Which charges were taxable when a provider furnished temporary construction barricades, lights, and fencing?

Plain-English summary

Temporary construction barricades, lights, and fencing were taxable rentals of tangible personal property. The taxable base included the rental charge and maintenance such as bulb replacement, whether or not maintenance was separately stated.

Separately stated delivery and pickup could be excluded, but only when clearly separated from setup, operating expenses, and maintenance.

The construction-site arrangement

A contractor repairing underground utility lines needed barricades and lighting for a two-week excavation affecting vehicles and pedestrians. A provider delivered and positioned the equipment, agreed to repair or replace anything that failed, and retrieved it when the project ended.

The lights were solar- or battery-powered and could operate throughout the project without further provider visits. The provider separately charged for furnishing the property and for delivery and pickup.

Why the equipment was a taxable rental

The state tax provisions cited in the ruling taxed gross proceeds from established or incidental leasing and rental businesses.

La. R.S. 47:301(16)(a) treated movable property perceptible to the senses as tangible personal property. Barricades, lights, and fencing fit that definition.

Under La. R.S. 47:301(7)(a), the customer paid for possession or use without receiving title. The arrangement was therefore a lease or rental.

Maintenance stayed in the taxable base

LAC 61:I.4303(B)(1)(e) provided that operating expenses and maintenance costs for keeping leased property in repair could not be deducted from rental gross proceeds.

Charges for servicing the equipment or replacing bulbs were therefore taxable, regardless of whether the invoice stated them separately.

Delivery and pickup could be excluded

The ruling relied on McNamara v. Patterson Services, Inc. for excluding a lessor's separately stated delivery charge from taxable rental proceeds.

Delivery and pickup were excluded only if they were clearly distinguishable from the rental and did not include:

• operating expenses;
• maintenance costs; or
• setup charges needed to make the property perform its intended function.

Bundling any of those items into transportation could pull the charge into the taxable base under the ruling's conditions.

Provider's purchase of rental inventory

La. R.S. 47:301(10)(a)(iii) allowed the provider to acquire durable barricades, lights, temporary fencing, and similar property tax-free when bought exclusively for lease or rental as tangible personal property.

What this means for you

Rental providers

Separate genuine transportation from setup and maintenance on contracts and invoices. Merely labeling a bundled charge “delivery” did not establish exclusion.

Contractors

Expect tax on both equipment rent and maintenance. Review whether separately stated pickup and delivery satisfy the ruling's conditions.

Equipment purchasers

The purchase exemption described here depended on exclusive rental use. Property used for another purpose may not qualify.

Common questions

Q: Were barricades and lights tangible personal property?

A: Yes.

Q: Were bulb-replacement charges taxable?

A: Yes, even when separately stated.

Q: Were delivery and pickup always exempt?

A: No. They had to be separately stated, clearly distinguishable, and contain no setup, maintenance, or operating costs.

Q: Could the provider buy the equipment tax-free?

A: Yes, if acquired exclusively for lease or rental as tangible personal property.

Citations and references

• La. R.S. 47:302(B), 47:321(B), and 47:331(B) — tax on lease or rental proceeds
• La. R.S. 47:301(7)(a) — lease or rental definition
• La. R.S. 47:301(16)(a) — tangible personal property definition
• La. R.S. 47:301(10)(a)(iii) — property acquired exclusively for lease or rental
• LAC 61:I.4303(B)(1)(e) — operating and maintenance costs remain in rental gross proceeds
• McNamara v. Patterson Services, Inc., 382 So. 2d 971 (La. App. 1st Cir. 1980) — separately stated delivery charges
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 07-007

Original ruling text

Revenue Ruling
No. 07-007
October 15, 2007
Sales and Use Tax
Furnishing of Construction Barricades and Associated Lighting Equipment
The purpose of this Revenue Ruling is to discuss the state sales tax treatment of transactions for
the furnishing of temporary barricades, lights, and fencing that are typically used in and around
construction and street repair sites.
Facts
A contractor is engaged in a project for the repair of underground utility lines. Since the project
will require two weeks to complete, and requires excavation of vehicle and pedestrian traffic
areas, the work site must be barricaded and lighted. Temporary use of lights and barricades is
secured from providers who deliver the barricades and lights to the sites, and place them at the
required locations to assure that motorists and pedestrians are alerted to the dangers of the open
excavation. The lights are solar or battery powered, are designed to remain illuminated for
several days or more without need for servicing. The provider of the lights and barricades agrees
to replace or service any lights or barricades that become dysfunctional while they are in service
to the contractor. However, the lights are such that they could remain illuminated for the entire
duration of the contractor’s project, without any visits to the project site or other intervention by
the provider. When the project is completed, the owner of the lights and barricades picks up the
property from the project site. Separate charges are made for the furnishing of the barricades and
lights, and for the delivery and pick up of the property.
Issue
Is the state sales tax due on the furnishing of the barricades and lights? If so, are the separate
charges for the delivery and pick up of the property within the taxable base?
Analysis
La. Stat. Ann. § 47:302(B), 321(B), 331(B), and the sales tax ordinance of the Louisiana
Tourism Promotion District each levy a tax on “the gross proceeds derived from the lease or
rental of tangible personal property … where the lease or rental of such property is an established
business, or part of an established business, or the same is incidental or germane to the said
business” and upon “the monthly lease or rental price paid by lessee or rentee, or contracted or
agreed to be paid by lessee or rentee to the owner of the tangible personal property.” La. Rev.
Stat. Ann. § 47:301(7)(a) defines the term “lease or rental,” in pertinent part, as “the leasing or
renting of tangible personal property and the possession or use thereof by the lessee or renter, for
a consideration, without transfer of the title of such property.” La. Rev. Stat. Ann. §
47:301(16)(a) defines the term “tangible personal property,” in pertinent part, as “personal
property which may be seen, weighed, measured, felt or touched, or is in any other manner
perceptible to the senses.”
Construction barricades, lighting, and fencing are clearly classifiable as “tangible personal
property” because they are movable and are perceptible to the senses. The transaction for the use
of the property facility is a “lease or rental” because the customer pays a consideration for the
right to use the property without acquiring the title to the property.

Revenue Ruling No. 07-007
Page 2 of 2

La. Admin. Code tit. 61:I.4303(B)(1)(e) provides that “operating expenses and maintenance
costs for keeping leased property in repair cannot be deducted from gross proceeds in arriving at
the taxable base.” Under this section of the Louisiana Administrative Code, the charges to the
customer for maintenance of the barricades, lighting, and fencing are included in the taxable
base. In McNamara v. Patterson Services, Inc., 382 So. 2d 971(La. App. 1 Cir. 1980) the First
Circuit Court of Appeal concluded that charges by the lessor for delivery to the customer’s
location of leased or rented property do not form part of taxable “gross proceeds.” Applying the
judicial decision cited above, any separately stated charges for the delivery and pick up of the
leased or rented property are excluded from the taxable base, provided that transportation
charges are clearly distinguishable from and are not inclusive of any operating expenses,
maintenance costs, or charges for the set up for the leased or rented property to enable the
property to perform its intended function.
Conclusion
Transactions for the furnishing for consideration of the temporary use of construction barricades,
lighting, and fencing are taxable as leases and rentals. The taxable base will include the charges
for the lease or rental, as well as any charges for bulb replacement or other maintenance of the
property while the property is in service to the contractor, regardless of whether or not those
charges are separately stated.
The barricades, lights, temporary fencing, and other durable tangible personal property that
providers acquire for the exclusive purpose of lease or rental as tangible personal property are
eligible for tax-free purchase, as provided by La. Rev. Stat. Ann. § 47:301(10)(a)(iii).
Questions can be directed to the Policy Services Division at 225.219.2780.
Cynthia Bridges
Secretary
By:

Raymond E. Tangney
Senior Policy Consultant
Policy Services Division

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue employees. It is
issued under LAC 61:III.101.C 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.