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On May 24, the Louisiana Department of Revenue released arevenue information bulletin and a revenue ruling addressing salesand use tax issues. The bulletin changes the renewal procedures forresale exemption certificates that are issued by theDepartment.1 The revenue ruling explains that coating,wrapping and galvanizing previously untreated tangible personalproperty are considered "fabrications" that are subjectto sales and use tax.2
Resale Exemption Certificates
Pursuant to the bulletin, dealers with Department-issued resaleexemption certificates must now renew their certificates onlinethrough the Louisiana Taxpayer Access Point (LaTAP) system. Resaledealers who are not registered for LaTAP should do so in order tocomplete the renewal process.3
Limited Resale Dealer Certificate (Form R-1055) No LongerIssued
The Department will no longer issue the Limited Resale DealerCertificate (Form R- 1055).4 Instead, all dealers whorenew their resale certificates will receive the Resale DealerCertificate (Form R-1064). A Form R-1055 certificate will continueto be valid until the expiration date shown on it.5Vendors may continue to accept the certificate until the expirationdate.
Resale Dealer Certificate (Form R-1064)
The Resale Dealer Certificate (Form R-1064) is designed fordealers whose primary business activity is the sale of tangiblepersonal property. When purchasing tangible personal property forresale, if the dealer presents the certificate to the vendor, thefour percent Louisiana state sales tax will not becharged.6
Renewing Resale Dealer Certificate
A dealer seeking renewal of its Resale Dealer Certificate musthave a consistent state sales tax return filing history within themost current twelve-month period. The dealer must also have a NorthAmerican Industry Code System (NAICS) code that indicates thatsales are its primary business activity. If the dealer's NAICScode does not indicate sales as its primary business activity, butthe dealer does occasionally purchase items for resale, it may beeligible for renewal of the Resale Dealer Certificate if its filinghistory reflects sales within the most recent twelve-monthperiod.
New Account Holders
The Department will continue to issue resale certificates to newsales tax account registrants if their NAICS codes indicate thatsales are their primary business. New account holders whose NAICScodes do not automatically qualify them for the Louisiana ResaleCertificate must apply online through LaTAP.
Fabrication of Tangible Personal Property
In the revenue ruling, the Department issued guidance clarifyingthat coating, wrapping and galvanizing pipe and other types ofproperty that have not previously been coated, wrapped orgalvanized are considered "fabrications" for purposes ofsales and use tax. Because the definition of a taxable"sale" includes fabrication,7 gross proceedsfor coating, wrapping and galvanizing tangible personal propertyare taxable.
The re-coating, re-wrapping or re-galvanizing of tangiblepersonal property that previously had been coated, wrapped orgalvanized is considered a taxable repair service.8State 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 oftangible personal property are also applicable to fabricationtransactions. For example, there is an applicable exemption forproperty purchased for first use outside the state.9Specifically, Louisiana exempts purchases and importation oftangible personal property from sales and use tax that has eitherits first use in another state or its first use in the offshorearea beyond the borders of Louisiana or any otherstate.10 If the transaction is considered a repair, anexemption applies to re-coating, re-wrapping and re-galvanizingtangible personal property when the servicing dealer subsequentlydelivers the tangible personal property to another state, using itsown vehicle or via common carrier.11
Commentary
The Department's bulletin provides a detailed discussion ofthe revised procedures that dealers must follow when renewing theirresale exemption certificate. As explained by the Department,dealers must now renew their certificates online. By discontinuingthe Limited Resale Dealer Certificate (Form R-1055) and requiringthe renewal of certificates online, the Department is simplifyingthe resale exemption certificate renewal process. TheDepartment's revenue ruling explains the taxation of chargesmade for the coating, wrapping and galvanizing of tangible personalproperty. Although fabrication is included in the definition of a"sale," there was ambiguity regarding the taxability ofthese transactions. The Department clarifies that these servicesare considered "fabrications" or repairs subject to tax,but notes that statutory exemptions may apply to thesetransactions. Thus, providers of these services should considerwhether an exemption is available.
Footnotes
1 Revenue Information Bulletin No. 12-027,Louisiana Department of Revenue, May 24, 2012. Note that thissupersedes Revenue Administrative Bulletin No. 09-015,Louisiana Department of Revenue, June 23, 2009, which validated theDepartment-issued Limited Resale Dealer Certificate (FormR-1055).
2 Revenue Ruling No. 12-002, LouisianaDepartment of Revenue, May 24, 2012.
3 To register an account in LaTAP, dealers should visitthe Department's Web site at www.revenue.louisiana.gov/latap.
4 Previously, the Department issued one of two resalecertificates to dealers depending on the nature of their business:(i) Limited Resale.
Dealer Certificate (Form R-1055) or (ii) Resale DealerCertificate (Form R-1064). The Limited Resale Dealer Certificate(Form R-1055) was designed for dealers who were not identified asretailers under the North American Industry Classification System(NAICS), but whose business involved the occasional purchase oftangible personal property for resale to the public. RevenueAdministrative Bulletin No. 09-015, Louisiana Department ofRevenue, 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 resalecertificates in their records as a release from the responsibilityof collecting taxes on the sales.
7 LA. REV. STAT. ANN. § 47:301(12) defines"sale" to include "any transfer of title orpossession, or both, exchange, barter, conditional or otherwise, inany manner or by any means whatsoever, of tangible personalproperty, for a consideration, and includes thefabrication of tangible personal property for consumerswho furnish, either directly or indirectly, the materials used infabrication 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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