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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)


The Louisiana Department of Revenue has amended the rule under which taxpayers are required to make payment by electronic funds transfer. This amendment extends the definition of Other Immediately Investible Funds to include credit and debit card payments and electronic checks. Under this amendment, taxpayers will also be responsible for payment of any fees associated with the use of Other Immediately Investible Funds. (Louisiana Department of Revenue, LAC 61:I.4910, effective February 20, 2005)


Counsel representing the State of Louisiana Department of Revenue attempted to prove that Dell Catalog Sales, a mail order computer company, had sufficient nexus through its optional service contracts to be subjected to Louisiana use tax. The judge, however, decided the case in Dell’s favor. The ruling found that Dell did not own the third party service contract provider and held no physical presence in the state of Louisiana; therefore, nexus did not exist. The state intends to appeal the decision. (State of Louisiana and Secretary of the Department of Revenue and Taxation v. Dell Catalog Sales, L.P., May 25th, 2004)


Effective July 1, 2004, a new form has been published for Louisiana’s new sales tax exclusion for manufacturing machinery and equipment. The form may be used by manufacturing and agricultural businesses to apply for the exclusion, effectively reducing the taxable sales price for purchase, imported or leased equipment by 5%. This reduction was enacted by Act 1 of the 2004 First Extra Session of the Legislature, and is scheduled to be phased in over a six-year period. For full details, see (Revenue Information Bulletin No. 04-012: Policy Documents, June 23, 2004.)


Effective July 1, 2004, Louisiana will exclude 5% of the price of machinery and equipment from state sales tax. This will be the first in the six-year, seven-step, phase-out of the sales and use tax currently levied on machinery and equipment used in manufacturing. Eligible machinery and equipment is defined in Act 1 (H.B. 2) as "tangible personal property or other property that is eligible for depreciation for federal income tax purposes and that is used as an integral part in the manufacturing of tangible personal property for sale." Machinery and equipment may be used to control pollution produced at the plant facility during the manufacturing process or to test or measure raw materials and product (finished or incomplete) being manufactured; computers and software integral to the machinery and equipment used in production also qualify. In addition, both the manufacturer and the plant must be principally engaged in manufacturing, as referred to in the North American Industry Classification System of 2002. The next six steps will be enacted over the course of the next six years to gradually increase the percentage of the price of manufacturing machinery and equipment exempt from the sales tax to 100%. The enactment of the Act was contingent upon the Revenue Estimating Conference forecasting additional revenue for 2004-5 of $235 million or more above the amount forecast in December 2003; the general revenues forecast for 2004-2005 were $268.8 million above that amount. (Revenue Information Bulletin No. 04-012-A, Louisiana Department of Revenue, May 18, 2004)



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