Who owed Louisiana sales tax when a dealer immobilized a manufactured home on dealer-owned land and then sold both as real property?

Plain-English summary

A dealer owed tax when it took a new manufactured home from tax-free resale inventory, immobilized it on dealer-owned land, and then sold the home and land as real property. Immobilization made the dealer the contractor and ultimate consumer of the home.

Under the ruling's 2007 percentage, 46% of the new home's price was taxable to the dealer and 54% was excluded. The later customer purchase of the immobilized home and land was not subject to Louisiana sales tax because it was a sale of immovable property.

The transaction

The dealer bought a manufactured home tax-free from the manufacturer for resale. It later placed the home on its own land and recorded an act of immobilization with the parish clerk of court by the twentieth day of the following month.

The dealer then sold the home together with the land to a customer as immovable property.

Resale exemption ended when the home was immobilized

Louisiana issued Form R-1018 so mobile-home dealers could buy homes tax-free for resale as tangible personal property.

But La. R.S. 9:1149.4 provided that a manufactured home became immovable when the required recorded instrument described the home and land and declared that the home would remain permanently attached. After recordation, the home ceased to be governed and taxed as movable property and became subject to the laws for immovable property.

The dealer therefore did not ultimately resell the home as tangible personal property. It withdrew the home from inventory and transformed it into an immovable.

Dealer was treated as contractor and end user

By immobilizing the home, the dealer assumed a contractor's role. The ruling cited American Sign and Indicator Corp. v. City of Lake Charles for the principle that a contractor is the ultimate consumer of materials incorporated into an immovable and pays tax on those materials.

The dealer accordingly owed tax on its purchase from the manufacturer. Under La. R.S. 47:301(16)(g) as described in the ruling, 46% of the price of a new manufactured or mobile home was taxable and 54% was excluded.

Customer's real-property purchase was not taxed as a retail sale

Once immobilized, the manufactured home was part of the real-property sale. Louisiana sales and use tax did not apply to the dealer's sale of the home and land to the customer as immovable property.

The two steps had different tax consequences: tax at the dealer's inventory-withdrawal/consumption stage, but no sales tax on the later real-property conveyance.

What this means for you

Manufactured-home dealers

A resale certificate does not protect a home later consumed in a dealer's own real-property contract. Track when inventory is immobilized and calculate the dealer-level tax under current law.

Developers and contractors

Incorporating movable property into an immovable can shift tax responsibility to the contractor as end user even when the finished real estate sale is outside sales tax.

Buyers

The customer did not owe sales tax on the ruling's sale of the immobilized home with land, but other real-estate, title, and local charges were outside the ruling's holding.

Common questions

Q: Could the dealer keep the resale exemption after immobilizing the home?

A: No.

Q: Who was the ultimate consumer?

A: The dealer acting as contractor.

Q: What percentage did the 2007 ruling tax?

A: 46% of the new manufactured home's price.

Q: Was the customer sale taxable?

A: No. The home and land were sold as immovable property.

Citations and references

• La. R.S. 47:301(16)(g) — then-current taxable portion of a new manufactured home's sales price
• La. R.S. 9:1149.4 — manufactured-home immobilization requirements and effects
• American Sign and Indicator Corp. v. City of Lake Charles, 320 So. 2d 234 (La. App. 3d Cir. 1975) — contractor as ultimate consumer
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 07-009

Original ruling text

Revenue Ruling
No. 07-009
October 25, 2007
Taxability of Manufactured Homes Immobilized by Dealers
The purpose of this revenue ruling is to clarify the sales tax treatment of manufactured homes
immobilized and then sold by dealers.
Facts
A dealer purchases a manufactured home tax-free from the manufacturer as an item for resale.
The dealer later places the new manufactured home on a tract of land owned by the dealer and
files an act of immobilization with the Parish Clerk of Court by the twentieth of the following
month. The dealer then sells the manufactured home with the land to a customer as immovable
property.
Issue
The question is whether state sales or use tax is due on the sale of the manufactured home.
Analysis
The retail sale of a new manufactured home as tangible personal property is currently taxed on
46 percent of the sales price as provided by R.S. 47:301(16)(g). Sales of immovable property are
not subject to Louisiana sales and use tax.
A dealer is allowed an exemption for the purchase of manufactured homes for resale as tangible
personal property. The Department of Revenue issues Form R-1018, Sales Tax Exemption for
Mobile Home Dealers, for this purpose.
R.S 9:1149.4 provides for the immobilization of a manufactured home and upon immobilization,
the manufactured home is considered an immovable for sales and use tax purposes. R.S.
9:1149.4 reads as follows:
A. A manufactured home placed upon a lot or tract of land shall be an immovable when there is
recorded in the appropriate conveyance or mortgage records of the parish where the said lot or
tract of land is situated an authentic act or a validly executed and acknowledged sale or
mortgage or sale with mortgage which contains a description of the manufactured home as
described in the certificate of title or manufacturer's certificate of origin and a description of the
lot or tract of land upon which the manufactured home is placed, and contains a declaration by
the owner of the manufactured home and, when applicable, the holder of a mortgage or security
interest under Chapter 9 of the Louisiana Commercial Laws on the manufactured home, that it
shall remain permanently attached to the lot or tract of land described in the instrument.
B. Upon recordation of the act described above, the manufactured home shall cease to be
subject to the application of Chapter 4 of Title 32 of the Louisiana Revised Statutes of 1950 and
the taxes applicable to movables and shall thereafter be subject to all laws concerning
immovable property; however, nothing herein shall be construed to affect the rights of the
holder of a validly recorded chattel mortgage or previously perfected security interest under
Chapter 9 of the Louisiana Commercial Laws duly noted on the certificate of title.

Revenue Ruling No. 07-009
Page 2 of 2

The facts presented in this instance, indicate the dealer is removing a manufactured home from
its inventory and filing an act of immobilization, thereby transforming an item of tangible
personal property into an immovable. By transferring the manufactured home to an immobilized
state, the dealer is taking on the responsibilities of a contractor. Generally, a contractor is treated
as the ultimate consumer of materials incorporated into an immovable and is taxed on the
purchase of those materials. This is evidenced by American Sign and Indicator Corp. v. City of
Lake Charles, 320 So.2d 234 (La.App. 3rd Cir.1975).
Since the dealer did not purchase the manufactured home for resale as tangible personal
property, the dealer is responsible for payment of sales tax on their purchase of the manufactured
home. The sale of the immobilized manufactured home by the dealer to the customer as
immovable property is not subject to Louisiana sales and use tax.
Conclusion
The dealer is fulfilling a real property contract and owes sales tax on its purchase of the new
manufactured home. Currently, 46% of the sales price of a new manufactured or mobile home is
subject to tax and 54% of that price is excluded from tax. The sale by the dealer to the customer
is not subject to sales tax.
For more information regarding this topic, taxpayers should contact the Taxpayer Services
Division at 225.219.7356.
Cynthia Bridges
Secretary
By:

Mark Dwyer, CPA
Revenue Tax Research Analyst
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.