Sales Tax State Activity Update - April 2004

When Will Machinery And Equipment be Exempt in Louisiana?

The tax on machinery and equipment used predominantly and directly in the actual manufacturing process of tangible personal property for resale, at one or more fixed locations in Louisiana, is being phased-out.

Machinery and equipment is defined 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 of the production, processing, and storing of food and fiber or of timber.”

The following items are included under the definition of Machinery and equipment:

• Computers and software that are an integral part of the machinery and equipment used directly in the manufacturing process
• Pollution control equipment where the pollution is produced by the manufacturing process
• Machinery and equipment used to test or measure raw material when necessary for the manufacturing process

Manufacturing is defined as the act of putting raw materials through a sequence of steps that brings about a change in their composition or corporal nature in order to make a new or distinct item of tangible personal property that will be resold.

The phase-out program reduces the actual taxable portion of the sale. The reduction in taxable basis is as follows:

• July 1, 2005, and ending on June 30, 2006, 14% of the sales price is disregarded.
• July 1, 2006, and ending on June 30, 2007, 28% of the sales price is disregarded.
• July 1, 2007, and ending on June 30, 2008, 42% of the sales price is disregarded.
• July 1, 2008, and ending on June 30, 2009, 56% of the sales price is disregarded. July 1, 2009, and ending on June 30, 2010, 70% of the sales price is disregarded.
• July 1, 2010, and ending on June 30, 2011, 84% of the sales price is disregarded.
• After July 1, 2011 the entire cost price will be excluded
  
  

Additional information including can be found on-line at: http://www.legis.state.la.us/bills/byinst.asp?sessionid=041ES&billid= HB2&doctype=ALL

(ACT No. 1, H.B. No.2, Louisiana, 04/04 First Extraordinary Session 2004, 3/22/04)

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