On May 22, 2007 the Department of Revenue issued a long-awaited Revenue Ruling detailing its position regarding the case of Word of Life Christian Center v. West, 936 So.2d 1226, 2004-1484 (La. Sup. Ct. 4/17/06). In Word of Life, the Supreme Court determined that two airplanes which were purchased out of state for use in interstate commerce were nevertheless subject to Louisiana use tax as they had become part of the mass of property of the state. The impact of this decision, however, is not limited to airplanes. Many companies purchase various items outside the territorial limits of Louisiana and thereafter import them into the state for use interstate commerce operations.
In Revenue Ruling 07-002, issued May 22, 2007, the Department adopted the Word of Life decision which replaced the “ultimate use” test with actual “use” for all transactions occurring after June 30, 2007. Now, any use which is not “bona fide” interstate commerce will subject the property to use tax. The Department also took the liberty to expand upon the Word of Life discussion of the language “bona fide” interstate commerce in La. R.S. 47:305E. The Department has taken the position that “bona fide” interstate commerce consists only of direct revenue producing activities and may expand it further to include “interstate commerce” provisions found elsewhere in the law. Activities which further the company as a whole but which do not result in a direct revenue stream are not considered to be “bona fide” interstate commerce.
The Word of Life decision may ultimately impact these companies as some storage and maintenance, which were previously considered to further interstate operations, may now be enough to subject the items to use tax. Some industries are already attempting to mitigate the impact of Word of Life in the current legislative session.