State and Local Tax Team Obtains Louisiana Supreme Court Decision On Further Processing Exclusion
Louisiana law imposes a sales tax on “sales at retail.” “Sale at retail” is defined in the sales tax law, and the definition provides that the term does not include “sales of materials for further processing into tangible personal property for sale at retail.” This provision is commonly referred to as the “further processing exclusion. The most recent Louisiana Supreme Court’s decision interpreting this “further processing exclusion,” Bridges v. Nelson Indus. Steam Co., 2015-1439 (La. 5/3/16), 190 So.3d 276 (the “NISCO decision”), recently became final.
The decision is significant for all taxpayer-manufacturers. It provides an excellent explanation of applicable legal principles relating generally to interpretation of the further processing exclusion and a comprehensive explanation of the three-prong jurisprudential test for application of the exclusion. In response to the NISCO decision, and before it became final, the Legislature passed an Act amending the further processing exclusion.