On May 24, the Louisiana Department of Revenue released a revenue information bulletin and a revenue ruling addressing sales and use tax issues. The bulletin changes the renewal procedures for resale exemption certificates that are issued by the Department.1 The revenue ruling explains that coating, wrapping and galvanizing previously untreated tangible personal property are considered "fabrications" that are subject to sales and use tax.2
Resale Exemption Certificates
Pursuant to the bulletin, dealers with Department-issued resale exemption certificates must now renew their certificates online through the Louisiana Taxpayer Access Point (LaTAP) system. Resale dealers who are not registered for LaTAP should do so in order to complete the renewal process.3
Limited Resale Dealer Certificate (Form R-1055) No Longer Issued
The Department will no longer issue the Limited Resale Dealer Certificate (Form R- 1055).4 Instead, all dealers who renew their resale certificates will receive the Resale Dealer Certificate (Form R-1064). A Form R-1055 certificate will continue to be valid until the expiration date shown on it.5 Vendors may continue to accept the certificate until the expiration date.
Resale Dealer Certificate (Form R-1064)
The Resale Dealer Certificate (Form R-1064) is designed for dealers whose primary business activity is the sale of tangible personal property. When purchasing tangible personal property for resale, if the dealer presents the certificate to the vendor, the four percent Louisiana state sales tax will not be charged.6
Renewing Resale Dealer Certificate
A dealer seeking renewal of its Resale Dealer Certificate must have a consistent state sales tax return filing history within the most current twelve-month period. The dealer must also have a North American Industry Code System (NAICS) code that indicates that sales are its primary business activity. If the dealer's NAICS code does not indicate sales as its primary business activity, but the dealer does occasionally purchase items for resale, it may be eligible for renewal of the Resale Dealer Certificate if its filing history reflects sales within the most recent twelve-month period.
New Account Holders
The Department will continue to issue resale certificates to new sales tax account registrants if their NAICS codes indicate that sales are their primary business. New account holders whose NAICS codes do not automatically qualify them for the Louisiana Resale Certificate must apply online through LaTAP.
Fabrication of Tangible Personal Property
In the revenue ruling, the Department issued guidance clarifying that coating, wrapping and galvanizing pipe and other types of property that have not previously been coated, wrapped or galvanized are considered "fabrications" for purposes of sales and use tax. Because the definition of a taxable "sale" includes fabrication,7 gross proceeds for coating, wrapping and galvanizing tangible personal property are taxable.
The re-coating, re-wrapping or re-galvanizing of tangible personal property that previously had been coated, wrapped or galvanized is considered a taxable repair service.8 State and local sales and use tax is due on the full amount, including materials and labor, that is charged for the repair.
Statutory Exemptions
Statutory exemptions that are applicable on other sales of tangible personal property are also applicable to fabrication transactions. For example, there is an applicable exemption for property purchased for first use outside the state.9 Specifically, Louisiana exempts purchases and importation of tangible personal property from sales and use tax that has either its first use in another state or its first use in the offshore area beyond the borders of Louisiana or any other state.10 If the transaction is considered a repair, an exemption applies to re-coating, re-wrapping and re-galvanizing tangible personal property when the servicing dealer subsequently delivers the tangible personal property to another state, using its own vehicle or via common carrier.11
Commentary
The Department's bulletin provides a detailed discussion of the revised procedures that dealers must follow when renewing their resale exemption certificate. As explained by the Department, dealers must now renew their certificates online. By discontinuing the Limited Resale Dealer Certificate (Form R-1055) and requiring the renewal of certificates online, the Department is simplifying the resale exemption certificate renewal process. The Department's revenue ruling explains the taxation of charges made for the coating, wrapping and galvanizing of tangible personal property. Although fabrication is included in the definition of a "sale," there was ambiguity regarding the taxability of these transactions. The Department clarifies that these services are considered "fabrications" or repairs subject to tax, but notes that statutory exemptions may apply to these transactions. Thus, providers of these services should consider whether an exemption is available.
Footnotes
1 Revenue Information Bulletin No. 12-027, Louisiana Department of Revenue, May 24, 2012. Note that this supersedes Revenue Administrative Bulletin No. 09-015, Louisiana Department of Revenue, June 23, 2009, which validated the Department-issued Limited Resale Dealer Certificate (Form R-1055).
2 Revenue Ruling No. 12-002, Louisiana Department of Revenue, May 24, 2012.
3 To register an account in LaTAP, dealers should visit the Department's Web site at www.revenue.louisiana.gov/latap.
4 Previously, the Department issued one of two resale certificates to dealers depending on the nature of their business: (i) Limited Resale.
Dealer Certificate (Form R-1055) or (ii) Resale Dealer Certificate (Form R-1064). The Limited Resale Dealer Certificate (Form R-1055) was designed for dealers who were not identified as retailers under the North American Industry Classification System (NAICS), but whose business involved the occasional purchase of tangible personal property for resale to the public. Revenue Administrative Bulletin No. 09-015, Louisiana Department of Revenue, June 23, 2009.
5 The Limited Resale Dealer Certificate (Form R-1055) remains valid for two years after its issuance.
6 Note that vendors should retain copies of the resale certificates in their records as a release from the responsibility of collecting taxes on the sales.
7 LA. REV. STAT. ANN. § 47:301(12) defines "sale" to include "any transfer of title or possession, or both, exchange, barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property, for a consideration, and includes the fabrication of tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication work ..." (emphasis added).
8 See LA. REV. STAT. ANN. § 47:301(14)(g).
9 LA. REV. STAT. ANN. § 47:305.10; LA. ADMIN. CODE tit. 61:I, § 4410.
10 Id.
11 LA. REV. STAT. ANN. § 47:301(14)(g).
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