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Louisiana Sales and Use Tax: The Maritime Industry and Interstate Commerce

John Rouchell -  Posted on by Baldwin, Haspel, Burke & Mayer


The State of Louisiana, the various parishes and other political subdivisions, including school boards, water and drainage districts impose a tax on the sale at retail, the use, consumption, distribution and storage for use or consumption of tangible personal property, as well as on the lease or rental of such property and on sales of certain services (hereinafter collectively, the “sales tax”) within their jurisdictions.[1]

Louisiana borders the Gulf of Mexico and is cut by the Mississippi River and many other navigable waterways. As a result, the import-export activities of Louisiana’s ports and the offshore oil and gas service industry are significant contributors to Louisiana’s economy. The Louisiana legislature has enacted a number of sales tax benefits to foster and promote the maritime industry.

The following is a discussion of the significant Louisiana statutory and regulatory provisions affecting the maritime industry and the interpretation of those provisions by the Louisiana courts.

Statutory Exclusion

LSA R.S. 47:305(E) states that it is not the intention of the Louisiana legislature to levy a sales tax on “bona fide interstate commerce”. However, the statute states that the legislature does intend to levy a sales tax on tangible personal property after it has come to rest in Louisiana and has become a part of the mass of property here.

State and local taxation of foreign exports and interstate commerce has obvious U.S. constitutional limitations.[2]  However, the U.S. Supreme Court has clearly held that state and local taxing authorities may impose taxes on interstate commerce despite the limitations of the Commerce Clause of the U.S. Constitution, provided that the tax has a substantial nexus with the state, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the taxing state.[3]

Although the State of Louisiana could tax interstate commerce, ever since the enactment of LSA R.S. 47:305(E) in 1959, the legislature has exercised its prerogative not to do so. Thus, unlike other states which tax interstate commerce, there is no issue in Louisiana whether that tax is unduly burdensome and prohibited by the Commerce Clause of the U.S. Constitution. Rather, the only analysis in Louisiana is whether the activity taxed is, in fact, bona fide interstate commerce and whether the activity being taxed arose prior to the onset of interstate commerce or after interstate commerce ceases when the property comes to rest in Louisiana.[4]

Statutory Exemptions

In addition to the statutory exclusion of LSA R.S. 47:305(E), Louisiana also provides a number of statutory exemptions from sales tax, including the following:

Although there is clear overlap, exclusions and exemptions from the sales tax have distinct and different legal significance even though the net result is the same, namely, no taxes are due. A taxpayer is not required to pick one or the other but can cumulate as many exclusions and exemptions as may be applicable in defense of payment of the tax.

A tax exclusion is a legislative statement of intent that a certain transaction is not meant to be taxed. Conversely, a tax exemption is a legislative decision not to tax a certain transaction that is otherwise within the power and authority of the taxing authority to tax and is within the ambit of the tax statute. So what is the difference?

Louisiana jurisprudence has consistently held that statutes involving tax exclusions are to be broadly construed in favor of the taxpayer, while statutes involving exemptions are narrowly construed.[11]  State statutes involving exclusions automatically apply at the local tax level while state tax statutes involving exemptions, if enacted after June 29, 1978, only apply at the local level if the state statute specifically so states.[12]  There is no procedural collection mechanism for certificates for exclusions while there is an administrative procedure for obtaining exemption certificates, although failure to have the appropriate exemption certificate will not necessarily result in loss of the exemption. Most importantly, exclusions cannot be suspended legislatively without a repeal of the statute; conversely, the Louisiana legislature can, and often does, suspend the applicability of exemption statutes in times of fiscal crisis. A suspension of a state exemption does not necessarily suspend the corresponding exemption at the local level.[13]  The state legislature has the power to suspend some exemptions while leaving others intact. Fortunately, the Department of Revenue and Taxation publishes a schematic grid showing the operation and suspension of exemptions.


Louisiana courts have had many opportunities to test the applicability to the maritime industry of the statutory interstate commerce exclusion and exemptions.

For a number of years, Louisiana courts have held that:

But what about a vessel that travels exclusively within Louisiana waters or within a single parish? Must bona fide interstate or foreign commerce be determined by the movement of the vessel or the movement of the cargo?

In litigation interpreting the U.S. Constitution’s Commerce Clause, the U.S. Supreme Court has consistently held that activities taking place solely in one state are part of interstate or foreign commerce if those activities facilitate the movement of cargo in interstate or foreign commerce.[17]   Consistent with the U.S. Supreme Court, a number of Louisiana courts of appeal have held that barge or stevedoring activity within a single parish nevertheless are engaged in interstate commerce if they facilitate the movement of persons or cargo across states lines or to foreign destinations.[18] Thus, it seemed settled that the movement of the cargo rather than the movement of the vessel was the appropriate consideration – at least until the Louisiana Supreme Court rendered its decision in Archer Daniels Midland v. Parish School Board of St. Charles on November 28, 2001.[19]

In Archer Daniels Midland, grain from the Midwest was shipped by river barge through St. Charles Parish in Louisiana destined for points outside of the state. The taxpayer owned tug boats which shifted grain barges to fleeting areas for loading and unloading onto other oceangoing vessels or into grain elevators. The taxpayer’s barges never left the waters in the parish. At issue were sales tax on fuel imposed by St. Charles Parish under an ordinance with language virtually identical to a Louisiana state statutory exemption.[20]

The Louisiana Supreme Court rejected the analytical approach of the U.S. Supreme Court in Commerce Clause cases as well as the approach taken in a number of lower Louisiana courts of appeal and focused instead on the movement of the vessel rather than the cargo to determine if the transaction was interstate commerce. In imposing the local sales tax, the Louisiana Supreme Court justified its conclusion based upon its belief that the purpose of the state exemption statute was to attract business to Louisiana by making the state competitive with other states. Employing somewhat circular logic, the court determined that the tax in this case was justified in order to attract true interstate commerce to Louisiana. It is difficult to understand how the imposition of this local tax under the circumstances would achieve that perceived policy objective.

The Louisiana legislature quickly responded in Acts 2002, No. 40, by amending the applicable exemption statute, namely, LSA R.S. 47:305.1(C), to define “foreign or interstate coastwise commerce” to mean and include trade, traffic, transportation or movement of passengers or property by, in or on a ship or vessel:

In order to make it doubly clear, the Louisiana legislature made a statement of legislative intent in the amendment to the statute specifically stating that such amendment was intended to explain and clarify the legislature’s original intent, notwithstanding the contrary interpretation given by the Louisiana Supreme Court in the Archer Daniels Midland case. The legislature went on to state that the provisions of the act amending the statute shall be applicable to all claims existing or actions pending on its effective date and to all claims arising or actions filed on or after its effective date.

It was unclear whether this statement of intent, setting forth the Louisiana legislature’s interpretation of this exemption statute, would have retroactive effect. After all, under both the U.S. and Louisiana Constitutional schemes, it is the legislature’s purview to enact law, but it is the role of the courts to interpret the laws so enacted.[21]

The Louisiana Supreme Court promptly refused to apply the provisions of Acts 2002, No. 40, retroactively, holding that to do so would violate the separation of powers as set forth in La. Constitution Article II, §2, in Mallard Bay Drilling v. Kennedy.[22]  In Mallard Bay, the Supreme Court further held that sales tax was due on diesel fuel sold, delivered and consumed in Louisiana by drilling barges in the course of offshore drilling activities.  The court found that the exemption of LSA R.S. 47:305.1(B), as then drafted, did not apply because the drilling barge was not a “ship or vessel,” stating that exemptions should be strictly construed against the taxpayer.[23]  Finally, the Supreme Court held that LSA R.S. 47:305(E)’s exclusion did not apply because the fuel had come to rest within Louisiana since it was consumed here and that the tax did not burden interstate commerce under the Commerce Clause of the U.S. Constitution.[24]

The Louisiana legislature then amended LSA R.S. 47:305.1(B) to expand the applicable exempt recipients of materials and supplies from “vessels and ships” operating exclusively in foreign and interstate commerce to include “ships, barges, or vessels, including drilling ships,” in response to Mallard Bay, but the amendment was prospective and not retroactive.[25]

The Louisiana Department of Revenue has provided regulatory guidance for complying with LSA R.S. 47:303(E).[26]  An item of tangible personal property clearly marked for transshipment to a federal offshore area at the time of purchase will not be subject to Louisiana sales tax, even if held in Louisiana for an indefinite period of time, unless actually diverted to use within Louisiana.  Invoices should evidence offshore use, setting forth the federal lease number, area and block number in the destination area of the invoice.

The legal tug of war between the Louisiana legislature and the Supreme Court concerning taxation and interstate commerce does not appear to be the subject of a truce anytime soon.

Stay tuned.

[1] LSA R.S. 47:302(A), (B) and (C).  See, Revenue Information Bulletin No. 16-034 (July 14, 2016) for guidance for the lease tax on intra and interstate commerce.

[2] U.S. Const, Article I, Section 8, Clause 3 and U.S. Const., Article I, Section 10, Clause 2.

[3] Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977); Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

[4] Word of Life Christian Center v. West, 936 So.2d 1226 (La. 2006).

[5]   LSA R.S. 47:305.1(A); McNamara v. Central Marine Serv., Inc., 504 So.2d 207 (La. 1987); Showboat Star Partnership v. Slaughter, 789 So.2d 544 (La. 2001).

[6] Ibid.  See also, Coastal Drilling Co. v. Dufrene, 198 So.2d 108 (La. 2016).

[7] LSA R.S. 47:305.1(B).

[8] LSA R.S. 47:305.19.

[9] LSA R.S. 47:305.20.

[10] Louisiana Const., Article VII, Section 27.

[11] Vulcan Foundry, Inc. v. McNamara, 414 So.2d 1193 (La. 1981); One River Place Condominium Assn., et al. v. Mitchell, 609 So.2d 942 (La. App.4th Cir. 1992), cert, den. 612 So.2d 81 (La. 1993); Showboat Star Partnership v. Slaughter, 789 So.2d 554 (La. 2001).

[12] LSA R.S. 33:2716.1(b).

[13] BP Oil Co. v. Plaquemines Parish Gov’t, 642 So.2d 1230 (La. 1994); amended in part, rev’d in part, 651 So.2d 1322 (La. 1995).

[14] Kerr-McGee Corp. v. McNamara, 826 So.2d 1 (La. App. 1st Cir. 2001); McNamara v. John E. Chance & Assoc., 491 So.2d 154 (La.App.3d. Cir. 1986); Sales Tax Dist. No. 1of Lafourche Parish v. Express Boat Co., Inc., 486 So.2d 947 (La.App.1st Cir. 1986), aff’d in part, 500 So.2d 364 (La. 1987); TXP Operating Co. v. Department of Revenue and Taxation, BTA Docket No. 3378 (1989).

[15] Rule 4403.

[16] Tarver v. World Ship Supply, Inc., 615 So.2d 423 (La. App.4th Cir. 1993), cert. den., 616 So.2d672 (La. 1993).

[17] See, for example, Stafford v. Wallace, 258 U.S. 495 (1992).

[18] See, for example, Peavy Co. v. McNamara, Case No. 302, 19th JDC, Parish of E. Baton Rouge (1989); Cooper Stevedoring Co., Inc. v. Dept. of Revenue and Taxation, 555 So.2d 32 (La App. 1st Cir. 1989).

[19] 802 So.2d 1270 (La. 2001).

[20] LSA R.S. 47:305.1(B).

[21] Unwired Telecom Corp. v. Parish of Calcasieu, 838 So.2d 854 (La.App.3d Cir. 2003); citing Unwired Telecom Corp. v. Parish of Calcasieu, 838 So.2d 854 (La.App.3d Cir. 2003); citing Bourgeois v. A. P. Green Industries, Inc., 783 So.2d 1251 (La. 2001) and Marbury v. Madison, 5 U.S. 137 (1803)., 783 So.2d 1251 (La. 2001) and Marbury v. Madison, 5 U.S. 137 (1803).

[22] 914 So.2d 533 (La. 2005).

[23] See also, Bridges v. Offshore Drilling Co., 69 So.3d 738 (La. App. 1 Cir. 2011).

[24] See footnote 3, supra.

[25] Acts 2006, 1st Ex. Sess. No. 34, §1, effective February 23, 2006.  R&B Falcon Drilling USA, Inc. v. Lafourche Parish School Board, 950 So.2d 696 (La. App. 1 Cir. 2006).

[26] LAC 61:I.4401(I); Revenue Information Bulletin No. 16-034 (July 14, 2006).



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