Was a carpet seller-installer making taxable retail sales, or acting as a contractor selling immovable property, when customers took title before installation?

Plain-English summary

Because customers took title to the carpet and padding before installation, the seller-installer made taxable retail sales of tangible personal property.

It had to collect sales tax on the carpet and padding. Separately stated, optional installation charges were excluded from the taxable sales price.

Advance sales tax

Sales tax paid to manufacturers, wholesalers, jobbers, and suppliers on carpet and padding was advance sales tax. The seller-installer could deduct it on its state sales tax returns as provided by La. R.S. 47:306(B)(3).

When contractor treatment would apply

If installation rendered the carpet and padding immovable before the customer bought it, the dealer would instead be treated as a contractor. The customer transaction would not be a taxable sale of tangible personal property, but the contractor would owe sales or use tax when acquiring the materials and could not take an advance-tax deduction.

Common questions

Q: Was the carpet taxable?

A: Yes. It was movable property when the customers took title.

Q: Was optional installation taxable?

A: No, when separately stated.

Q: Could the seller credit supplier tax?

A: Yes. On these facts it was advance sales tax eligible for deduction.

Q: What fact controlled the result?

A: The customers took title when they signed the purchase agreements, before installation.

Citations and references

• La. R.S. 47:301(10)(a)(i), (13)(a), and (16)(a)
• La. R.S. 47:302(A)(1), 47:306(B)(2)-(3), 47:321(A)(1), and 47:331(A)(1)
• LAC 61:III.101 — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 03-011

Original ruling text

Private Letter Ruling No. 03-011
Redacted Version
Sales Tax
Is the Furnishing of Carpet a Retail Sale of Tangible Personal Property or the Fulfillment of a
Construction Contract?
October 14, 2003
Facts
The taxpayer seeking the ruling is a subchapter S corporation doing business as a carpet seller
and installer from a retail location in Louisiana.
In the course of its business this carpet seller/installer executes purchase agreements for
carpeting that the seller/installer installs at pre-agreed upon times. The seller/installer’s
customers assume title to the carpet at the times time of their purchases. Upon completion of the
installations, customers receive invoices that separately state the cost of the carpet and the cost of
the installation. The invoices also list the tax due upon the purchase prices of the carpet as well
as the installation. The seller/installer makes wholesale purchases of carpet and padding upon
which its pays sales tax to wholesalers.
Issue
Shall this carpet seller/installer be treated, for sales tax purposes, as a seller of tangible personal
property who will be required to collect tax on sales, and be entitled to claim credit for taxes paid
on purchases of tangible personal property for resale, or alternatively, be treated as a real
property contractor and seller of immovable property who will be required to pay the sales or use
tax on purchases of tangible personal property that the business will resell as immovable
property.
The Law
R.S. 47:302(A)(1), 321(A)(1), 331(A)(1), and the sales tax ordinance of the Louisiana Tourism
Promotion District levy the sales tax on the “sales price of each item or article of tangible
personal property when sold at retail in this state …”
R.S. 47:301(13)(a) defines the term “sales price”, in pertinent part, as follows:
“’Sales price’ means the total amount for which tangible personal property is sold,
less the market value of any article traded in including any services, except
services for financing, that are a part of the sale valued in money, whether paid in
money or otherwise, and includes the cost of materials used, labor or service
costs, except costs for financing which shall not exceed the legal interest rate and
a service charge not to exceed six percent of the amount financed, and losses;
provided that cash discounts allowed and taken on sales shall not be included, nor
shall the sales price include the amount charged for labor or services rendered in
installing, applying, remodeling or repairing property sold.”

Redacted Private Letter Ruling No. 03-011
Page 2 of 3

R.S. 47:301(16)(a) defines “tangible personal property” as personal property that can be seen,
weighed, measured, felt, touched, or is perceptible to the senses. The Louisiana Supreme Court
has ruled that “tangible personal property” is equivalent to corporeal movable property as
defined in Article 471 of the Louisiana Civil Code. The Louisiana Civil Code describes
corporeal movable property as things that physically exist and normally move or can be moved
from one place to another.
The term “sale at retail” is defined by R.S. 47:301(10)(a)(i), in pertinent part, as “a sale to a
consumer or to any other person for any purpose other than for resale as tangible personal
property …”
R.S. 47:306(B)(2), regarding the sales tax collected by manufacturers, wholesalers, jobbers, and
suppliers on sales to dealers of tangible personal property for resale by the dealers, provides that
“(t)he amount paid by dealers to manufacturers, wholesalers, jobbers, or suppliers shall be
advance payment of the Louisiana sales tax which the dealer is required to collect upon the sale
at retail, and the advance payment is required only as a means of facilitating collection of the
sales tax.” R.S. 47:306(B)(3) further provides, in this regard, as follows:
“In making their returns to the collector, dealers who have paid advance sales tax
shall deduct from the total tax collected by them upon the retail sale of the
commodity the amount of tax paid by them to manufacturers, wholesalers, jobbers
and suppliers during the period reported, provided tax paid invoices evidencing
the payment are retained by the dealer claiming the refund or credit.”
Analysis
In cases where the facts surrounding transactions for the sale and installation of carpet are clear,
the application of the sales and use tax law to those facts is also clear.
When dealers sell to consumers carpet and underpadding that is movable or personal property at
the time of sale, the transactions are “sales at retail” of “tangible personal property”. The sales
tax levied by R.S. 47:302(A)(1), 321(A)(1), 331(A)(1), and the sales tax ordinance of the
Louisiana Tourism Promotion District must be collected on the total “sales price” of this tangible
personal property. Separately stated and optional charges for the installation of the carpet and
underpadding are excludible from the taxable “sales price” of the property. The wholesale
purchases by that dealer of carpet and underpadding that the dealer will use for no purpose other
than to sell as tangible personal property are not “sales at retail”. Accordingly, any state sales
taxes that the dealer remitted to manufacturers, wholesalers, jobbers, and suppliers his/her
purchases of the carpet and padding will be considered advance sales taxes, and will be eligible
to be deducted on the dealer’s state sales tax return, as provided by R.S. 47:306(B)(3).
When a dealer in carpet and padding, through the process of installing or laying the carpet and
padding, renders the property immovable before the dealer sells the property to the customer, the
sales or use tax is payable in a significantly different way. When the carpet and padding is
immovable at the time of its sale, the dealer will be considered a contractor with respect to those
sales. In such cases the transactions with the contractor’s customers are not sales of tangible
personal property, and the sales tax is not collectible on the sales. The dealer/contractor will have
acquired the carpet “other than for resale as tangible personal property” so the transactions in
which the dealer/contractor acquired the carpet and padding are “sales at retail” to the

Redacted Private Letter Ruling No. 03-011
Page 3 of 3

dealer/contractor.
Any tax that the dealer/contractor’s suppliers collected from the
dealer/contractor on the purchases of carpet and padding are not considered advance sales taxes,
and will not be eligible to be deducted on the dealer’s state sales tax return, as provided by R.S.
47:306(B)(3). In cases where the dealer/contractor’s suppliers fail to collect the state sales tax on
the sales to the dealer/contractor, the dealer/contractor will be required to remit use taxes directly
to the Louisiana Department of Revenue.
Ruling
The person who requested this Private letter Ruling indicated that the carpet seller/installer’s
customers assume title to the carpet and padding purchased from the carpet seller/installer at the
time that purchase agreements are signed, and before the carpet is installed by the carpet
seller/installer. In the fact scenario that was provided to the department, the carpet seller/installer
will be considered a seller of tangible personal property, and will be required to collect the sales
tax on all “sales at retail” to consumers, as explained above. Separately stated and optional
charges for the installation of the carpet and underpadding are not taxable. Any state sales taxes
that the carpet seller/installer remits to manufacturers, wholesalers, jobbers, and suppliers on its
purchases of the carpet and padding will be considered advance sales taxes, and will be eligible
to be deductible on the carpet seller/installer’s state sales tax returns, as provided by R.S.
47:306(B)(3). Should the department audit this business and determine that the facts
surrounding the carpet seller/installer’s transactions vary materially from those that were
presented in the request for the Private Letter Ruling, this ruling will not be applicable.
The department is aware that conflicts sometimes arise between carpet seller/installers and carpet
consumers over responsibility for the payment of sales taxes on the flooring materials. The
conflicts typically arise because the consumer believes that he or she has entered into a contract
with a dealer/contractor, and that the responsibility for the payment of sales or use taxes on the
flooring materials lies with the dealer/contractor. Those types of conflicts can be avoided by
clearly stating the terms of sale in the contract or sales documents, including whether the flooring
materials are sold as movables or immovables, and which of the parties to the contract is
responsible for payment of sales or use taxes.
Questions or comments about this matter can be directed to the department’s Policy Services
Division at (225) 219-2780.
Cynthia Bridges
Secretary
By: Raymond E. Tangney
Senior Policy Consultant
Policy Services Division

This correspondence constitutes a private letter ruling (PLR) by the Louisiana Department of Revenue, as provided
for by section 61:III.101 of the Louisiana Administrative Code. A PLR provides guidance to a specific taxpayer at the
taxpayer's request. It is a written statement that applies principles of law to a specific set of facts or a particular tax
situation. A PLR does not have the force and effect of law, and is not binding on the person who requested it or on
any other taxpayer. This PLR is binding on the department only as to the taxpayer to whom it is addressed, and only
if the facts presented were truthful and complete and the transaction was carried out as proposed. It continues as
authority for the department’s position unless a subsequent declaratory ruling, rule, court case, or statute supersedes
it.