Co-packing, or contract manufacturing companies, help food companies manufacture and package their products in warehouses designed to house, develop, and prepare foods for shipping. The industry invests extensive resources in research and development (R&D). If your co-packing business improves product speed and efficiency or implements processes to meet industry regulations, it may be eligible to claim the R&D Tax Credit. Tax credits are offered at the federal and state levels and can help offset the costs of innovation.
Employee wages, raw materials and supplies, cloud computing expenses, and third-party contractor costs associated with research and development activities are considered qualified research expenses (QREs). Companies can receive refunds of up to 22% of total QREs through federal and state tax credits, depending on the state in which your business operates.
Examples of qualifying activities:
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Benefits for the R&D Tax Credit vary from state to state. Get an accurate estimate of your potential state tax credit!