Does Louisiana's pipeline gross-receipts tax apply when an oil movement starts or ends in a Louisiana Foreign Trade Zone?

Plain-English summary

Louisiana Revenue Ruling 19-002 held that a pipeline owed the Transportation and Communication Utilities Tax on oil movements between a Louisiana Foreign Trade Zone and another location in Louisiana.

The tax applied at 2% of gross receipts from intrastate pipeline business under the statutes quoted in the ruling. A movement began and ended in Louisiana even when one endpoint was inside an FTZ.

The reason is that a Foreign Trade Zone remains geographically inside Louisiana. Federal law treats zone property as outside the United States for limited customs and tariff purposes, but that fiction did not turn an in-state pipeline movement into interstate or foreign commerce for this tax.

The pipeline tax

La. R.S. 47:1001 imposed a 2% license tax on a public utility's gross receipts from intrastate business. The public-utility definition included pipelines, and a pipeline included a person transporting oil within Louisiana for hire.

For pipelines, gross receipts included billings for services and receipts from business beginning and ending within the state.

La. R.S. 47:1002 excluded interstate and foreign commerce and business conducted on navigable waters of the United States. The question was whether an FTZ endpoint made an otherwise Louisiana-to-Louisiana movement foreign or interstate.

Why FTZ status did not change the result

An FTZ is a geographical area located in or adjacent to a U.S. port of entry. Louisiana authorized zones under La. R.S. 51:62.

Federal FTZ law treated certain property as outside U.S. customs territory for tariff purposes and exempted specified U.S.-produced export property from state and local ad valorem tax.

Those rules did not create a general exemption from every state and local tax. The ruling found no statute treating a Louisiana FTZ as outside the state for the pipeline gross-receipts tax.

Limited income- and franchise-tax rules

Louisiana had separately enacted two rules treating certain FTZ property as outside Louisiana:

• La. R.S. 47:287.95(H) for corporation income-tax apportionment; and
• La. R.S. 47:606(D) for corporation franchise-tax capital allocation.

The Department treated those as tax-specific provisions. They did not carry over to the Transportation and Communication Utilities Tax.

The holding

An oil movement was taxable when:

• the pipeline transportation began in a Louisiana FTZ and ended elsewhere in Louisiana; or
• it began elsewhere in Louisiana and ended in the Louisiana FTZ.

Both endpoints were geographically within the state, so the receipts came from business conducted wholly in Louisiana.

What this means for you

Pipeline operators

Do not remove Louisiana-to-Louisiana receipts from the tax base merely because one terminal or storage point sits inside an FTZ. Track the actual geographic origin and destination.

Foreign Trade Zone businesses

FTZ treatment is tax-specific. A customs, ad valorem, corporation-income, or franchise-tax rule does not automatically control another Louisiana tax.

Tax professionals

Identify the precise statutory benefit claimed for the zone. RR 19-002 rejected a broad "outside Louisiana" theory and required an exemption or special rule applicable to the T&C Tax itself.

Common questions

Q: Is a Louisiana FTZ physically outside Louisiana?

A: No. The ruling treated it as geographically within the state.

Q: Does customs treatment make a movement foreign commerce for the pipeline tax?

A: No. The outside-U.S. treatment was limited to tariff purposes and specified exemptions.

Q: Did the special corporation income- and franchise-tax FTZ rules apply?

A: No. The Department limited them to the taxes named in those statutes.

Q: What receipts were taxable?

A: Gross receipts from oil transportation beginning or ending in a Louisiana FTZ when the other endpoint was also in Louisiana.

Citations and references

• La. R.S. 47:1001-1003 — Transportation and Communication Utilities Tax, public utilities, pipelines, and gross receipts
• La. R.S. 51:62 — Louisiana authority for Foreign Trade Zones
• La. R.S. 47:287.95(H) — corporation income-tax FTZ rule
• La. R.S. 47:606(D) — corporation franchise-tax FTZ rule
• 19 U.S.C. §§ 81a et seq. and 81o — federal Foreign-Trade Zones Act provisions discussed
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 19-002

Original ruling text

Revenue Ruling No. 19-002
April 17, 2019
Transportation and Communication Utilities Tax
Pipelines with Intrastate Movements Beginning or Ending in Foreign Trade Zones
Purpose
The purpose of this ruling is to provide clarity regarding the application of the Transportation and
Communication Tax (“T&C Tax”) owed by pipelines with respect to movements of oil within
Louisiana which begin or end in a Foreign Trade Zone (“FTZ”) located in Louisiana.
Law
LA R.S. 47:1001 imposes the T&C Tax as follows:
Every person owning or operating, or owning and operating, any public utility in
this state as defined in this Part, shall, in addition to all other taxes and licenses
levied and assessed in this state, pay a license tax, for the privilege of engaging in
such business in this state, of two per centum (2%) of the gross receipts from its
intrastate business.”
LA R.S. 47:1002 provides further explanation providing:
This Part levies, in addition to other taxes and licenses levied in this state, a license
tax on every person owning or operating or owning and operating a public utility,
as herein defined, for the privilege of engaging in such business carried on wholly
in this state, and not a part of interstate commerce. This tax is not intended to be a
tax for the privilege of engaging in interstate commerce, nor is it intended to be a
tax on the business of interstate commerce nor is it intended to be a tax having any
relation to interstate or foreign business or commerce in which any such person,
firm, association or corporation may be engaged in addition to its business in this
state.
The provisions of this Part and the taxes collectible hereunder shall not apply to or
be levied against gross receipts derived from any business or operations conducted
on navigable waters of the United States.
LA R.S. 47:1003(1) defines public utility as “railroads and railways, sleeping cars, motor bus lines,
motor freight lines, express companies, telegraph companies, boat or packet lines, and pipe lines,
as herein defined. The term public utility shall not include publicly owned ambulance companies.”
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.

Revenue Ruling No. 19-002
April 17, 2019
Page 2 of 3

Pipe lines include “any person engaging in the business of transporting oil within this state for
hire.”1
For purposes of the T&C Tax due by pipelines, gross receipts means “the total amount of billings
for services rendered and all receipts from business beginning and ending within the state.”2
FTZs are geographical areas in or adjacent to ports of entry located within the United States but
considered to be outside of the United States for tariff purposes.3 LA R.S. 51:62 authorizes the
establishment of FTZs in Louisiana. As provided by 19 U.S.C. 81o, “[t]angible personal property
produced in the United States and held in a zone for exportation … shall be exempt from State and
local ad valorem taxation.”
For purposes of determining Louisiana apportionment percentages to calculate the Louisiana
corporation income tax, corporeal movable property located in Louisiana in United States customsbonded warehouses or FTZs established under the FTZ Act shall be considered located outside of
Louisiana.4
Similarly, for purposes of the allocation of taxable capital when calculating Louisiana corporation
franchise tax, corporeal movable property imported into the United States and located in FTZs
established under the FTZ Act shall be considered located outside of Louisiana.5
Analysis
The T&C Tax is due on all gross receipts from intrastate business, that is, all business beginning
and ending within Louisiana.6 FTZs established in accordance with 19 U.S.C. 81c are, by
definition, geographical areas located within the United States. Those FTZs established in
Louisiana under the authority granted in LA R.S. 51:62 are, in fact, located within the geographical
limits of Louisiana.
Under the FTZ Act, property located in an FTZ is considered located outside of the United States
for tariff purposes and is exempt from state and local ad valorem taxes.7 The exemption does not
extend to other state and local taxes and is limited to tangible personal property produced in the
United States and held in the FTZ for exportation.

LA R.S. 47:1003(10)
LA R.S. 47:1003(11)(a)
3
19 U.S.C. 81a et seq. (“FTZ Act”)
4
LA R.S. 47:287.95(H)
5
LA R.S. 47:606(D)
6
See generally LA R.S. 47:1001-1003.
7
19 U.S.C. 18c; 19 U.S. C. 81o
1
2

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.

Revenue Ruling No. 19-002
April 17, 2019
Page 3 of 3

As noted above, Louisiana has legislatively adopted two additional instances in which property
located in FTZs in Louisiana will be considered located outside of Louisiana.8 Those instances
specifically relate to the calculation of Louisiana corporation income and corporation franchise tax
and are limited to those taxes.
There is no exemption in the law that authorizes or requires an FTZ located in Louisiana to be
treated as being outside of the state for purposes of the T&C Tax. Therefore, the FTZ is not
considered to be outside of Louisiana or the United States for purposes of the T&C Tax. Since the
FTZ is, in fact, located in Louisiana, any movement of oil which begins or ends within the FTZ is
considered to occur within Louisiana. In that regard, movements from or into an FTZ into or from
another location in Louisiana are not considered interstate or foreign commerce within the meaning
of LA R.S. 47:1002.
Ruling
Transportation and Communication Tax is due by pipelines on gross receipts from their business
conducted wholly within Louisiana, including movement of oil which begins or ends in a Foreign
Trade Zone located in Louisiana.
Kimberly L. Robinson
Secretary

8

See LA R.S. 47:287.95(H) and 47:606(D)

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.