Louisiana Business Utilities 1% Sales Tax - Refund Procedure Update

Aug 20, 2015, 16:54 ET from Ryan, LLC

DALLAS, Aug. 20, 2015 /PRNewswire/ -- The Louisiana Department of Revenue (LDR) has issued Statement of Acquiescence No. 15-001, which announces the agency's intent to be bound by a final, non-appealable court decision in a pending lawsuit challenging the recent suspension of a state sales tax exemption applicable to most business utilities. 

Issued on August 13, 2015, the Statement is important because it expresses LDR's intent to permit affected taxpayers to file refund claims to recover taxes in the event of a final court decision striking down the suspension, rather than requiring taxpayers to follow the state's more onerous "payment under protest" procedures.

The Statement was issued in response to a lawsuit filed on July 1, 2015 by the Louisiana Chemical Association (LCA), challenging the constitutionality of the Legislature's adoption of House Concurrent Resolution No. 8 (HCR 8) during its 2015 session. HCR 8 suspended the state sales tax exemption on most business utilities from July 1, 2015 through August 5, 2016. This subjects most business purchases of electricity, natural gas, water, and steam to a 1% sales tax. Utility purchases that are not affected by the suspension include:

  • Natural gas used in direct reduced iron process
  • Electricity for chlor-alkali processes
  • Electricity or natural gas used by paper or wood products manufacturing facility

Since the lawsuit was filed, affected taxpayers have sought guidance on how to protect their rights to recover taxes paid in the event that the LCA prevails. There are generally two options for pursuing a sales tax refund claim in Louisiana.

  1. Payment Under Protest (La. Rev. Stat. 47:1576) – Used to protest the tax payment for transactions in which there is a dispute relating to the constitutionality of a law or a dispute as to LDR's application of a law. A payment under protest requires filing an administrative Intent to Protest letter by the 20th day following the disputed transaction(s) and filing a lawsuit with the Board of Tax Appeals (BTA) within the subsequent 30 days. This process would have to be repeated monthly, with the option of securing an "Abide By Agreement" with LDR to forgo filing successive lawsuits with the BTA.
  2. Refund Claim Form R-20127 (La. Rev. Stat. 47:1621) – Used to secure refunds of tax overpayments due to taxpayer errors, such as miscalculations, misinterpretation of tax law, and mistakes of facts associated with a transaction. This claim must be submitted within the standard statute of limitations and does not require the lawsuit filings that are required by a payment under protest.

Through its Statement, LDR agreed in advance that affected taxpayers can file refund claims in lieu of the payment under protest requirements noted above. A Statement of Acquiescence is binding on LDR; however, it can be superseded by future LDR issued guidance, rules, statutes, or court verdicts. Therefore, taxpayers may choose to follow the statutory payment under protest procedures or rely on LDR's announcement and file an administrative refund claim if HCR 8 is ruled unconstitutional.

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