The state has issued a clarification to the laws regarding property purchased or leased for use outside of Louisiana and offshore. This impacts many property holders in Louisiana so Broussard Poché, LLP wanted to help sum up the information. The actual bulletin can be seen here and is known as Revenue Information Bulletin No. 16-034.
Here’s what you need to know:
- The state has clarified that purchases for use offshore beyond the territorial limits of Louisiana are exempt from sales tax. The property must be marked for transshipment to an offshore area in order to qualify.
- The purchaser must provide an offshore exemption certificate containing the federal lease number, area, and block number information.
- The seller should report this information on the invoice in the “ship to” area. Whether or not a lease is subject to tax depends on the average operational use. If the average operational usage during the lease period is offshore/interstate and is greater than or equal to 90%, then the entire lease isn’t subject to tax. If the lease does not meet the 90% criteria, then you must subject the intrastate amount to tax.
- The lessee must provide proof of where the operational usage will take place. Continued communication between the lessee and lessor is important.
- The lessor should keep track of the operational usage to support the exemption of sales tax.
Please be aware that first use offshore for property purchased, with an offshore exemption is subject to a 2% sales tax until June 30, 2018. Contact your professional tax adviser for help; the experts at Broussard Poché, LLP would be happy to guide you through the regulations.