When must a Louisiana diving service company collect sales tax on underwater repair work?

Plain-English summary

A diving company generally had to collect Louisiana state and local sales tax when it repaired movable property in Louisiana. Ships, vessels, barges, and boats counted as movable property, so work such as patching hulls or removing rope and cable from propellers was taxable unless an exemption applied.

The service had to be a repair, the property had to be tangible personal property, and no statutory or constitutional exemption could apply.

Movable versus immovable property

Repairs to real or immovable property were not taxable repair services. The ruling identified buildings and permanent drilling platforms mounted on the ocean floor as immovable property. For those repairs, the service provider instead had to pay sales or use tax on the tangible personal property used in the work.

The ruling defined a repair as restoring an existing thing that had become imperfect. Services that did not constitute repairs were not taxable under the repair-service provision.

Vessel, delivery, and offshore rules

A ship, vessel, barge, or boat used exclusively in interstate coastwise commerce could qualify for the exemption in La. R.S. 47:305.1(B). Otherwise, Louisiana repair charges were taxable.

The ruling also described a state-tax exclusion when repaired property was delivered to a customer in another state by common carrier or the repair dealer's vehicle. That exclusion did not automatically apply to parish, municipal, or school-board taxes, and offshore areas did not count as another state.

Repairs clearly performed outside Louisiana were not taxable Louisiana repair services. The ruling separately warned that additions made to property repaired outside the state could face use tax when the property returned.

Common questions

Q: Are underwater repairs to a vessel taxable merely because a diving company performs them?

A: The company performing the work did not control the result. Repairs to tangible personal property in Louisiana were taxable regardless of who performed them.

Q: Were repairs to a permanent offshore platform taxable services?

A: The ruling treated a permanent drilling platform mounted on the ocean floor as immovable property, so the repair charge was not a taxable service. The provider owed tax on materials used.

Q: Did work offshore automatically escape Louisiana tax?

A: No. Offshore areas were not another state for the delivery exclusion. But repair work clearly performed outside Louisiana's limits was not taxable under the cited repair-service rule.

Q: Were all vessel repairs exempt?

A: No. The ruling identified an exemption only for an individual vessel engaged exclusively in interstate coastwise commerce; otherwise, qualifying repair services were taxable.

Citations and references

• La. R.S. 47:302(C), 47:321(C), and 47:331(C) — tax on sales of services
• La. R.S. 47:301(14)(g) — repair services and qualifying out-of-state delivery
• La. R.S. 47:305.1(B) — exclusive interstate coastwise commerce exemption
• LAC 61:I.4301(C) — repair-service rules
• City of New Orleans v. Baumer Foods, Inc., 532 So. 2d 1381 (La. 1988)
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 01-006

Original ruling text

Revenue Ruling
No. 01- 006
October 10, 2001
Sales and Use Tax
Repair Services to Movables Rendered by Diving Service Companies Are Sales
Taxable
The purpose of this Revenue Ruling is to inform diving service companies and their customers
that sales taxes are collectible and payable on some transactions, depending upon the facts
surrounding each transaction.
The Louisiana sales tax statute, at Revised Statute 47:302(C), 321(C), and 331(C) levies the sales
tax on all sales of services, as defined in the law. La. R.S. 47:301(14)(g) defines taxable services
to include the furnishing of repairs to tangible personal property. Repairs to tangible personal
property are taxable, regardless of who renders the repairs. Accordingly, repairs to tangible
personal property performed in Louisiana by diving service companies are taxable.
La. R.S. 47:301(14)(g) provides, in pertinent part, as follows:
“(14) ‘Sales of services’ means and includes the following:
(g) (i) The furnishing of repairs to tangible personal property, including but not restricted to the
repair and servicing of automobiles and other vehicles, electrical and mechanical appliances and
equipment, watches, jewelry, refrigerators, radios, shoes, and office appliances and equipment.
Charges for the furnishing of repairs to tangible personal property may be excluded from sales of
services, as defined in this Subparagraph, when the repaired property is delivered to the customer
in another state either by common carrier or the repair dealer's own vehicle, however, as to
aircraft, delivery may be by the best available means. This exclusion shall not apply to sales and
use taxes levied by any parish, municipality or school board. However, any parish, municipality
or school board may apply the exclusion as defined in this Subparagraph to sales or use taxes
levied by any such parish, municipality, or school board. Offshore areas shall not be considered
another state for the purpose of this Subparagraph.
(ii) For the purposes of this Subparagraph, tangible personal property shall include machinery,
appliances, and equipment which have been declared immovable by declaration under the
provisions of Article 467 of the Louisiana Civil Code, and things which have been separated
from land, buildings, or other constructions permanently attached to the ground or their
component parts as defined in Article 466 of the Civil Code.”

Section 61:I.4301(C)(i-iii) of the Louisiana Administrative Code provides additionally with
respect to the taxation of repairs to tangible personal property, as follows:

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue
employees. It is issued under Section 61:III.101(C) of the Louisiana Administrative Code to apply
principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of
law and is not binding on the public. It is a statement of the department's position and is binding
on the department until superseded or modified by a subsequent change in statute, regulation,
declaratory ruling, or court decision.

Revenue Ruling No. 01-006
Page 2 of 3

“i. R.S. 47:301(14)(g)(i) includes as sales of services the furnishing of repairs to tangible
personal property. By clear illustration in the statute, both repair and routine servicing of all
kinds of tangible personal property are included as taxable services. All repairs performed within
Louisiana on tangible personal property are taxable sales of services except for repaired property
which is returned to a customer located in another state by common carrier or by the repair
dealer's vehicle. The charge for repairs to property returned to a customer's location in the
offshore area are taxable regardless of the mode of transportation. Repair services performed
outside the state of Louisiana to property which is normally or permanently located here except
for its removal for repair, would not be taxable under this provision. However, if property is
shipped outside the state for repairs, any additions made thereto may subject the property to the
use tax imposed by R.S. 47:302 (A)(2) upon its return to the state. If personnel normally attached
to a repair installation within the state go outside the state, for instance, to a location offshore
which is clearly outside the limits of the state of Louisiana to perform repairs, those repairs are
not taxable under this Chapter.
i. Prepaid repairs such as maintenance contracts and other similar transactions are included in
sales of services under this Paragraph, if the tangible personal property to which they apply is
located in Louisiana and the agreement calls for any necessary repairs to be performed at the
location of the property.
ii. R.S. 47:301(14)(g)(ii) provides that tangible personal property, for purposes of sales of
services, shall include machinery, appliances, and equipment which have been declared
immovable under the provisions of Article 467 of the Louisiana Civil Code. It also includes
things incorporate into land, buildings, or other construction, which have been separated from the
land, buildings, or other construction. Similarly, the component parts of buildings and other
construction, as defined by Article 466 of the Louisiana Civil Code, are movable property when
they are separated from the building or other construction, and repairs thereto are includible in
taxable sales of services.”

Diving service companies are responsible for the collection and remittance of the Louisiana state
and local sales tax on charges for repair services that are rendered in Louisiana to tangible
personal property. In order for a transaction to be taxable, the service must constitute a “repair”,
the thing being repaired must be “tangible personal property”, and there must be no statutory or
constitutional exemption to bar the taxation of the transaction. Services that do not constitute
repairs are not subject to the sales tax. The sales tax is not collectible by the service provider on
charges for repair services to real or immovable property. In the case of repairs to immovable
property, the service provider is required to pay the sales or use tax on tangible personal property
that he/she uses in making the repair.
Black's Law Dictionary (6th Edition, 1990, page 1298) defines the word "repair," which appears
in both the state sales tax statute and most local sales tax ordinances, as follows: "To mend,
remedy, restore, renovate. To restore to a sound or good state after decay, injury, dilapidation, or
partial destruction."
The commentary following this definition states: "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, or as near as may be."

Revenue Ruling No. 01-006
Page 3 of 3

The Louisiana Supreme Court has held, in accordance with the general property law of
Louisiana, that the term "tangible personal property" as used in a taxing statute or ordinance, is
the same as "corporeal movable property" as used in the Civil Code [City of New Orleans v.
Baumer Foods, Inc., 532 So 2d 1381, (La. 1988)]. Ships, vessels, barges, and boats of whatever
size constitute tangible personal property. Buildings, including permanent drilling platforms
mounted on the ocean floor, constitute real or immovable property.
Unless an individual ship, vessel, barge, or boat is engaged exclusively in interstate coastwise
commerce, so as to be exempt from taxation on repairs under the provisions of Revised Statutes
Title 47, Section 305.1(B), the tax must be collected on any repair services rendered to ships
vessels, barges, or boats. Taxable repair services commonly provided by diving service
companies include, but are not limited to, patching holes in the hulls of vessels and removing
rope and cable from engine propellers.
Cynthia Bridges
Secretary
By:

Raymond E. Tangney
Senior Policy Consultant
Policy Services Division