How did Louisiana tax first-time coating, wrapping, or galvanizing compared with redoing the same treatment?

Plain-English summary

Louisiana Revenue Ruling 12-002 classified the first coating, wrapping, or galvanizing of pipe or other property as taxable fabrication.

Doing the work again on property that had already been coated, wrapped, or galvanized was instead a taxable repair service. In either case, the charge was generally taxable, but different exemptions could apply.

First-time work was fabrication

La. R.S. 47:301(12) included fabrication for a customer who directly or indirectly supplied the materials within the definition of a sale.

The ruling therefore treated first-time coating, wrapping, and galvanizing as taxable sales. The vendor had to collect sales tax on the gross proceeds from the transaction.

Exemptions available for other tangible-personal-property sales could also apply to these fabrication transactions. The ruling specifically identified the offshore-use exemption in La. R.S. 47:305.10 as an example.

Repeat work was a repair

Recoating, rewrapping, or regalvanizing property that had already received the treatment was a taxable repair service under La. R.S. 47:301(14)(g).

Tax applied to the full repair charge, including both materials and labor.

Delivery outside Louisiana

The repair statute described in the ruling exempted state sales-tax collection when the servicing dealer delivered repaired property to another state:

• in the dealer's own vehicle; or
• by common carrier.

For aircraft, delivery could be by the best available means.

Offshore delivery limits

The ruling said the out-of-state repair exemption did not apply when repaired property was delivered to an offshore location within Louisiana's territorial limits.

Delivery to Outer Continental Shelf waters outside Louisiana's territorial limits also did not qualify unless the property was a component part of a drilling rig under the cited statutory definitions.

What this means for you

Coaters, wrappers, and galvanizers

Determine whether the customer is asking for an initial fabrication or restoration of a prior treatment. That classification changed which statutory exemption rules applied, even though both transactions were generally taxable.

Offshore operators

Do not assume all offshore delivery is out-of-state delivery. The ruling distinguished Louisiana territorial waters from Outer Continental Shelf waters and imposed a drilling-rig-component condition in the latter setting.

Accountants and tax professionals

For repair work, include materials and labor in the taxable charge unless a specific exemption applies and its delivery conditions are documented.

Common questions

Q: Is coating new pipe a repair service?

A: No. The ruling treated the first coating, wrapping, or galvanizing as fabrication and therefore a taxable sale.

Q: Is recoating taxed only on materials?

A: No. The full repair charge, including materials and labor, was taxable.

Q: Does delivery to another state qualify for an exemption?

A: Under the ruling, yes when the servicing dealer delivered the repaired property in its own vehicle or by common carrier, subject to the stated rules.

Q: Is delivery to an offshore Louisiana location exempt?

A: No. The ruling expressly denied the out-of-state repair exemption for delivery within Louisiana's territorial limits.

Citations and references

• La. R.S. 47:301(12) — taxable fabrication using customer-furnished materials
• La. R.S. 47:305.10 — offshore-use exemption referenced for fabrication sales
• La. R.S. 47:301(14)(g) — taxable repair services and out-of-state delivery exemption
• La. R.S. 47:301(14)(g)(iii) — drilling-rig component-part definition
• La. R.S. 47:305(I) — drilling-rig component treatment
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 12-002

Original ruling text

Revenue Ruling No. 12-002
May 24, 2012
Sales Tax
Coating, Wrapping, Galvanizing of Tangible Personal Property
The charges made for the coating, wrapping, and galvanizing of pipe and other types of property
which have not previously been coated, wrapped, or galvanized are considered “fabrications” as
contemplated by La. R.S. 47:301(12). This statute defines “sale” to include “any transfer of title
or possession, or both, exchange, barter, conditional or otherwise, in any manner or by any
means whatsoever, of tangible personal property, for a consideration, and includes the
fabrication of tangible personal property for consumers who furnish, either directly or indirectly,
the materials used in fabrication work …” [emphasis added]. Since these fabrication
transactions are considered taxable sales, vendors are required to charge and collect sales tax on
the gross proceeds from the coating, wrapping, and galvanizing transactions.
Statutory exemptions that are applicable on other sales of tangible personal property (including
the offshore use exemption of R.S. 47:305.10) are applicable also on these fabrication
transactions.
The re-coating, re-wrapping, or re-galvanizing of tangible personal property that previously had
been coated, wrapped, or galvanized is considered a taxable repair service under R.S.
47:301(14)(g), and tax is due on the full amount charged for the repair, including materials and
labor. La. R.S. 47:301(14)(g) provides an exemption from the collection of state sales tax on
repairs in those cases in which the property which has been repaired is delivered by the servicing
dealer, either in its own vehicle or by common carrier, to another state. (As to aircraft, delivery
may be by the best available means.) The statute provides no exemption, however, when
repaired property is delivered to offshore locations within the territorial limits of Louisiana.
Also the statute provide no exemption when repaired property is delivered to Outer Continental
Shelf waters outside the territorial limits of the Louisiana unless that property is a “component
part” of a “drilling rig,” as the terms are defined in R.S. 47:301(14)(g)(iii) and 47:305 I.

Cynthia Bridges
Secretary

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