28 May Louisiana Sales Tax Exemption for Manufacturing
The Louisiana sales tax exemption for manufacturing provides an incentive for manufacturing production in Louisiana by allowing manufacturers to purchase manufacturing machinery and equipment tax exempt [La. Rev. Stat. Ann. §47:301(13)(k)(i)]. Louisiana defines “machinery and equipment” as “tangible personal property or other property that is eligible for depreciation for federal income tax purposes and that is used as an integral part in the manufacturing of tangible personal property for sale.” “Machinery and equipment” shall also mean tangible personal property or other property that is eligible for depreciation for federal income tax purposes and that is used as an integral part of the production, processing, and storing of food and fiber or of timber” [La. Rev. Stat. Ann. §47:301(3)(i)(ii)(aa)].
The state then reviewed this statue and determined that although manufacturing machinery repair parts are not depreciated, they are still considered exempt under the spirit of the statue [Louisiana Revenue Bulletin No. 15-006, 01/22/2015]. To qualify for the Louisiana sales tax exemption for manufacturing, the manufacturer must have a Louisiana Workforce Commission assigned NAICS code of one of the following: 113310, 2211, 31-33, 3211-3222, 327213, 3361, 423930, or 511110.
The expert tax consultants at Agile Consulting are here to help navigate the nuance of the Louisiana sales tax exemption for manufacturing.
Exempt Machinery and Equipment:
- Computers and software that are an integral part of the machinery and equipment used in the manufacturing process
- Pollution control machinery and equipment
- Testing and measuring machinery and equipment that are a necessary part of the manufacturing process
- Machinery and equipment used to generate electric power for use in the manufacturing process
- Machinery and equipment used for news publication
Taxable Machinery and Equipment:
- Real Property
- HVAC systems
- Material handling equipment used before or after the manufacturing process
Additional Exempt Tangible Personal Property used in Manufacturing Process:
- Machinery and equipment repair parts (fuse, belts, felts, wires, etc.) of qualifying manufacturing machinery and equipment
- Consumables (lubricants, oils, coolant, etc.)
- Production gases
- Cost of Goods Sold – component parts of finished product and packaging materials
- Dyed diesel fuel
- Material handling equipment used within the manufacturing process
Claiming the Louisiana Sales Tax Exemption for Manufacturing
Louisiana separates state and local taxes into two different governing bodies. The Louisiana Department of Revenue handles all state taxes and the local parish handles the local taxes. Each parish handles sales tax and refunds differently so it is important to review your local parish’s rules. In order to purchase manufacturing machinery and equipment tax exempt manufacturers must apply for a manufacturing certification with the Louisiana Department of Revenue. Manufacturers need to fill out, sign and send in Form R-1070 “Application for Certification as a Manufacturer” found at the LA DOR website. Once the state approves the application and issues an exemption certificate, the manufacturer can then purchase manufacturing machinery and equipment tax free.
How to Recover Louisiana Sales Taxes
The statue of limitations on sales tax in Louisiana goes back 3 years (36 months) to when the sales tax was paid. Meaning Louisiana manufacturers can go back 3 years and recover sales taxes erroneously paid under the Louisiana sales tax exemption for manufacturing. The first step for manufacturers to recover sales taxes is to fill out, sign and send in Form R-20127 “Claim for Refund of Overpayment” found at the LA DOR website. Once submitted, a Louisiana auditor will review the refund claim and either approve or deny the refund. If denied the taxpayer can send in additional materials to support their refund claim. Once the taxpayer and the state have agreed on the refund claim, the state will send out a refund check to the taxpayer. Please remember that this refund request is only for state sales tax and to review your local parish’s rules for sales tax refunds. Each parish has their own claim for refund form which is to be sent to the appropriate parish. Agile consulting’s sales tax consultants are eager to assist Louisiana manufacturers with this sales tax refund process.
As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Louisiana sales and use tax exemptions.
Agile Consulting Group
If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at firstname.lastname@example.org.