The Louisiana Legislative opened its doors on Monday, March 26, 2001 to the 2001 Regular Legislative Session. The session, scheduled to close during mid June, is certain to be one we should keep an eye on.

As an odd numbered year, the Legislature is scheduled to meet for a sixty day session. By constitution our lawmakers are prohibited (off year) from considering proposals to levy a new tax or increase an existing one. Well that’s what is supposed to happen anyway! I’m fairly sure, however, that you would have a little trouble convincing Bob Rainer on that issue.

As in the past, there has been some discussion concerning major tax restructuring. When those ideas, which are certainly are not new, rise to the top they can only mean trouble for us local collectors. Who knows, maybe the days of Buddy R. are back...

They say they want to give local governments a broader tax base. What that really means is they no longer want to support our causes by way of their general fund. They also think it would be a good idea if we all (state and local government), were a little less dependant on sales taxes. That is not a unique idea, however, in the past that has been a tough act to sale.

One concept that keeps rising to the top is the homestead exemption. On a personal level, this one slays me. Those that think this one has a chance certainly must not have been in Louisiana more than 15 minutes. In the past, this has been one of those sacred cows that you just don’t want to rope. If the exemption is reduced, currently $75,000, more money will be realized and maybe local governments could be less dependant upon the state right. Wrong! One very popular belief is that if the exemption is reduced, without a levy rollback, locals officials will experience huge windfalls. Well duh! Without an increase in revenue from some source, how can we become less dependant on the state, and less dependant on sales taxes. Another interesting part of this equation is that homestead exemptions have zero affect on municipal property taxes.

Well, without a doubt, they know more than I, so maybe it is a good idea? But, one thing is for sure, as witnessed by the "Stelly Plan," lowering the homestead exemption will require voter approval, and it very unlikely that our citizens are willing to increase their property taxes in an "exchange" for lower sales taxes! Please forgive me...I will get off the soap box now.

The one thing that local tax collectors is certainly to face again is state central. We just faced that issue in 1999, but it just won’t go away. Every time that issue comes up, I can’t help but think of our ole friend Tom Purcell. Some of you may remember, a few years before he retired he indicated that the "young fellows" would never see retirement as a local sales tax collector. Over the years, I have had many mentors, and Tom is certainly one of those, however, I’ve kept my fingers crossed hoping that he would be in error. Who knows, maybe one day, but lets all work together to insure that day is not today.

As we discovered at the First Quarterly Meeting in Monroe, another big issue that we are going to face is a local taxpayer bill of rights. I don’t think that there are a lot of us that would oppose a true "bill of rights." But, you can bet... life is just not that simple!

Another sure thing during this session will be the Streamline Sales Tax issue. As you all know, our Board has made a considerable contribution to keep abreast of this one. In theory (by the way is an engineering term, not accounting), this is a good idea if all the kinks can be worked out. There are a number of issues that sort of goes against the grain, but, there have been some might good people working some long hours to try and come up with something good for all concerned.

This is the motto of my term as your president. I chose it because I, like many of you have felt and continue to feel that there is nothing we can’t accomplish when we work together. I had observed over the last several years that some of our colleagues in business and industry had either dropped out of the organization for one reason or another or were not attending our conferences as they had in the past. This got me to thinking of why did they drop out or stop attending. Was it perhaps because the LATA no longer met their expectations and if so why?

Among my goals discussed at our organization meeting in January was to try and accomplish two things. One was to establish a Business and Industry Committee made up of just that, members that worked for business and industry. I contacted several individuals that are employed by business and industry and asked them if they thought it was a good idea to form this committee which would meet at each quarterly conference if not more often, to discuss issues relevant to the companies that they represented. The response was a unanimous yes. As a result, we now have a Business and Industry Committee which is very active right now in participating in discussions regarding the Local Taxpayer’s Bill of Rights which is being considered during this Regular Legislative Session. This committee also met at the first quarterly meeting in Monroe to discuss several items of importance, one of which was the expansion of the committee. My second goal was to have this committee contact those members that for whatever reason had dropped out of the LATA and let them know that they were still welcome. This has already had a positive effect as at least one company has rejoined the organization after a noticeable absence..

If you did not notice on our last conference agenda, the Business and Industry Committee is holding closed meetings concurrent with the Audit Chat Room and the Board of Directors Meeting. Please respect their privacy which allows them to discuss topics and issues and then bring them to the organization to either address or respond. My hat is off to these charter committee members for sharing my idea that, together, we can!

In closing, I want to invite members of the LATA to consider joining a committee. We have many and I am sure that there is one that you could contribute to. Of particular importance at this time is the Jurisprudence Committee. This Committee is knee deep in reviewing and summarizing literally hundreds of court cases. The goal of this committee is to bring to the organization a CD of these court cases which will be indexed by subject matter and can be called up for review simply by inserting the CD into your computer. As mentioned in our last newsletter (www.loata.com), Price Waterhouse Coopers and the LATA are reviewing the possibility of a joint venture, based on the work of the Jurisprudence Committee which would result in this CD being offered for a fee. Right now the committee is in need of members to review and summarize these cases. Won’t you consider helping out?

Looking forward to seeing you at the next quarterly!

Steve Thomas

 

This is a suit for refund of state sales and use taxes paid under protest. Plaintiffs (taxpayers) are a group of three entities that own and operate a river boat gaming vessel. The Department of Revenue assessed the taxes at issue on plaintiffs’ purchases of certain "gaming equipment" and other items such as surveillance equipment and illuminated signs, that was installed during construction on the vessel. In doing so, the Department rejected plaintiffs’ claim for an exemption of the equipment as component parts of the vessel.

While the lower courts determined that the taxes were due, those courts nonetheless concluded that the doctrines of detrimental reliance and equitable estoppel precluded the Department from collecting not only the interest, but also the taxes.

The Department previously formed a "task force" to study what was then a new industry to Louisiana. One issue facing the industry was whether purchases of river boats for conducting gaming may invoke the sales tax exemption for materials, equipment, and machinery incorporated into the vessels built in in the state. This exemption is authorized by RS 47:305.1A.

Relying on a internal memo, from a Senior Agent, which addressed size requirements of vessels that may satisfy the statute and equipment to outfit them, the Task Force provided plaintiffs with sales tax exemption forms and instructed them to give the exemption certificates to the equipment vendors at the time of purchase so that no sales or use tax would be imposed.

The plaintiffs, relying on the Task Force representations, used the exemption certificates in purchasing various gaming equipment for installation during construction of the river boat vessel without paying sales or use taxes.

The legal division, on a later date, issued an opinion that indicated that the exemption was intended to promote the ship building industry in Louisiana and that its use was to have been used only on the original construction of the vessel (ship).

Two months following the legal division determination, the Department’s official policy position was issued...The construction and sale of those river boat gaming vessels and dockside gaming vessels which are of over 50 tons load displacement, and which are sold by the builders, will not be subject to the sales or use tax on the vessel structure itself, as provided for by Revised Statute 47:305.1(A). The sales or use tax will be due on the original and replacement equipment which are placed on the vessels for the vessels’ outfitting and operation. Taxable property will include, but not be limited to, slot machines, gaming tables, seating, bar ware, cookware, as well as the full range of expendable tangible personal property used in the operation of the vessels and in serving their patrons.

Thereafter, the Department changed its position on the component parts exemption for river boat equipment and denied the plaintiffs request for said exemptions.

Afterwards plaintiffs protested the denial, however, the Department maintained its position. The plaintiffs paid under protest and proceeded with action to recover.

After trial on the merits, the trial court concluded that the gaming equipment did not qualify as component parts of the vessel under RS 47:305.1A. However, the court ruled that the Department was equitably estopped from collecting the tax. Although the court acknowledged the only real harm occasioned by plaintiffs was the payment of interest, the court concluded that RS 47:1601 was a mandatory "all-or-nothing" statute that inseparably linked interest and taxes. The court thus ordered the Department to refund both the taxes and interest.

Upon appeal, the First Circuit acknowledged that the codification of detrimental reliance in the Civil Code limits the remedy to the harm incurred and that interest was the only harm plaintiffs incurred.

Nevertheless, the court agreed with the trial court’s interpretation of RS 47:1601 and concluded that both taxes and interest are always due, or not due, together, and that since interest cannot be collected, taxes also cannot be collected. Accordingly, the court held that "the trial court’s assessment is correct in that the interest and the tax must be levied together or not at all."

LA Supreme Court....The sole dispute is whether the items of gaming equipment, acquired by plaintiffs to outfit the vessel for river boat gaming operations, qualifies as component parts of the vessel under RS 47:305.1A. The statute provides an exemption from sales tax for "sales of materials, equipment, and machinery which enter into and become component parts of ships, vessels or barges" The statute, however, does not define "component parts."

Because of the absence of definition, component parts of vessels should be defined by reference to the codal definition of a component part of a building or other structure set forth in La. Civil Code article 466. "Things permanently attached to a building or other construction, such as plumbing, heating, cooling, electrical or other installations, are its component parts." "Things are considered permanently attached if they cannot be removed without substantial damage to themselves or to the immovable to which they are attached."

The judicial interpretations of Article 466 have not been consistent, but the courts generally have applied a societal expectations analysis. In this case what would one reasonably expect to see when they enter a gaming river boat. Relying on that analysis, plaintiffs argue that the ability to remove the slot machines without damage to them or the vessel is irrelevant.

When the analysis is properly focused on the shipyard industry, the relevant inquiry is not whether society expects to see gaming equipment when it enters a river boat operated for gaming purposes, but whether society expects to see such equipment when it enters a vessel. The shipyard construction contract involving the vessel at issue did not mention gaming equipment. Moreover, gaming equipment is customarily moved around the vessel to keep customer interest. And finally, under the customers and practices of the shipyard industry developed in this record, shipbuilding contracts do not include equipment. Therefore, we conclude that the average prudent business entity buying a vessel would not expect, in the absence of specific contractual provisions to the contrary, gaming equipment to be permanently attached to the vessel when the buyer took possession.

The high court concluded that the facts presented satisfied not only the jurisprudential requisites for detrimental reliance, but also the statutory requirements set forth in Civil Code. We disagree that extreme harm resulted from the reliance in the case and that gross injustice will occur in the absence of the application of judicial estoppel. Detriment resulting from reliance simply has not been proved.

The judgment of the court of appeal is reversed, and plaintiffs’ action seeking a refund of taxes and interest paid under protest is dismissed and the case is remanded to the trial court.

(Showboat Star partnership, Showboat of Louisiana, and Lake Pontchartrain Showboat v Department of Revenue)

The First Quarterly Meeting for 2001 was held in Monroe at the Holiday Inn Holidome during the month of March.

The meeting host, Ron Carter and staff, with the assistance of Jerry Moore, did a wonderful job for us. The program was good, the golf...well it was a little wet (but it didn’t hurt my game) however, the course was really nice and thanks to David, Paul, Bill and Steve the hospitality for the outing was great....Ron even found some north Louisiana folks that know how to cook...and I mean cook..you hear me...thanks guys you did good!!

 

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We have a new tax collector in Rapides Parish..arriving for duty on April 7, he weighed in at 8.7 lbs and 21 inches high..sorry guess I mean ..long. His Name, Hunter Austin Andries...this is great news guys, we are extremely happy for you and wish you both all the pleasures that a little one seems to bring...Ain’t God Good!!

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Jon Betts, one of Concordia’s Field Collectors has recently been elected to fill an unexpired term on the Vidalia Town Council. Although not mentioned as often as it should be in governmental circles, Jon is certain to bring a lot of Integrity and Christian values to City Hall.

Congratulations JB, we all wish you well!

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Long time mayor-president of East Baton Rouge City/Parish Government, Tom Ed McHugh, has been tapped as the new Louisiana Municipal Association’s Executive Director.

Tom Ed is replacing another friend of our association, Gordon King who is seeking a career in the private sector.

The LATA wishes both of these fine men good luck in their chosen endeavors.

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Louis Babineaux has passed away. Louis, a past president (1983) of our organization and Father of our state’s Lt. Governor, Kathleen Blanco, recently died at his home in New Iberia. Our regrets are certainly extended to the family.

 

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The Louisiana Supreme Court has denied Writ Applications by Mercury Cellular Telephone Company. This case was covered in our last publication and reviewed at the 1^st Quarterly Meeting by our friend Rufus Fruge of Calcasieu Parish.

 

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Brady moves on...

Virgil Brady, former Deputy Assistant of the Louisiana Department of Revenue, has joined the Ashland Group as a Senior Consultant.

Virgil with over 40 years of experience in the income and franchise field will certainly be missed by the Department. He will be based in firm’s new Baton Rouge office.

Ashland Group, L.P. a national state tax consulting firm in the area of franchise, income and sales taxes opened the Baton Rouge office on November 1, 2000.

 

Due to the delinquent filing of tax rolls in the reassessment year of 2000, interest and penalties for the late payment of taxes should be calculated from 45 days of the filing of the tax rolls. If the tax rolls are filed on or before November 30, 2000, then interest and penalties can be calculated from December 31, 2000.

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Collection agency...

After hearing months of testimony about bounced checks and delinquent taxes, Rep Hunt Downer wants to form a central collection agency in the Attorney General’s Office to target those persons who owes the state money.

His idea is to create a new statewide agency to deal specifically with people and businesses who bounced checks in the paying of their taxes, or didn’t pay at all.

 

Louisiana Association of Tax Administrators P.O. Box 398 Vidalia, LA 71373 Attn: Tom O’Neal, Secretary/Treasurer