The Louisiana Department of Revenue (Department) has issued new guidance explaining which purchases qualify for the sales and use tax exemption available to contractors and subcontractors working on qualifying public construction projects. Although the exemption has been effective since July 1, 2025, the new guidance provides greater clarity on what is and what is not exempt.
Contractors and subcontractors working on qualifying projects for the state of Louisiana, local governments, or other public entities may purchase certain materials and equipment rentals without paying state or local sales tax. However, the exemption is limited and only applies when specific requirements are met. To qualify for the exemption, the purchased items must be used exclusively and directly to perform a public construction contract, must become part of the completed project and be owned by the public entity after the project is finished. Examples of qualifying items include concrete, sheetrock, HVAC systems, nails, and other building materials incorporated into the project. Examples of qualifying equipment rentals include cranes, excavators, and concrete pumps.
The Department also identified several purchases that do not qualify for the exemption. General jobsite support items, including office trailers, portable restrooms, temporary storage containers, and buses used to transport workers, remain taxable. Likewise, tools and equipment that stay with the contractor after the project is complete, such as hammers, ladders, generators and saws, do not qualify. In addition, consumable items used to operate equipment, including fuel, lubricants, coolants and cleaning solvents, are not exempt. Safety equipment such as hard hats, gloves, safety glasses and fall protection gear also remain taxable. Lastly, labor and service charges continue to fall outside the exemption because they are not considered purchases of tangible personal property.
The guidance also reminds taxpayers that the exemption generally does not apply to the property owned by a public entity but leased to a private party under a payment-in-lieu-of-taxes (PILOT) or similar agreements unless required approvals have been obtained from the Louisiana Department of Revenue and the Louisiana Department of Economic Development.
The new guidance helps contractors better understand where the exemption begins and where it ends, properly distinguishing between qualifying materials, equipment rentals, and taxable support items. Contractors should carefully review purchases made for public projects to ensure only qualifying materials and equipment rentals are treated as tax-exempt. Proper documentation and accurate tax treatment can help reduce audit risk. For further details please review Revenue Information Bulletin No. 26-010.
(Revenue Information Bulleting No. 26-010, Louisiana Department of Revenue, March 17, 2026)