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The Louisiana Legislature enacted a full sales and use tax exemption for machinery, equipment, repair parts, and repair services purchased, leased, or rented to replace or refurbish equipment damaged as a result of Hurricanes Katrina or Rita. This exemption is effective June 1, 2006 through June 30, 2007. Manufacturers must apply for exemption certificates from the Louisiana Department of Revenue to qualify for this benefit. The exemption is an addition to the current 10-year phase-in of a manufacturing exemption. (LA Revenue Information Bulletin No. 05-034)


In a recent Private Letter Ruling, the State of Louisiana held that electronic discovery services, consisting of evidence collection, data preparation, data review, and data production, were not subject to sales and use tax because they fell outside the scope of the state’s three categories of taxable transactions: sale at retail or use of tangible personal property, lease or rental of tangible personal property, or taxable services. The fact that the client received tangible personal property in conjunction with the services was considered insignificant when compared to the value of the non-taxable services performed. Any tangible personal property or taxable services acquired to provide such services, however, would be subject to use tax. (Private Letter Ruling No. 05-003).


The Louisiana Department of Revenue has released a ruling that amends the definitions of “cost price,” “lease or rental” and “sales price” as they relate to the manufacturing, machinery and equipment exemption from sales tax. These terms are clarified to exclude machinery and equipment used “predominantly and directly” in the process of manufacturing tangible personal property for sale or used directly in the production of processing and storing food, fiber or timber for sale. For purposes of “cost price,” the exclusion is applicable only to manufacturing businesses that are registered with the Department or that have been assigned specific NAICS (North American Industrial Classification System) codes in certain sectors. This exclusion is being phased in over a seven-year period that began on July 1, 2004. For the current rate of exclusion, contact the Louisiana Department of Revenue. (LAC 61:I:4301, Louisiana Department of Revenue, Effective March 20, 2005)


Effective July 1, 2005, the state of Louisiana will no longer tax sales or leases of rail rolling stock used in either intrastate or interstate commerce. The bill also provides an exemption for parts and services used in building or repairing rail rolling stock. Since Louisiana has home rule cities for sales and use tax, this does not exempt these goods and services on the local level. However, the bill does carry language that would allow the cities to easily conform to this law by passing an ordinance. (2005 LA H 78, Effective July 1, 2005)


The State of Louisiana has issued a final rule under the authority of R.S. 47:301 and R.S. 47:511. This rule amends LAC 61:I.4301 related to the definition of cost price, lease or rental, and sales price. The amendment states that under R.S. 47:301(3)(i), machinery and equipment is excluded from cost price if the property is used to manufacture tangible personal property for sale to another or is used directly in the production, processing, and storing of food, fiber, or timber for sale; is used predominantly and directly in the manufacturing process or in the actual manufacturing for agricultural purposes; and is eligible for depreciation for federal income tax purposes. The exclusion is subject to a phase-in from July 1, 2004 to June 30, 2010. This phase-in will be based on the state’s budgetary review. For the exclusion to apply a business must have been assigned by the Louisiana Department of Labor, North American Industrial Classification System codes within the agricultural, forestry, fishing, and hunting Sector 11 or the manufacturing Sectors 31 through 33 as existed in 2002. Any businesses that do not meet these qualifications are not able to utilize the benefits of the exclusion. The rule further states that machinery and equipment if used in the above qualifying matters is excluded from cost price, which includes the cost for a lease or rental of such equipment. The rule also provides definitions of direct use and qualifying machinery and equipment. (Final Rule; RULE; Department of Revenue; Policy Services Division, Louisiana Department of Revenue, March 20, 2005)



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