La. Admin. Code tit. 61 § I-4410

Current through Register Vol. 50, No. 5, May 20, 2024

Section I-4410 - Property Purchased for First Use Outside the State

A.R.S. 47:305.10 provides an exemption from state and local sales or use tax for the purchase or importation of tangible personal property in Louisiana for first use beyond the territorial taxing jurisdiction of this state. This Section provides an exemption for purchases and importations in two categories of first use: first use in another state; and first use in the offshore area beyond the borders of Louisiana or any other state.

B. Purchases or importations of tangible personal property for first use in another state for which an exemption is claimed under the provisions of R.S. 47:305.10 may be accomplished by the use of an exemption certificate LGST 9-D, entitled "Foreign Purchasers," which is available from the Department of Revenue. The transaction must meet the following requirements before the exemption will be allowed:

1. the purchaser is properly registered for sales and use tax in the state of use and regularly reports and remits the taxes due in such state; and

2. the state in which first use occurs grants on a reciprocal basis a similar exemption on purchases within that state for first use in Louisiana; and

3. either §4410. B.3.a or b must be met in addition to requirements §4410. B.1 and 2:

a. the purchaser obtains a written authorization from the Secretary of the Department of Revenue to make the tax-exempt purchase; or

b. the property being purchased is a craft which would ordinarily be subject to registration by the state of Louisiana as a motor boat, but is not in fact registered for use in Louisiana.

C. Foreign nations and the territorial waters of foreign nations are not considered to be another state for purposes of this Section.

D. Tangible personal property imported for use outside the state of Louisiana may still be imported tax-free under R.S. 47:305(E) if the requirements specified in §4401 are met. Under that provision, specific pieces of property which have been clearly labeled for trans-shipment outside the state of Louisiana at the time of their importation into the state are exempt without the necessity for meeting the above guidelines.

E. Purchases or importations of tangible personal property for use in the offshore area of Louisiana or that of any other state, for which an exemption is claimed under R.S. 47:305.10, may be accomplished by use of either one of two exemption certificates available from the Department of Revenue, LGST 9-D or LGST 9-O/S, depending on the following conditions:

1. if the exact location (area name, block number, lease number) of first use of the property is known at the time of purchase, the purchaser must claim exemption to the vendor by properly completing an exemption certificate LGST 9-D;

2. if the exact location of first use of the property is not known at the time of purchase, and the purchaser has been assigned an "offshore registration number" by the Secretary of Revenue, then the purchaser may claim the exemption by completing an exemption certificate LGST 9-O/S and presenting it to the vendor. All accounting records of importations and purchases made through the use of this certificate will be maintained in such a manner so as to accurately account for tax-free and tax-paid inventories until they are withdrawn for use. Physical segregation of tax-free inventory is not required. In the case of fungible goods, such as diesel fuel, where usage occurs continuously in travel in and out of the offshore area, exemption certificate LGST 9 O/S may be used to make tax-free purchases of such goods in their entirety. At the end of each reporting period, the purchaser will determine that portion of the fungible goods which was actually consumed within any taxing jurisdiction and make the necessary accrual entries to record the proper tax due;

3. the LGST 9-O/S certificate may only be used by purchasers who have been granted the "offshore registration number," and unauthorized use of the certificate is forbidden. An "offshore registration number" will be evidenced by the word "offshore" appearing above the account number on the purchaser's registration certificate, and the purchaser will be required to enter this complete registration number on the LGST 9-O/S when making tax-free purchases for first use offshore. Vendors should exercise tenable judgment in accepting the LGST 9-O/S exemption certificate in lieu of the sales tax. Vendors should also ensure that all required information appears on the face of the certificate;

4. an offshore registration number will be issued only to dealers who have demonstrated to the Secretary of Revenue that the nature of their business is such that consumption of tangible personal property occurs in the offshore area beyond the territorial limits of Louisiana, or that of other states or foreign nations. It must also be shown to the satisfaction of the secretary that the records maintained by the purchaser are adequate to facilitate an examination and that they document the location of first use of all tangible personal property purchased tax-free under the provisions of this Section. In the case of fungible goods, such as diesel fuel, which are purchased tax-free, the purchaser must retain, and make available for examination, all purchase invoices, vessel logs, fuel usage records, fuel transfer records, and all other pertinent information which will determine the portion which has been consumed in and/or delivered to, offshore locations, and the portion which has been consumed in, and/or delivered to, locations within the taxing jurisdiction of any state or foreign nation. Timely returns must be filed, along with the proper remittance, to report the taxes due on all withdrawals from nontax-paid inventory for taxable uses. The following shall be taxable uses:

a. withdrawal from nontax-paid inventory for first use within the territorial limits of Louisiana or that of any other state. The use tax cost basis shall be original acquisition cost;

b. withdrawal from nontax-paid inventory for first use in a foreign nation or its territorial waters. The use tax cost basis shall be the original acquisition cost;

c. withdrawal from nontax-paid inventory for sale, exchange, trade, or barter under any circumstances. The sale will be regarded as a casual sale under the provisions of R.S. 47:301(10), and a use tax will be due at the time of such withdrawal on one of the following bases:

i. in the case of property never previously used, the use tax basis will be original acquisition cost;

ii. in the case of property which has previously been used in the offshore area and subsequently returned to storage in the offshore inventory, the use tax basis will be the lesser of original acquisition cost or reasonable market value at the time of the withdrawal;

d. the subsequent return of property, following its first use in the offshore area, to a location within the territorial limits of Louisiana for a taxable use at that location. Such a use would subject the property to a use tax based on the lesser of acquisition cost or reasonable market value at the time of its return to the location of use within Louisiana. The return of property into the state for the purpose of repairing, modifying, further fabrication, or for return to the offshore inventory will not be regarded as taxable uses. Property returning from offshore locations for repairs retains its exempt status for use tax purposes, but the repair charges are taxable in accordance with R.S. 47:301(14)(g);

e. the use of that portion of fungible goods that is determined to have been consumed within the territorial limits of Louisiana or that of any other state or any foreign nation.

F.R.S. 47:305.10 makes it clear that the aforementioned records shall be maintained by the purchaser or importer, and shall be made available for examination. It also provides that the offshore registration number issued under the provisions of this Section may be revoked by the secretary at any time, if the purchaser misuses the exemption to make tax-exempt purchases of property for first use in the state, or if he fails to maintain adequate records, or fails to report and remit any tax which becomes due under this Section. In case of such a revocation, all tangible personal property which is stored in an offshore inventory site will immediately become taxable, unless the purchaser is able to identify the exact location (area name, block number, lease number) of first use of the property. Thereafter, and until the offshore registration status is reinstated, tax-free purchases may be made only in instances when the exact location of first use is known at the time of purchase, and a certificate form LGST 9-D is presented to the vendor. The offshore registration number may be reinstated at the discretion of the Secretary of Revenue, upon being provided with sufficient proof that the conditions and requirements of this Section will be adhered to by the purchaser. The burden for supplying proof of eligibility shall rest with the purchaser/importer at all times, whether the request is for initial registration or for reinstatement of a revoked registration.

G. This Section provides an exemption from the sales and use tax on tangible personal property purchased in or imported into a taxing jurisdiction under the circumstances described. All other purchases and importations of property shall be subject to state and local sales or use tax at the time of such purchase or importation, unless otherwise exempted.

La. Admin. Code tit. 61, § I-4410

Promulgated by the Department of Revenue and Taxation, Sales Tax Section, LR 13:108 (February 1987), amended by the Department of Revenue, Policy Services Division, LR 31:96 (January 2005).

AUTHORITY NOTE: Promulgated in accordance with R.S. 47:305.10, R.S. 47:337.2, R.S. 47:337.9, and R.S. 47:1511.