Now that research & development (R&D) tax credits can be used to offset payroll tax liability, startup companies may be able to save big on their federal tax liability. While R&D credits are a federally-funded credit program, most states also offer incentives for performing research & development.
Each state is different, but below we discuss incentives available in Missouri and Illinois.
Missouri R&D Tax Exemption
Missouri offers a sales tax exemption for R&D purchases made within the state. Any materials, equipment, machinery, chemicals and energy sources that are used for research and development can be exempt. This exemption applies to state sales tax only, so local sales taxes would still be due on each purchase. This is a great exemption to take advantage of in addition to the federal credit.
Illinois R&D Credit
Illinois has its own R&D credit, similar to the federal R&D credit. It’s an income tax credit equal to 6.5% of R&D expenditures that exceed the ‘base amount’. Qualifying expenditures include wages, supplies and contract research purchased within the state. The credit had previously expired, but Illinois lawmakers retroactively reinstated it.All Insights