utility exemptions can quietly drain thousands in recurring overpayments. But utilities are just one piece of the puzzle. When it comes to high-dollar savings, nothing compares to manufacturing and equipment-related exemptions.

And yet—most companies overpay for years without realizing it.

What Are Capital Equipment & Manufacturing Exemptions?

These exemptions apply when machinery, tools, parts, or systems are used directly in the manufacturing, production, or processing of goods.

In many states, items used in production, R&D, pollution control, packaging, or quality control are fully or partially exempt from sales & use tax.

Common exempt categories include:

Category

Example Items

Production machinery

CNC machines, conveyor systems, injection molding equipment

Repair & replacement parts

Motors, drives, belts, bearings, sensors

Safety & environmental

Dust collectors, PPE for production, air filtration

R&D & testing

Lab equipment, measuring tools, prototypes

Packaging systems

Shrink wrap machines, labeling equipment

Why Businesses Overpay

Reason

What Usually Happens

Vendors charge tax by default

Invoices show tax because supplier didn’t apply the exemption.

Teams unaware of exemption rules

Accounts payable assumes tax is required

Partial exemption confusion

Some states exempt equipment, but still tax installation or shipping

No exemption certificate on file

States require valid forms to claim exemption

Strict “direct use” definitions

Companies assume their equipment doesn’t qualify

Result?

Millions in refundable tax paid unnecessarily—often over multiple years.

Real-World Refund Example

A manufacturing client replaced $2.1M in production machinery over 4 years.

The vendor charged sales tax every time

The team assumed “that’s just how it works.”

No exemption certificate was ever filed

After a review, $126,000 refunded

Plus → future exemption process established = $30K+ annual savings

Who Benefits the Most?

Industries with major opportunities:

Manufacturing & fabrication

Food & beverage production

Pharmaceuticals & life sciences

Automotive & aerospace

Electronics & plastics

Metalworking & machining

Packaging & distribution centers

If your business makes, builds, processes, mixes, fabricates, or packages anything—you likely qualify.