Dietary supplement manufacturers can benefit from R&D tax credits. Eligibility requirements must be met before a credit can be awarded.
Growing luscious locks and keeping your body fighting fit has been made easier than ever with dietary supplements. The manufacturers of these products put in a lot of time and money to create high-quality supplements, but like consumers, even they can use a boost. This article will explain how federal and state R&D tax credits can give these companies the push they need to keep creating innovative health products.
What is the Federal R&D Tax Credit?
The federal R&D tax credit has been a part of the U.S. entrepreneurial landscape since 1981. This incentive program encourages companies to spend more on research and development in the U.S. Qualifying businesses from any state can apply for this tax credit. An R&D credit is a wonderful resource no matter if you run a startup or a well-established company. Let’s examine what an R&D tax credit can do for your company.
Does the Federal R&D Tax Credit Benefit Dietary Supplement Manufacturers?
Yes, your company could benefit immensely from the federal R&D tax credit. You can reclaim 7-10% of your company’s qualified research expenses (QRE) and apply it in three different ways:
- Payroll Tax. If your company is pre-revenue or bringing in less than $5 million in revenue, the federal R&D credit can reduce the social security portion of your payroll tax.
- Income Tax. If your coming is bringing in over $5 million in revenue, the credit can reduce the income portion of your business tax.
- Carry Forward. You can choose to carry the R&D tax credit forward by 20 years.
As you can see, applying for a federal R&D tax credit comes with a lot of benefits, but you’ll need to be able to identify what is a QRE. While there are many costs to running a business, only three items will count as QRE. These include:
- Wages. Only the wages of U.S.-based, W2 employees working on R&D will count for your credit calculation.
- Disposable Supplies. The cost of disposable items purchased for your company’s R&D activities.
- Contractor Fees. 65% of fees paid to U.S.-based contractors conducting R&D for your company can be added to your credit calculation.
Taking advantage of these resource is a great way to give your company a financial boost. Use our free R&D tax credit calculator to see how much your credit could be. Bear in mind that the federal credit isn’t the only tool you can use to lower your tax costs.
Are there State R&D Tax Credits?
While over 25 states do offer an R&D tax credit incentive, unfortunately there are 13 states without such programs. Review this list to see if your state doesn’t provide an R&D tax credit:
- North Carolina
- South Dakota
- West Virginia
If your state is listed above, don’t panic. As long as your company meets all necessary criteria, you can always apply for a federal R&D tax credit. Let’s take a look at R&D credit application process, also known as an R&D study.
How can Businesses Apply for an R&D Tax Credit?
When applying for an R&D tax credit, be sure to work with a professional. An R&D tax credit professional will help you categorize your QREs, put together a well-reviewed R&D study, and empower you to maximize your credit. After completing your R&D study, you’ll be ready to submit Form 6765 with your business taxes. Be aware that each state has a different application process. Working with Bowers R&D will prepare you for every step of the federal and state R&D application process.
Do Dietary Supplement Manufacturers have to Register with the FDA?
According to the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, if your U.S.-based company manufactures, processes, packs, or holds dietary supplements and/or dietary ingredients for consumption, then you must register with FDA before beginning any operations. It’s important to be sure you’re operating your business correctly, so you don’t encounter any hiccups when applying for a federal or state R&D tax credit.
R&D Tax Credits for Dietary Supplement Manufacturers: What You Need to Know
With these credits, you can use your recouped funds to reinvest in your company, so your product lands on the top list of supplements. Your company could reduce your tax burden with the federal R&D credit alone, but many states offer a similar program as well. Remember to enlist an R&D tax credit professional, so you can be fully prepared to take advantage of a federal and state R&D credit, if applicable. Contact Bowers R&D today to get the credit you deserve.