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. For an update on this news item, click here. (Revenue Information Bulletin No. 04-012-A, Louisiana Department of Revenue, May 18, 2004)