When did an airplane bought outside Louisiana become subject to Louisiana use tax after entering the state?

Plain-English summary

An airplane purchased outside Louisiana became subject to Louisiana use tax when it entered the state, came to rest, and experienced a taxable moment outside continuous bona fide interstate commerce. An owner's intended “ultimate use” for interstate travel did not prevent tax.

An airplane entering only to refuel, undergo repair, or load or unload passengers or cargo did not come to rest on that entry. But an airplane indefinitely hangared in Louisiana and using the state as its operating base was taxable.

The Word of Life decision

Word of Life Christian Center bought airplanes in Oklahoma and South Carolina and imported them into Louisiana. The Louisiana Supreme Court held that state use tax was due.

Louisiana's use-tax statutes applied to tangible personal property not sold in the state but used, consumed, distributed, or stored for use in Louisiana. Section 47:305(E) protected bona fide interstate commerce but expressly allowed tax after imported property came to rest and joined the mass of property in the state.

“Ultimate use” was not the test

Earlier appellate decisions in Shaw Group, Inc. v. Kennedy and Tigator Inc. v. West Baton Rouge Police Jury had focused on the owner's intended ultimate interstate use.

The Supreme Court rejected and overturned that approach. The statutes referred to actual use, consumption, distribution, or storage—not “ultimate use.” Otherwise, a resident could buy property out of state, import and use it in Louisiana, and escape tax merely by planning later interstate activity.

Taxable moment and constitutional test

The ruling applied the Court's “taxable moment” analysis: after importation, the airplanes were withdrawn from interstate commerce and came to rest in Louisiana before later interstate operation.

It also cited Complete Auto Transit, Inc. v. Brady, which permits state tax when the activity has substantial nexus, the tax is fairly apportioned, does not discriminate, and is fairly related to state-provided services.

Bona fide interstate commerce was narrow

Crossing state lines did not automatically qualify. The ruling adopted the Court's definition focused on the exchange of goods and services.

Qualifying commercial activity included:

• for-hire interstate transport of passengers or property;
• vendor delivery of sold or leased property;
• transport of inventory, rental assets, or other revenue-producing property to operational locations; and
• moving personnel and property across state lines directly to commercial revenue-producing work.

Transporting owners, officers, or employees between states for purposes other than direct revenue production did not qualify under the Department's definition.

For the Section 47:305(E) protection to continue, bona fide interstate commerce had to be continuous and uninterrupted from the aircraft's entry. An interruption after importation could create Louisiana use-tax liability.

Temporary stops and Louisiana bases

A commercial or private airplane entering solely for refueling, repair, or passenger or cargo loading or unloading did not come to rest merely from that stop.

An airplane indefinitely hangared in Louisiana and using Louisiana as its base for interstate travel did come within the use tax.

La. R.S. 47:303(A)(3) allowed credit against Louisiana state use tax for qualifying sales or use tax paid to another state.

What this means for you

Aircraft owners

Track entry, hangar location, storage, flight purpose, commercial activity, and interruptions. Future interstate travel plans do not by themselves prevent Louisiana tax.

Aviation and transportation businesses

Document whether each interstate movement directly exchanges goods or services or supports revenue-producing activity under the ruling's definition.

Tax professionals

Analyze both the state statutory taxable moment and the four-part federal constitutional test, then apply any other-state tax credit.

Common questions

Q: Did interstate travel alone exempt an airplane?

A: No.

Q: What created the taxable moment?

A: The imported airplane came to rest in Louisiana outside continuous bona fide interstate commerce.

Q: Did a refueling-only stop create tax?

A: No, under the ruling's stated facts.

Q: Was a Louisiana-based, indefinitely hangared aircraft taxable?

A: Yes.

Q: Was credit available for tax paid elsewhere?

A: Yes, as authorized by La. R.S. 47:303(A)(3).

Citations and references

• La. R.S. 47:302(A)(2), 47:321(A)(2), and 47:331(A)(2) — Louisiana use-tax levies
• La. R.S. 47:305(E) — bona fide interstate commerce and property coming to rest
• La. R.S. 47:301(18) and (19) — use and use-tax definitions
• La. R.S. 47:303(A)(3) — credit for tax paid to another state
• Word of Life Christian Center v. West, 936 So. 2d 1226, 2004-1484 (La. 4/17/06)
• Shaw Group, Inc. v. Kennedy, 767 So. 2d 937, 1999-1871 (La. App. 1st Cir. 9/22/00) — overturned ultimate-use approach
• Tigator Inc. v. West Baton Rouge Police Jury, 657 So. 2d 221 (La. App. 1st Cir. 1995), writ denied — overturned ultimate-use approach
• Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) — four-part constitutional test
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 07-002

Original ruling text

Revenue Ruling
No. 07-002
May 22, 2007
Sales Tax
Discussion of Judicial Decision Affecting the Sales and Use Taxation of Airplanes
The purpose of this Revenue Ruling is to discuss the department’s application of the decision of the
Louisiana Supreme Court in Word of Life Christian Center v. West, 936 So.2d 1226, 2004-1484
(La. Sup. Ct. 4/17/06). In its decision, the Court held that use taxes were due to the State of
Louisiana on two airplanes that Word of Life Christian Center, Inc. purchased in the states of
Oklahoma and South Carolina and subsequently imported into Louisiana.
The State of Louisiana levies a use tax on tangible personal property that is not sold in the state, but
that is used, consumed, distributed, or stored for use or consumption in the state. The Louisiana use
tax is levied by La. Rev. Stat. Ann. § 47:302(A)(2), 321(A)(2), 331(A)(2) and the sales tax
ordinance of the Louisiana Tourism Promotion District, which each provide tax levies that are
essentially identical (except for the rate) to La. Rev. Stat. Ann. § 47:302(A)(2), as follows:
A. There is hereby levied a tax upon the sale at retail, the use, the consumption, the
distribution, and the storage for use or consumption in this state, of each item or
article of tangible personal property, as defined herein, the levy of said tax to be as
follows:
*

*

*

(2) At the rate of two per centum (2%) of the cost price of each item or article of
tangible personal property when the same is not sold but is used, consumed,
distributed, or stored for use or consumption in this state; provided there shall be no
duplication of the tax.
The Word of Life Christian Center argued the imposition of the use tax was barred as the planes
were being used in interstate commerce pursuant to La. Rev. Stat. Ann. § 47:305(E), which now
provides, in pertinent part, as follows:
It is not the intention of any taxing authority to levy a tax upon articles of tangible
personal property imported into this state, or produced or manufactured in this state,
for export; nor is it the intention of any taxing authority to levy a tax on bona fide
interstate commerce; however, nothing herein shall prevent the collection of the
taxes due on sales of tangible personal property into this state which are promoted
through the use of catalogs and other means of sales promotion and for which federal
legislation or federal jurisprudence enables the enforcement of the sales tax of a
taxing authority upon the conduct of such business. It is, however, the intention of
the taxing authorities to levy a tax on the sale at retail, the use, the consumption, the
distribution, and the storage to be used or consumed in this state, of tangible personal
property after it has come to rest in this state and has become a part of the mass of
property in this state.

Revenue Ruling 07-002
Page 2 of 4

Word of Life relied on an interpretation of the above statute by the Louisiana First Circuit Court of
Appeal six years earlier in Shaw Group, Inc. v. Kennedy, 767 So.2d 937, 1999-1871 (La.App. 1 Cir.
9/22/00). In Shaw Group, the First Circuit Court established the test of intended “ultimate use” of
airplanes in interstate commerce as being determinative of whether the assessment of use taxes on
airplanes was barred by La. Rev. Stat. Ann. § 47:305(E). The Shaw Group Court reasoned that,
even though the taxpayer’s airplanes were imported into the state, stored in the state between flights,
and were occasionally used in for intra-Louisiana flights, the taxation of the airplanes was governed
by the taxpayer’s intended “ultimate use” of the airplanes in interstate commerce, and the taxation of
such intended interstate use was barred by La. Rev. Stat. Ann. § 47:305(E).
In Word of Life, the Louisiana Supreme Court rejected this argument and overturned the decision in
Shaw Group. It also overturned Tigator Inc. v. West Baton Rouge Police Jury, 94-1771, 94-1772
(La.App. 1st Cir.5/5/95) 657 So.2d 221, writ denied, 95-2126 (La.11/17/95), 663 So.2d 712, which
held that use taxes were not due to the Parish of West Baton Rouge on truck trailers and repair parts
that were picked up by a trucking company in Texas, brought to West Baton Rouge, and prepared or
stored there for future use in the taxpayer’s trucking business. These two cases collectively held the
intended “ultimate use” of airplanes or truck trailers in interstate commerce barred the Louisiana use
taxation of the property. The Supreme Court, relying on the main meaning of the taxing statute, held
use taxes were due on the airplanes that Word of Life Christian Center imported into Louisiana. The
Court stated its rationale, as follows:
La. R.S. 47:301(19) states that “use tax” includes the use, the consumption, the
distribution, and the storage as herein defined. La. R.S. 47:301(18) provides, in
pertinent part, as follows: “For purposes of the imposition of the sales and use tax
levied by a political subdivision or school board, ‘use’ shall mean and include the
exercise of any right or power over tangible personal property incident to the
ownership thereof....” The statute says nothing about “ultimate use” merely “use.”
The interpretation of “use” as “ultimate use” conflicts with a plain reading of the
statute and leads to absurd consequences. Under Word of Life's reading, so long as
a taxpayer intends to use out-of-state purchased goods in interstate commerce, any
and all use in the taxing jurisdiction would be immune from state taxation. Such a
conclusion contradicts the underlying purposes of the use tax which are: (1) to
protect local merchants who would face a competitive disadvantage if resident
consumers could purchase similar goods without tax, or at a lower tax rate, in
another jurisdiction; and (2) to compensate the state for the erosion of its sales tax
base when resident consumers purchase out-of-state goods and then import those
goods into Louisiana for use. Indeed, that is the reality of the present case. If Word
of Life or similar resident consumers can travel out-of-state and purchase airplanes
or other tangible personal property and not pay a sales or use tax, then import those
goods into Louisiana for subsequent use in interstate commerce, and be immune
from Louisiana use tax because they ultimately used, or planned to use, the goods in
interstate commerce, then they have effectively circumvented decades of use tax
jurisprudence.
The Louisiana Supreme Court established as the test of use taxability of imported airplanes and
similar property the occurrence in Louisiana of a “taxable moment” aside from the continuous use of
the property in “bona fide interstate commerce”, and the Louisiana use taxation of the property
meeting the four-prong test for state use taxation established by the United States Supreme Court in

Revenue Ruling 07-002
Page 3 of 4

1977 in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977).
The four-prong test is that (1) the tax is applied to an activity with a substantial nexus to the taxing
jurisdiction; (2) the tax is fairly apportioned; (3) the tax is non-discriminatory; and (4) the tax is
fairly related to services provided by the taxing jurisdiction.
In the case of the airplanes imported into Louisiana by the Word of Life Christian Center, the
Louisiana Supreme Court opined that the “taxable moment” occurred after the out-of-state
purchased airplanes were imported in Louisiana, came to rest in Louisiana, and had not yet begun to
be consumed in interstate operation by stating, “[w]hen the airplanes had been withdrawn from
interstate commerce and had come to rest in Louisiana, Louisiana's tax on storage and use was
effective and the tax became due.”
The Louisiana Supreme Court further reasoned that not all forms of interstate travel would qualify as
“bona fide interstate commerce”, the higher standard for use tax exclusion provided by La. Rev. Stat.
Ann. § 47:305(E). Again, the Louisiana Supreme Court reasoned as follows:
We previously determined that both airplanes came to rest and became a part of the
mass of property in Louisiana. Next, we must analyze the terms “bona fide
interstate commerce” used in La. R.S. 47:305(E). The legislature carefully drafted
the statute to include the words “bona fide,” which describes and limits the scope of
“interstate commerce” which the state is prohibited from taxing. It is clear that the
legislature did not intend to exclude all forms of “interstate commerce” from
taxation. Black's Law Dictionary 285 (7th ed.1999), defines “commerce” as “[t]he
exchange of goods and services ... involving transportation between cities, states, and
nations.” To interpret “bona fide interstate commerce” as goods traveling in
interstate commerce would be to ignore the insertion of the terms “bona fide,” which
clearly limits the definition of “interstate commerce.” The fact that owners use the
durable goods (such as airplanes and/or automobiles) for travel across state lines
does not necessarily classify the goods as part of “bonafide interstate commerce” as
used in La. R.S. 47:305(E).
In order for an airplane that is imported into Louisiana to be considered in bona fide interstate
commerce during the airplane’s time of use, consumption, distribution or storage in Louisiana, such
that the levy of the use tax on the airplane is barred by La. Rev. Stat. Ann. § 47:305(E), the bona fide
interstate commerce activity must be continuous and uninterrupted from the moment that the
airplane enters the state. If the continuous use of the airplane in bona fide interstate commerce is
interrupted at any time after the importation of the airplane into Louisiana, Louisiana use taxes will
become payable. Credit against Louisiana state use taxes may be claimed for the rate of sales or use
taxes paid in other states, as authorized by La. Rev. Stat. Ann. § 47:303(A)(3).
The department adopts the definition of “bona fide interstate commerce” that includes only the
limited scope of activity discussed by the Louisiana Supreme Court in the language quoted above.
Specifically, for an airplane or any other commercial transportation vehicle to be considered in bona
fide interstate commerce, the vehicle must be used exclusively, in the words of the Court, in “the
exchange of goods and services”.
Interstate commerce activity means the use of airplanes in the exchange of goods and services

Revenue Ruling 07-002
Page 4 of 4

between states. This interstate exchange of goods and services includes not only the for-hire
commercial transportation of passengers or property between states, but also the vendor delivery to
customers of property sold or leased; the transportation of inventory, assets to be rented or leased, or
other direct revenue-producing property to the locations from where the property will be sold,
leased, manufactured or fabricated for sale or lease, or deployed for use in the rendering of
commercial services; and the transportation of personnel and property across state lines to and from
sites where the personnel and property will be used directly in commercial revenue-producing
activities. Mileage to transport business owners, officers, or employees between states for purposes
other than direct revenue production will not be considered bona fide interstate commerce for the
airplanes used in such transportation.
A commercial or private airplane that enters the state from an out-of-state point of origin for the sole
purpose of re-fueling, repair, or letting off or taking on passengers or cargo is not subject to the
Louisiana use tax on the basis of that entry into the state because, in such instances, the airplane
would not have come to rest in the state. However, an airplane that is indefinitely hangered in
Louisiana and uses Louisiana as its base of operation for interstate travel is subject to the Louisiana
use tax.
The department will apply the decision in Word of Life for all periods beginning after July 1, 2007.
Questions concerning this matter can be directed to the department’s Policy Services Division at
225.219.2780.
Raymond E. Tangney
Senior Policy Consultant
Policy Services Division

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue
employees. It is issued under LAC 61:III.101.C to apply principles of law to a specific set of facts. A
Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a
statement of the Department's position and is binding on the department until superseded or modified
by a subsequent change in statute, regulation, declaratory ruling, or court decision.