Sales tax on invoices in Louisiana

In Louisiana, a contractor who builds, alters or repairs immovable property is presumed to be the consumer of the materials it buys for the work, so it pays the sales tax on them. Labor to construct or repair immovable property is generally not taxable.

Who pays, and the certificate you need

Louisiana’s state general sales tax is payable by users, consumers, lessees and persons receiving taxable services. If you qualify as a dealer, for example because you sell tangible personal property, furnish taxable services or keep a business location in Louisiana, you must apply for a sales tax certificate, collect the tax from your customers and file returns with the Louisiana Department of Revenue.

Parish and city taxes need accounts of their own. Parish E-File’s registration application lets you apply to the local taxing authority where your business is located and to any parish you deliver into; each parish office issues its own account number. Collect and remit both state and parish or city taxes on your taxable sales.

Immovable property: you’re the consumer of your materials

LAC 61:I.4372 defines a contractor as any dealer who contracts to construct, manage or supervise the construction, alteration or repair of immovable property, such as buildings, houses, roads and pipelines. Subcontractors are included. Materials, supplies and equipment sold to you for that work are presumed to be sales to a consumer, not sales for resale, so you owe the tax on your purchases.

The presumption can be rebutted with credible evidence, such as a writing signed by your customer stating that title or possession of itemized articles passed to the customer before they were made immovable.

What becomes part of an immovable? The Department answers with Article 466: things attached to a building that, by prevailing usage, serve to complete a building of the same general type are its component parts. These may include doors, shutters, gutters and cabinetry, and plumbing, heating, cooling, electrical and similar systems. Things attached so firmly that they can’t be removed without substantial damage to themselves or the building are component parts too.

Labor: immovable property or tangible personal property

• Labor to construct, install, remodel or repair immovable (real) property, such as buildings, homes, permanently installed fixtures and other real property improvements, is generally not subject to Louisiana sales tax.
• Labor to fabricate, repair or maintain tangible personal property generally is.
• Certain installation, application, remodeling or repair labor may not be taxable if you state its charges separately on the invoice, as Louisiana law provides.

For services, only the transactions Louisiana law enumerates are taxable. They include repairs and maintenance of tangible personal property, telecommunications services, cold storage, prewritten computer software access and information services.

Your invoice: tax stated separately, none on immovable-property labor

• Separate statement: on your taxable sales, R.S. 47:304 has you collect the tax from the purchaser, adding it to the sale price as far as practicable, and you’re permitted and required to state and collect it separately from the price. If you don’t collect it, you owe it yourself.
• No absorbing: you may not advertise or tell the public that you’ll absorb all or part of the tax, except under the conditions the statute sets.
• Over-collection: if the tax you collect for a period is more than the rate provides, you must pay all of it over to the state.
• No tax on immovable-property labor: the Department lists charging sales tax on labor to construct or repair immovable property among common mistakes. So is failing to separately state qualifying installation, repair or remodeling labor on the invoice when the law allows it. It recommends deciding first whether the work is on tangible personal property or immovable property, and itemizing labor charges on your invoices.
• Materials on immovable-property jobs: under LAC 61:I.4372 the tax on them is yours, paid when you buy them, unless the presumption is rebutted, for example by your customer’s signed writing that title passed before they were made immovable.

Parish and city taxes follow their own ordinances

Sales and use taxes levied by Louisiana’s political subdivisions are in addition to the state tax. They are similar to it, but differ in significant ways, especially in exemptions and suspensions of exemptions, so learn both the state statutes and the local ordinances that apply to your business. The Louisiana Association of Tax Administrators publishes local rate information.

Government jobs: a certificate of exemption from the Department of Revenue

Under R.S. 47:305.7, Louisiana, its parishes, municipalities and other political subdivisions, and their agencies, boards, commissions and instrumentalities are exempt from sales and use taxes imposed by any taxing authority. That exemption extends to purchases a general contractor or its subcontractor makes related to work under a construction contract for a public project of the state or a local government, or of one of their agencies, boards, commissions or instrumentalities. For state sales and use tax, the exemption doesn’t apply to purchases for property a public entity owns and leases to a private party under a payment in lieu of taxes or similar agreement signed after this provision took effect, unless the secretaries of the Department of Revenue and of Louisiana Economic Development approve the agreement.

Before you claim the exemption, get a certificate of exemption from the secretary of the Department of Revenue. The certificate is in the form the secretary prescribes and includes the job description, the contract number, the government entity’s identifying information and the project’s valid dates or date range. When you apply, you also provide a copy of the construction contract. Local tax collectors must accept a certificate the secretary properly issued and you completed.