California income or franchise tax may be reduced by the amount of sales or use tax paid on certain machinery, machinery parts, and equipment purchased for exclusive use in an Enterprise Zone.

Eligible property includes machinery and machinery parts used for fabricating and processing, air and water pollution control equipment and, as of a business' 1998 tax year, data processing and communications equipment (computers, CAD systems, copy machines, telephone systems and faxes), and certain motion picture manufacturing equipment.

$1.45 million or more per year in tax credits is available for qualifying property. The credits may be carried over until they are exhausted.

Example: You spend $50,000 to purchase machinery
used to manufacture wooden toys. The sales tax paid for the purchase is $3,000. You may reduce the amount of your tax imposed on Enterprise Zone income by up to $3,000.