Property Purchased or Leased for Use Outside of Louisiana and Offshore Addressed in New Louisiana Guidance
The Louisiana Department of Revenue issued Revenue Information Bulletin No. 16-034 (July 14, 2016) to address the taxability of items of tangible personal property purchased or leased for use outside of Louisiana and offshore.
Louisiana Revised Statute 47:305(E) provides that it is not the intention of any taxing authority to levy a tax upon articles of tangible personal property imported into this state, or produced or manufactured in this state, for export; nor is it the intention of any taxing authority to levy a tax on bona fide interstate commerce. The corresponding regulation, LAC 61:I.4401(I), provides that specific pieces of property, which have been clearly labelled for transshipment outside the taxing jurisdiction at the time of manufacture or importation into the taxing jurisdiction, meet the requirements of La. R.S. 47:305(E), even though the item may be stored for an indefinite period of time. This exemption includes items purchased for use in an offshore area beyond the territorial limits of Louisiana.
With respect to purchases for use in the federal offshore waters, the RIB requires that the invoice issued to the purchaser should evidence that the item has been purchased for use in a federal offshore area and identify in the destination area of the invoice: (1) the federal lease number, (2) area and (3) block number. If this information is not available, the invoice should note that the item is being shipped to the purchaser’s yard to await shipment to the purchaser’s platform in a federal offshore area.
With respect to a taxpayer’s importation of property from its yard in another state to a yard in Louisiana to be used in an offshore area beyond the territorial limits of Louisiana, then the taxpayer should document on the material transfer sheet the following: (1) the federal lease number, (2) area and (3) block number.
With respect to an item leased for use both in interstate and intrastate commerce, such property may be subject to state lease tax depending upon its usage for each lease payment billing cycle. The amount subject to Louisiana lease tax is determined by a ratio of the property’s operational use in Louisiana intrastate commerce versus total operational use of both interstate and intrastate commerce. The Department set forth two percentages that will either exempt the entire lease payment or trigger full state lease tax on the lease payment:
If the average operational in Louisiana intrastate commerce is less than or equal to 10 percent of the total operational usage during a lease payment billing cycle, then the leased property is deemed to be used exclusively in interstate commerce, and no state lease tax will be due for this transaction.
If the average operational usage in Louisiana intrastate commerce is greater than or equal to 90 percent of the total operational usage during a lease payment billing period, then the leased item is deemed to be used in Louisiana intrastate commerce and state lease tax is due upon the entire payment.
Finally, the Department specifically notes the provisions of this Revenue Information Bulletin do not apply to ships of 50-ton displacement and ship’s supplies, which are exempt from state sales tax pursuant to La. R.S. 47:305.1.