Baldwin Haspel Burke & Mayer LLC

Construction Contracts and Additional Louisiana Sales Tax

John A. Stewart, Jr. - 

The Louisiana legislature during this year’s First Extraordinary Session adopted a new statute, L.R.S. 47:321.1, imposing an additional 1% sales and use tax and tax on the lease or rental of tangible personal property. Act No. 26, 2016 First Extraordinary Session. The new tax is effective April 1, 2016. L.R.S. 47:305.11 provides relief from the tax for lump sum or unit price construction contracts entered into and reduced to writing prior to the effective date of the statute, or contracts entered into and reduced to writing within ninety days thereafter, if such contracts involve contractual obligations undertaken prior to the effective date. The statute states:

A. No new or additional sales or use tax shall be applicable to sales of materials or services involved in lump sum or unit price construction contracts entered into and reduced to writing prior to the effective date of the statute or ordinance levying same or to sales or services involved in such contracts entered into and reduced to writing within ninety days thereafter, if such contracts involve contractual obligations undertaken prior to such effective date and were computed and bid on the basis of sales taxes at the rates effective and existing prior to such effective date.

The Louisiana Department of Revenue has provided guidance with respect to the application of the statute to the new taxes. Revenue Information Bulletin 16-016, Sales Tax, April 19, 2016. The Bulletin states in part:

This provision applies only to the sale of materials or services involved in a lump sum or unit price contract, after the contractor has become liable for performance and completion of a contract, which did not provide for new or additional taxes. This provision does not apply to contracts entered into on a cost plus or fixed fee basis. It also requires that the contract be entered into prior to the effective date of the statute or ordinance levying the new tax.

This provision also applies to sales and services involved in a lump sum or unit price construction contract reduced to writing within ninety days after the effective date of a statute levying a new tax, but only if the contractor had a contractual obligation entered into prior to the effective date. This ninety day period is intended to cover a situation where a contractor has computed and bid a contract on the basis of existing taxes prior to the effective date of the new tax, but where awarding of the contract and formal signing thereof do not take place prior to the effective date of the new tax, but does take place within ninety days after the effective date of the new tax.

Contracts meeting all of the requirements set forth in La. R.S. 47:305.11 will not be subject to the new 1% increase in tax pursuant to La. R.S. 47:321.1. This state sales tax increase is effective April 1, 2016 as provided by Act 26 of the 2016 First Extraordinary Session of the Louisiana Legislature.

Those contractors who have entered lump sum or unit price construction contracts meeting the requirements of La. R.S. 47:305.11 should complete Form R-1075 and attach a copy of the contract containing the signatures of all parties.

Form R-1075 and the attached contract should be mailed to:

Louisiana Department of Revenue
Taxpayer Compliance – SSEW
P.O. Box 66362
Baton Rouge, LA 70821

Questions concerning Revenue Information Bulletin 16-016 can be directed to sales.inquiries@la.gov.

It is suggested that anyone who wishes to seek the benefit of the statute consult with their professional tax consultant. The tax might have to be paid, and reimbursement sought from the Department of Revenue.


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