California Gives Tesla a Tax Break

04 November, 2009 10:49:00

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Tesla Motors won't have to pay sales tax on $320 million worth of manufacturing equipment for building its electric cars, under an agreement with Californiaâ€™s Alternative Energy and Advanced Transportation Financing Authority (CAEATFA).

Zero Emissions Vehicle Production Will Create 1,400 Jobs That tax arrangement will allow Tesla to save more than 9 percent of the total cost of equipment purchases.

Under the terms of the agreement, CAEATFA will assume title of $320 million worth of manufacturing equipment purchased by Tesla directly from vendors. CAEATFA will not pay the sales tax on the transaction.

When the transactions are completed, CAEATFA will transfer title of the equipment to Tesla. The end result of the arrangement: Tesla will not have to pay the sales tax, saving the company slightly more than nine percent of the $320 million total cost of equipment purchases.

The equipment purchases will be used for three purposes. First and primarily, Tesla will use $238 million to establish a production facility for its Model S sedan. No location has yet been determined but potential locations include Long Beach and Downey, CA. Tesla will also spend $59 million to upgrade its Palo Alto powertrain production facility and $5 million to expand current Roadster assembly at its Menlo Park facility. They will use $18 million on other unbudgeted equipment purchases.

The California tax deal comes after the U.S. Department of Energy offered Tesla $465 million in low-cost loans for its sedan manufacturing.

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