Current through Register Vol. 50, No. 9, September 20, 2024
A. While state and local sales or use tax
laws are classified as general sales or use tax laws indicating that they apply
broadly across all sales, use, consumption, or lease of tangible personal
property as well as to some selected services, these laws do provide many
exemptions.
B.R.S. 47:305(A) and
(B) deal primarily with agricultural
commodities, and the tax liabilities associated therewith, as they apply to all
phases from production to final consumption or disposition. The broadest
exemptions apply to the producer of agricultural commodities. Any sale of
livestock, poultry, or other farm products made directly from the farm and
directly by the producer regardless of the purpose to which it will be put when
sold is exempt from these taxes. The producer is also exempt from use tax on
any farm products consumed by him or his family. This exemption extends to
livestock and livestock products, to poultry and poultry products, to farm,
range or agricultural products so long as they are produced by the farmer and
used by him and members of his family.
1. In
addition to the exemption from sales tax for sales made directly from the farm,
R.S.
47:305(A) further provides a
sales tax exemption for three types of off-the-farm-premises sales:
a. livestock sold at a public sale which is
sponsored by a breeder's association or a registry association is exempt from
state sales or use tax;
b.
livestock sold at a commercial livestock auction market which holds regularly
scheduled auction sales, not limited to any certain producer or producers is
exempt from state and local sales or use tax;
c. race horses sold through entry in a
claiming race, whereby the horse was claimed, at any racing meet held in
Louisiana is exempt from state sales or use tax.
2. Exemptions afforded other persons in
connection with agricultural commodities are limited depending upon the purpose
for which they are sold. The only exemption in the law for any farm products
sold directly to the consumer as a finished product, other than food sold under
circumstances described in
R.S.
47:305(D), is for sales made
by the farmer directly from the farm. There are, however, very broad exemptions
from state and local sales or use tax for all agricultural commodities sold by
any person other than a producer as raw materials for use or for sale in
preparing, finishing or manufacturing the commodities into merchandise intended
for ultimate retail sale. This exemption applies to all horticultural,
viticultural, poultry, farm and range products, livestock and livestock
products. The exemption applies to the tax imposed on the sale, storage, use,
transfer or any other utilization or handling of those products except when
they are sold as a finished product to the final consumer. The law further
provides that in no case shall there be more than one tax applied with respect
to agricultural commodities.
3.R.S.
47:305(A)(4) provides an
exemption for feed and feed additives for animals which are held primarily for
commercial, business, or agricultural uses. It also establishes certain
criteria which characterize these three categories of use for purposes of this
Subsection.
a.
Commercial
Use-the purchasing, producing, or maintaining of animals for
resale. Examples of such use are: cattle, poultry, and hog farms which produce
animals for market, pet animal breeders, and thoroughbred farms. Breeding
stock, although not normally held for sale, is included in the category of
commercial use.
b.
Business
Use-the keeping and maintaining of animals to perform specific
functions and services in conjunction with a business. Examples of this
category are dogs used in providing security services and horses used in a
rental business or carnival rides.
c.
Agricultural Use-broadly
defined to include the maintaining of work animals for producing: crops or
animals for market, food for human consumption, or animal hides or other animal
products for market. Examples of these agricultural uses would include draft
horses used to pull cargo, quarter horses used to work cattle, dogs used to
herd sheep, and dairy cattle used for milk production. Breeding stock which is
held for the propagation of these animals is also included in the
definition.
d. Specifically
excluded from the exemption in
R.S.
47:305(A)(4) is feed for
animals held primarily for other purposes, even though they might be used in
one or more exempt categories of use at times. For example, a registered breed
pet which is occasionally bred for the purpose of selling the offspring is not
considered held for commercial use.
C.R.S.
47:305(C) provides for the
use tax cost basis of motor vehicle dealers' service vehicles which are
withdrawn from resale inventory for use, such as towing trucks, parts trucks,
delivery vehicles, etc. It provides that in determining the cost basis for use
tax, a reduction is allowed if a used and previously taxed vehicle is
simultaneously returned to resale inventory. That reduction in the cost basis
of the newly withdrawn vehicle will be the wholesale value of the returned
vehicle according to the current value published by the National Automobile
Dealers Association.
D. In addition
to exemptions granted for broad categories of property or transactions,
R.S.
47:305(D) grants exemption
for the sale or use of specific items of property. The sale at retail, use,
consumption, distribution or the storage to be used or consumed, of gasoline,
steam, electric power or energy, newspapers, natural gas, or fertilizer and
containers used for farm products if they are sold directly to the farmer are
specifically exempted from state and local sales or use tax.
1. In addition to the exemption for electric
power or energy in
R.S.
47:305(D)(l)(d), the sale
and purchase of all materials and energy sources used to fuel the generation of
electric power for resale by utility companies, and the sale and purchase of
materials and energy sources for use by an industrial manufacturing plant to
produce electric power for self-consumption or cogeneration are exempt from
state and local sales or use tax.
2. Other fuels and specific applications of
energy sources are exempted from the tax.
R.S.
47:305(D)(l)(h) exempts all
energy sources used for boiler fuel except refinery gas. A boiler, for purposes
of this exemption, means a pressure-regulated vessel into which water is placed
and converted to steam by the application of heat, after which the steam is
sold, used for heating purposes, electrical generation, or any other industrial
use. R.S.
47:305(D)(1)(h), together
with R.S.
47:305(D)(l)(g), also
provides a limited exemption for refinery gas. The language in these two
subparagraphs exempt refinery gas from both state and local sales or use tax,
except when it is used as boiler fuel. Refinery gas, for sales
tax purposes, is defined as a by-product gas or waste gas which is produced in
the process of distilling crude petroleum into its refined marketable products.
R.S.
47:305(D)(l)(h) also
provides the formula by which the cost basis shall be computed annually for use
taxation purposes. For the period of July 1, 1985, through December 31, 1985,
the value shall be $0.52 per 1,000 cubic feet, or MCF. For each succeeding
calendar year thereafter, the cost basis shall be adjusted by multiplying $0.52
by a fraction the numerator of which shall be the posted price for a barrel of
West Texas Intermediate Crude Oil on December first of the preceding calendar
year, and the denominator of which shall be $29. Each annual cost basis, as
computed by the Department of Revenue, shall be the maximum value placed upon
refinery gas by any taxing authority.
3. Water (but not including mineral water or
carbonated water) is also exempt provided it is not placed in a container such
as a jug, bottle, or carton.
E.
1.R.S.
47:305(D) provides, in part,
an exemption from state sales or use tax upon the sale at retail, the use, the
consumption, the distribution, and the storage to be used or consumed in this
state for orthotic and prosthetic devices and patient aids prescribed by
physicians or licensed chiropractors for personal consumption or use.
Orthotic, by definition, means a branch of mechanical and
medical science that deals with the support and bracing of weak or ineffective
joints or muscles, and such things as orthopedic shoes, braces, crutches,
wheelchairs, surgical supports, and traction equipment are exempt from
taxation, while such items as prescription eyeglasses and hearing aids are not
covered by the exemption. Prosthesis, by definition, means the
replacement of a missing part of the body, as a limb or eye, by an artificial
substitute, and such things as artificial eyes, legs, or arms are exempt from
taxation. Toupees, eyeglasses, corrective lenses, and similar items are not
covered by the exemption. Patient aids mean such equipment as sickroom supplies
and other tangible personal property used for the convenience and comfort of
the patient. In all instances, the orthotic and prosthetic devices and patient
aids must be prescribed by a physician or a licensed chiropractor for personal
use or consumption in order for the sale to be exempt for sales tax purposes.
Further, the rental tax and sales tax for repairs to orthotic and prosthetic
devices and patient aids are not exempted under
R.S.
47:305(D).
2. For the purposes of state and local sales
or use tax, orthotic devices, prosthetic devices, prostheses and restorative
materials utilized by or prescribed by dentists in connection with health care
treatment or for personal consumption or use and any and all dental devices
used exclusively by the patient or administered exclusively to the patient by a
dentist or dental hygienist in connection with dental or health care treatment
are exempt. Dental prosthesis includes but is not limited to, full dentures,
fixed and removable dental prosthesis and all parts thereof, and all other
items associated with replacement and restoration of the teeth, which by law
also necessitates a prescription from the attending dentist for
fabrication.
F.
1.R.S.
47:305(D) provides an
exemption from state sales or use tax upon the sale at retail of food sold for
preparation and consumption in the home as well as for some other expressed
types of food sales. For this purpose, meat, fish, milk, butter, eggs, bread,
vegetables, fruit and their juices, canned goods, oleo, coffee and its
substitutes, soft drinks, tea, cocoa and products of these items, bakery
products, candy, condiments, relishes and spreads, are all considered food
items. Items such as flour, sugar, salt, spices, shortening, flavoring and oil
that are generally purchased for use as ingredients in other food items
constitute food. Items considered to be food are not limited to the examples
set forth above. The listing is not all inclusive.
2. Alcoholic beverages, malt beverages and
beer; tobacco products; distilled water, water in bottles, carbonated water,
ice and "dry ice" are not considered to be food. Medicines and preparations in
liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as
dietary supplements or adjuncts are also not considered to be food.
Dietary Supplements-any product, other than
tobacco, intended to supplement the diet that:
i. contains one or more of the following
dietary ingredients:
(a). a vitamin;
(b). a mineral;
(c). an herb or other botanical;
(d). an amino acid;
(e). a dietary substance for use by humans to
supplement the diet by increasing the total dietary intake; or
(f). a concentrate, metabolite, constituent,
extract, or combination of any ingredients described in Subclauses (a)-(e)
above; and
ii. is
intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid
form, or if not intended for ingestion in such a form, is not represented as
conventional food and is not represented for use as a sole item of a meal or of
the diet; and
iii. is required to
be labeled as a dietary supplement, which is identifiable by the fact that the
product contains a "Supplemental Facts" box on the label.
3. Food for home consumption as used in
R.S.
47:305(D)(1)(n) does not
include prepared food .
Prepared Food-
i. food sold in a heated state or heated by
the seller;
ii. two or more food
ingredients mixed or combined by the seller for sale as a single item, which
does not include food that is only cut, repackaged, or pasteurized by the
seller, and eggs, fish, meat, poultry, and food containing these raw animal
foods requiring cooking by the consumer in order to prevent food borne
illnesses; or
iii. food sold with
eating utensils provided by the seller, including plates, knives, forks,
spoons, glasses, cups, napkins, or straws. A plate does not include a container
or packaging used to transport the food.
4. Notwithstanding language to the contrary
in Paragraph F.3, bakery products, dairy products, soft drinks, fresh fruits
and vegetables, and package foods requiring further preparation by the
purchaser are considered food for home consumption unless sold by an
establishment listed in
R.S.
47:305(D)(3). However, soft
drinks that are sold with a cup, glass or straw are not considered food for
home consumption.
5. Sales of meals
furnished to the staff and students of educational institutions including
kindergartens; the staff and patients of hospitals; the staff, inmates and
patients of mental institutions; boarders of rooming houses; and occasional
meals furnished in connection with or by educational, religious or medical
organizations are exempt from state and local sales or use tax, provided the
meals are consumed on the premises where purchased. Sales of food by any of
these institutions or organizations in facilities open to outsiders or to the
general public are not exempt and tax should be charged on the entire gross
receipts rather than just the receipts from the outsiders or the general
public.
6. Facilities for the
consumption of food on the premises as discussed in
R.S.
47:305(D)(3) include not
only inside facilities, but also outside facilities, including parking
facilities.
7. For state sales or
use tax purposes, stores, institutions, and organizations can purchase food
items for resale without paying the advance sales tax that must be collected by
wholesale dealers under
R.S.
47:306(B) provided the
ultimate retail sale or consumption of the food is exempt. Regardless of the
type of purchaser, if a majority of the food purchased and disposed is taxable
under the established rules, advance sales tax must be paid by the purchaser.
G. For state sales or
use tax purposes, drugs prescribed by a physician, dentist or other persons
authorized to issue medical prescriptions for personal consumption or use are
exempt. For a definition of drugs, refer to
R.S.
47:301(20). Retail
establishments are authorized to allow this exemption for any retail sale
thereof which is sold due to the presentation of a medical prescription
authorizing such sale. Persons selling drugs, medicine, or ingredients thereof
to drug stores which cannot be sold at retail without the authorization of a
medical prescription are deemed to be making exempt sales, and as such, the
advance state sales tax should not be charged. Since hospitals and sanitariums
are primarily engaged in the business of selling services supervised and
directed by medical doctors, persons selling drugs, medicine, or ingredients
thereof to such institutions are deemed to be making exempt sales, and as such,
state sales taxes should not be charged. If a hospital or sanitarium operates
any divisions that sell tangible personal property to the public, such as a
prescription department, then the hospital or sanitarium becomes liable for the
tax upon the gross receipts or gross proceeds derived from such sales, except
for drugs sold on prescriptions which are specifically exempt from taxation.
For sales tax exemptions pertaining to insulin, see
R.S.
47:305.2.
1. In addition to drugs,
R.S.
47:305(D) provides an
exemption from state sales or use tax for any and all medical devices, but only
when they are used personally and exclusively by the patient, and only when the
medical device is purchased by the patient on the written authority of a
registered physician for use in the medical treatment of a disease. Purchases
of identical medical devices by hospitals and other medical institutions, for
use in administering the medical treatment to a patient would not qualify for
exemption under
R.S.
47:305(D)(1)(s).
2.
a. All
of the exemptions provided by
R.S.
47:305(D), except for the
exemptions on food and drugs, orthotic and prosthetic devices, and patient aids
prescribed by physicians or licensed chiropractors for personal consumption or
use apply to state and local sales or use tax. The exemptions for food and
drugs, orthotic and prosthetic devices, and patient aids prescribed by
physicians or licensed chiropractors apply only to state sales or use
tax.
b.
i.R.S.
47:305 D(4)(b) provides a limited exemption
from local sales and/or use taxes on the procurement of prescription
chemotherapy drugs administered to the patient for treatment of cancer and also
includes prescription drugs related to chemotherapy treatment administered in
connection with the treatment of cancer patients.
ii. In order for these prescription drugs to
be eligible for exemption, they must be procured by a physician who specializes
in the diagnosis and treatment of cancers and administered by the physician,
nurse, or other health care professional in the physician's office where
patients are not kept as bed patients for twenty-four hours or more. It is the
intent of this limited exemption to apply only to medications that have been
prescribed by and administered in the physician's office at the time medical
services are delivered. The issuance of a prescription for personal use of
similar drugs away from the physician's office will be fully taxable at the
local level. This exemption shall not apply to medical supplies or equipment
used to administer any treatment to patients.
iii. Chemotherapy drugs are those drugs that
kill or inhibit the growth of cancerous cells or tumors and have been approved
by the Food and Drug Administration for use in the treatment of cancers.
Chemotherapy drugs may be used individually or in combination to achieve
optimum results. Language dealing with "related chemotherapy prescription
drugs" (emphasis added) may present difficulties in interpretation and
therefore, this regulation is being adopted to establish certain guidelines to
govern this limited exemption. The treatment of diagnosed cancer with
prescribed drugs and chemotherapy relates to professional medical services
delivered to the patient in a physician's office where patients are not
regularly kept as bed patients for periods beyond 24 hours. These prescribed
drugs must be administered by the physician, his/her nurse, or other health
care professional orally or intravenously during the treatment. These exempt
prescribed drugs would include medications prescribed to treat the side effects
of chemotherapy, such as nausea and blood-related side effects. Such
prescription drugs must be medically necessary, prescribed as part of an
established protocol and appropriate in light of clinical standards of medical
practice. Procurement of these and similar drugs by hospitals, hospital
clinics, and other facilities that do not qualify as the physician's office
shall not be exempt from local taxation under this exemption. Purchases of
these and similar drugs that are prescribed for treatment in medical conditions
other than cancer would also not be exempt under this statute from local
taxation. Local taxing authorities have developed a specific Local Exemption
Certificate which is to be acquired and employed by those persons who are found
to be eligible for this exemption. Each local tax administrator or collector is
authorized to issue a local exemption certificate that has been approved by the
Board of Directors of the Louisiana Association of Tax Administrators (LATA)
upon application found suitable by said collector.
H.R.S.
47:305(D)(1)(i) provides, in
part, an exemption from state and local sales or use tax for new automobiles
and new aircraft withdrawn from stock by factory authorized new automobile and
new aircraft dealers, with the approval of the secretary and titled in the
dealers' name for use as demonstrators. There are several restrictions involved
in this particular exemption: first, the dealer must be a factory authorized
new automobile or aircraft dealer; second, the car or plane withdrawn from
stock must be a new automobile or aircraft; and third, the car or plane must be
titled in the dealer's name for use solely as a demonstrator. In order to
qualify as a demonstrator, the units can be driven or flown only by personnel
attached to the respective dealership or by a prospective customer accompanied
or supervised by personnel from the respective dealership. The car or plane
cannot be used by members of the family of dealership personnel nor can the
units be used to run errands or for pleasure purposes. The term demonstrators
will be construed in its narrowest sense and is limited to use of the property
for display of its qualities to prospective customers. Only a very limited use
by authorized dealer personnel is permissible in accordance with the provisions
of R.S.
47:305(H). Approval of the
secretary is required in titling the car as a demonstrator. Writing of the word
demonstrator across the face of the license application will be accepted as
sufficient request for approval and issuance of the license by the secretary on
an application bearing such notation will constitute full approval by the
secretary. Since new aircraft are titled in the name of the dealership upon
purchase, a request for and approval of the unit as a demonstrator will be
granted provided the dealership dates and signs the bill of sale and retains it
in his possession for verification by Department of Revenue personnel. If any
misuse of the demonstrator is detected subsequent to approval of the unit as a
demonstrator, the transaction immediately becomes taxable, and the dealer will
be held responsible for the tax due thereon.
I.R.S.
47:305(E) makes it clear
that the taxes imposed under state and local sales or use tax laws do not apply
to tangible personal property manufactured or produced in this state or
imported in this state for export outside the state. The exemption applies
solely to the property for export and does not apply to tangible personal
property used, consumed, or expended in the manufacturing process, unless the
conditions for exemption set forth in
R.S.
47:301(10) are met. Neither
do state and local sales or use tax laws levy a tax on bona fide interstate
commerce. In addition, it has been provided that when property comes to rest in
a taxing jurisdiction and has become a part of the mass of the property in that
taxing jurisdiction, it is no longer involved in interstate commerce and its
sale, use, consumption, distribution or storage for use there will be taxable.
Specific pieces of property which have been clearly labeled for trans-shipment
outside the taxing jurisdiction at the time of its manufacture or importation
into the taxing jurisdiction would meet the exemption requirements even though
it may be stored for an indefinite period of time. Any disposition of the
property for a purpose contrary to that originally intended would immediately
subject the property to the tax.
J.R.S.
47:305(F) exempts materials
and the use of film, video or audio tapes, records, and any other means of
exhibition or broadcast, supplied by licensors to radio and television
broadcasters from the taxes imposed by state and local sales or use tax laws.
The exemption applies to amounts paid for the right to exhibit or broadcast
copyrighted material and to the use of other materials supplied by licensors
but does not apply to film, tapes, or records purchased outright by the
broadcaster and retained in his private library. The exemption from the sales
and use tax is further extended to apply to licensors or distributors of such
material. This exemption, however, does not apply to the lease tax which might
be due by licensors or distributors in cases where they lease the material from
the owner or producer thereof.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
47:305,
R.S.
47:337.2,
R.S.
47:337.9, and
R.S.
47:1511.
