Which cylinder inspection, blasting, pressure-testing, and recoating charges were taxable, and what happened when they were billed together?

Plain-English summary

Cylinder inspection and pressure testing were nontaxable services. Bead blasting performed only to expose markings and allow inspection was part of that nontaxable test, while recoating a blasted cylinder was a taxable repair.

Separate statement was essential. If taxable recoating and nontaxable testing were billed as one sum, the entire charge was taxable.

Testing and inspection

The company removed excess paint when necessary, visually inspected the cylinder, and pressure-tested cylinders that passed inspection. Failed cylinders were set aside for the customer to discard.

Cylinder testing was not an enumerated taxable service under the law applied in the ruling.

Blasting

Blasting was nontaxable when required to make DOT numbers and other information readable or to permit visual inspection. The ruling warned that blasting for another purpose could receive different treatment.

Recoating

Blasting left the cylinder unusable without protective coating. Recoating restored the item to its prior usable condition and therefore qualified as a taxable repair service.

Common questions

Q: Was all blasting nontaxable?

A: No. Only inspection-related blasting on the described facts.

Q: Was recoating taxable?

A: Yes.

Q: What if testing and recoating appeared as one charge?

A: The entire amount was taxable.

Citations and references

• La. R.S. 47:301(14)(g)(i) — taxable repair service
• La. R.S. 47:302(C) — tax on enumerated services
• Black's Law Dictionary repair definition cited in the ruling
• LAC 61:III.101.C — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 01-008

Original ruling text

STATE OF LOUISIANA

DEPARTMENT OF REVENUE
M. J. "MIKE" FOSTER, JR.

CYNTHIA BRIDGES

Governor

Secretary

Private Letter Ruling 01-008
Redacted Version
January 22, 2002
A Private Letter Ruling based upon the following scenario was requested:
A Louisiana company provides cylinder testing services and, if necessary, recoats the cylinders after the testing process. The company receives cylinders and runs them through a bead blaster, if required, to take off any excess paint or coatings so that all information on the cylinders, including for example, DOT numbers, cylinder size, date made and date of last inspection, are readable. The blasting is also required in most instances to visually inspect the cylinders. The exterior and interior of the cylinders are then visually inspected. Any cylinder that does not pass visual inspection is set aside to be discarded by the customer. Those that do pass visual inspection go to the hydro-testing computer where they are tested under pressure to determine whether they meet the specified criteria. Any cylinder that does not meet the specified criteria is set aside to be discarded by the customer. Any cylinders that have been blasted are then coated to prevent rusting. The customer then picks up all cylinders. The Department of Environmental Quality requires this test be performed at specified intervals. The Department of Revenue was asked to determine whether or not these services are taxable. La. R.S. 47:302(C) provides that sales of services are taxable. La. R.S. 47:301(14) goes on to define the term “sales of services,” which does not include the testing of cylinders. Therefore, the testing of cylinders is not taxable as long as the charge is separately stated. It is the understanding of the Department that the only reasons for blasting the cylinders are to make various numbers and information readable and to prepare them for visual inspection. As a result, the blasting is a necessary part of the testing process and is therefore not taxable as long as the charge is stated separately from any taxable charge. The blasting of cylinders for purposes other than testing may be treated differently. Once the testing process is complete, the cylinders that have been blasted during the process are coated. This coating is considered a repair. “Repair” is defined by Black’s Law Dictionary, pg. 1298 (6th ed. 1990), as follows: “To mend, remedy, restore, renovate. To restore to a sound or good state after decay, injury, dilapidation, or partial destruction. The word “repair” contemplates an existing structure or thing which has become imperfect, and means to supply in the original existing structure that which is lost or destroyed, and thereby restore it to the condition in which it originally existed, as near as may be.” If blasting is required during the testing process, the existing cylinder becomes imperfect because it is no longer in a usable condition. The cylinders are coated in order to restore them to the condition in which they originally existed. Therefore, coating the cylinders that have

Private Letter Ruling No. 01-008
Page 2 of 2

been blasted is a repair. La. R.S. 47:301(14)(g)(i) includes repairs in the definition of “sales of services” that are taxable under La. R.S. 47:302(C). Thus, coating the cylinders is a taxable service. If the charge for the nontaxable portion of the services provided is stated separately, that portion is not taxable. However, if the charges for taxable and nontaxable services are stated as one sum, sales tax is due on the entire amount. Should you have any questions or need additional information, please contact the Policy Services Division at (225) 219-2780. Sincerely, Cynthia Bridges Secretary By:

Cynthia D. Pugh
Attorney
Policy Services Division

A Private Letter Ruling (PLR) is issued under the authority of LAC 61:III.101( C ). A PLR provides guidance to a specific taxpayer at the taxpayer’s request. It is a written statement issued to apply principles of law to a specific set of facts or a particular tax situation and is limited to the matters specifically addressed. A PLR does not have the force and effect of law and may not be used or cited as precedent. A PLR is binding on the Department only as to the taxpayer making the request and only if the facts provided with the request were truthful and complete and the transaction was carried out as proposed. The Department’s position concerning the particular tax situation addressed remains in effect for the requesting taxpayer until a subsequent declaratory ruling, rule, court case, or statute supersedes it.