Louisiana ~ Sales and Use Tax: Exemption for Items Purchased or Leased for Use Outside State Discussed

CCH Tax Day Report

A Louisiana Department of Revenue release discusses the sales tax implications of purchasing or leasing an item for use outside the state. Items purchased for use in an offshore area beyond the territorial limits of Louisiana that are clearly labelled for shipment to the offshore area at the time of purchase are eligible for the interstate commerce exclusion, even if they are stored and awaiting shipment in state for an indefinite period of time. However, if a taxpayer diverts an item labelled for shipment to a federal offshore area for his own use or disposition within Louisiana, then the item is no longer in interstate commerce and will be subject to state sales and use tax.

If a leased item is used in an offshore area beyond the territorial limits of Louisiana, then state sales and lease tax does not apply. If a leased item is used in both interstate and intrastate commerce, then the lease tax is due only on the portion of the lease payments attributable to operational usage in Louisiana in intrastate commerce. If the average operational usage in Louisiana is less than or equal to 10% of the total operational usage during a lease payment billing cycle, then the leased property is considered to be used exclusively in interstate commerce, and no state lease tax will be due for that period. Conversely, if the average operational usage in state is greater than or equal to 90% 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 sales and lease tax is due upon the entire payment.

These provisions do not apply to ships of 50-ton displacement and ship’s supplies, which are exempt from state sales tax.

Revenue Information Bulletin No. 16-034, Louisiana Department of Revenue, July 14, 2016, ¶202-734

Other References:

Explanations at ¶60-450

Explanations at ¶60-460

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