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BATON ROUGE — State Revenue Secretary Cynthia Bridges says a five percent exclusion from the state sales tax on the price of eligible manufacturing machinery and equipment becomes effective July 1, 2004.
“The implementation of this five percent level is the first of seven steps toward the total elimination of sales tax on such property,” Bridges says. She adds that the exclusion was passed as Act 1 of the 2004 First Extraordinary Session of the Louisiana Legislature and is one of the main components in Governor Kathleen Blanco’s stated goal of new economic development for Louisiana. In fiscal year 2002-03, there were 139 companies that paid sales tax on their new machinery and equipment, but received rebates totaling $39.6 million because they were located in Enterprise Zones. The Enterprise Zone program encourages companies to invest in areas of the community that are in need of economic development. “With incentives like Enterprise Zones already in place, this exclusion is another example of Louisiana''s serious effort to encourage the growth of business,” Bridges points out.
“Act 1 provides for a gradual increase in the exclusion over a period of six years until the sales, use, lease, and rental taxes on machinery and equipment used by eligible manufacturers are completely eliminated,” Bridges states. The exclusion is scheduled to rise to 19 percent on July 1, 2005, 35 percent on July 1, 2006, 54 percent on July 1, 2007, 68 percent on July 1, 2008, 82 percent on July 1, 2009, and 100 percent on July 1, 2010.
In order for tangible personal property to be excluded from taxation in the percentages authorized by the act, it must be machinery and equipment or other property that is eligible for depreciation for federal income tax purposes and be used as an integral part of the manufacturing of tangible personal property that is for sale. Specific examples that Act 1 categorizes as eligible machinery and equipment are: computers and software that are an integral part of the machinery and equipment used directly in the manufacturing process; machinery and equipment necessary to control pollution at a plant facility where pollution is produced by the manufacturing operation; and machinery or equipment used to test or measure raw materials, the property undergoing manufacturing, or the finished product when the test or measurement is a necessary part of the manufacturing process.
Bridges says eligible manufacturers may download an application form for the new exclusion from the Department’s website at www.revenue.louisiana.gov. Due to the expected initial flood of application forms, Bridges adds that it may be necessary to issue exemption certificates to some applicants after the July 1 effective date. “However, any manufacturer who makes purchases or leases of qualifying machinery or equipment from July 1, 2004 to the date they receive the exemption certificate from the Department will be able to recover the sales, use, or rental tax paid on the 5 percent exclusion,” Bridges states. “The taxpayer only needs to go to our website and download the form Claim for Refund of Taxes Paid (Form R-20127-L) and submit it to the Department along with a copy of the applicant’s exemption certificate.”
Detailed information about the exclusion for manufacturing machinery and equipment is available in Revenue Information Bulletin No. 04-012-A. The document is found on the Department’s website by clicking on “Laws and Policies,” then “Policy Documents,” then “Sales Tax,” and then “Revenue Information Bulletins." Questions concerning the exclusion may be submitted by clicking on “Contact Us” and then selecting “Tax Questions/Suggestions.”
Taxpayers may also contact any of the following offices of the Department: Alexandria, 201 Johnson Street, Suite 100, (318) 487-5333; Baton Rouge (Headquarters Office), 617 N. Third St, (225) 219-7318; Baton Rouge (Regional Office), 8549 United Plaza Blvd., Suite 200, (225) 922-2300; Lafayette, 825 Kaliste Saloom Road, Brandywine III, Suite 150, (337) 262-5455; Lake Charles, One Lakeshore Drive, Suite 1550, (337) 491-2504; Monroe, 122 St. John Street, Room 105, (318) 362-3151; New Orleans, 1555 Poydras Street, Suite 900, (504) 568-5233; Shreveport, 1525 Fairfield Avenue, (318) 676-7505; and Thibodaux, 1418 Tiger Drive, (985) 447-0976.
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