Do Louisiana pipeline inspection and supervision fees apply when an oil movement starts or ends in a Louisiana Foreign Trade Zone?

Plain-English summary

Louisiana Revenue Ruling 19-001 held that pipelines owed Inspection and Supervision Fees on gross receipts from oil movements between a Louisiana Foreign Trade Zone and another location in Louisiana.

La. R.S. 45:1177 measured the fee for a regulated public utility by gross receipts from Louisiana intrastate business. Because a Louisiana FTZ remains geographically inside the state, a movement to or from the zone began and ended in Louisiana.

Federal law's treatment of FTZ property as outside the United States for limited tariff purposes did not transform the movement into interstate or foreign business and did not create an exemption from the fees.

What the fee covered

La. R.S. 45:1177 required a public utility doing business in Louisiana and subject to commission control and jurisdiction to pay a fee for inspection, control, and supervision of its business, service, and rates.

The public-utility fee was measured by gross receipts from Louisiana intrastate business and applied in addition to other property, franchise, license, and other taxes and charges.

The ruling treated pipeline oil movements that began and ended inside Louisiana as intrastate business for this purpose.

Why FTZ status did not create an exemption

An FTZ is a geographical area in or adjacent to a U.S. port of entry. Louisiana zones were authorized by La. R.S. 51:62 and physically located within Louisiana.

The federal Foreign-Trade Zones Act treated zone property as outside U.S. customs territory for tariff purposes and exempted specified U.S.-produced export property from state and local ad valorem tax.

The Department found that those benefits were limited. They did not generally remove the zone from Louisiana or exempt pipeline receipts from Inspection and Supervision Fees.

Tax-specific Louisiana FTZ rules

Louisiana had separately adopted provisions treating certain FTZ property as outside the state for:

• corporation income-tax apportionment under La. R.S. 47:287.95(H); and
• corporation franchise-tax capital allocation under La. R.S. 47:606(D).

The ruling confined those provisions to the taxes they named. Neither supplied an exemption under La. R.S. 45:1177.

The holding

Pipeline gross receipts were subject to Inspection and Supervision Fees when:

• oil moved from a Louisiana FTZ to another Louisiana location; or
• oil moved from another Louisiana location into the FTZ.

The FTZ endpoint remained in Louisiana, making the business wholly intrastate for the fee.

What this means for you

Pipeline operators

Include receipts from Louisiana-to-Louisiana movements even when one terminal, storage site, or other endpoint is inside an FTZ, unless a fee-specific exemption applies.

Foreign Trade Zone businesses

Do not assume customs treatment controls state regulatory fees. Identify the exact statute creating the claimed benefit and the tax or fee to which it applies.

Accountants and regulatory teams

Track physical origin and destination separately from tariff status. The ruling based intrastate treatment on geography.

Common questions

Q: Is a Louisiana FTZ outside the state for Inspection and Supervision Fees?

A: No. It remains geographically within Louisiana.

Q: Did federal tariff treatment exempt the receipts?

A: No. The ruling limited that treatment to customs purposes and the specified ad valorem protection.

Q: Did the corporation income- and franchise-tax rules apply to this fee?

A: No. Those were separate tax-specific provisions.

Q: Which movements were covered?

A: Oil movements between a Louisiana FTZ and another point in Louisiana.

Citations and references

• La. R.S. 45:1177 — Inspection and Supervision Fees measured by Louisiana intrastate gross receipts
• La. R.S. 51:62 — Louisiana authority for Foreign Trade Zones
• La. R.S. 47:287.95(H) — corporation income-tax FTZ rule
• La. R.S. 47:606(D) — corporation franchise-tax FTZ rule
• 19 U.S.C. §§ 81a et seq. and 81o — federal Foreign-Trade Zones Act provisions discussed
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 19-001

Original ruling text

Revenue Ruling No. 19-001
April 17, 2019
Inspection and Supervision Fees
Pipelines with Intrastate Movements Beginning or Ending in Foreign Trade Zones
Purpose
The purpose of this ruling is to provide clarity regarding the application of the Inspection and
Supervision Fees (“I&S Fees”) owed by pipe lines with respect to movements of oil within
Louisiana which begin or end in a Foreign Trade Zone (“FTZ”) located in Louisiana.
Law
LA R.S. 45:1177(A)(1) imposes I&S Fees as follows:
Each motor carrier as defined in R.S. 45:162(12) and public utility doing business
in Louisiana and subject to control and jurisdiction of the commission shall pay to
the state a fee for the inspection, control, and supervision of the business service
and rates of such common carrier and public utility, in addition to any and all
property, franchise, license, and other taxes, and fees and charges now or hereafter
fixed, assessed, or charged by law against such common carrier and public utility.
The amount of the fees shall be measured by the gross receipts of each public utility
from its Louisiana intrastate business. The amount of the fees for each motor carrier
as defined in R.S. 45:162(12) shall be measured by the gross receipts of such carrier
derived from those activities that are subject to the control and jurisdiction of the
commission.
FTZs are geographical areas in or adjacent to ports of entry located within the United States but
considered to be outside of the United States for tariff purposes.1 LA R.S. 51:62 authorizes the
establishment of FTZs in Louisiana. As provided by 19 U.S.C. 81o, “[t]angible personal property
produced in the United States and held in a zone for exportation … shall be exempt from State and
local ad valorem taxation.”
For purposes of determining Louisiana apportionment percentages to calculate the Louisiana
corporation income tax, corporeal movable property located in Louisiana in United States customs-

1 19 U.S.C. 81a et seq.

A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued 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.

Revenue Ruling No. 19-001
April 17, 2019
Page 2 of 3

bonded warehouses or FTZs established under the FTZ Act shall be considered as located outside
of Louisiana.2
Similarly, for purposes of the allocation of taxable capital when calculating Louisiana corporation
franchise tax, corporeal movable property imported into the United States and located in FTZs
established under the FTZ Act shall be considered located outside of Louisiana.3
Analysis
I&S Fees are due on all gross receipts from intrastate business, that is, all business beginning and
ending within Louisiana.4 FTZs established in accordance with 19 U.S.C. 81c are, by definition,
geographical areas located within the United States. Those FTZs established in Louisiana under
the authority granted in LA R.S. 51:62 are, in fact, located within the geographical limits of
Louisiana.
Under the FTZ Act, property located in an FTZ is considered as being located outside of the United
States for tariff purposes and is exempt from state and local ad valorem taxes.5 The exemption
does not extend to other state and local taxes and is limited to tangible personal property produced
in the United States and held in the FTZ for exportation.
As noted above, Louisiana has legislatively adopted two additional instances in which property
located in FTZs in Louisiana will be considered as located outside of Louisiana.6 Those instances
specifically relate to the calculation of Louisiana corporation income and corporation franchise tax
and are limited to those taxes.
There is no exemption in the law that authorizes or requires an FTZ located in Louisiana to be
treated as being outside of the state for purposes of the I&S Fees. Therefore, the FTZ is not
considered to be outside of Louisiana or the United States for purposes of the I&S Fees. Since the
FTZ is, in fact, located in Louisiana, any movement of oil which begins or ends within the FTZ is
considered to occur within LA. In that regard, movements of oil which occur within Louisiana and
begin or end in an FTZ located in Louisiana is considered Louisiana intrastate business within the
meaning of LA R.S. 45:1177, and gross receipts from these transactions are subject to the I&S
Fees.

LA R.S. 47:287.95(H)
LA R.S. 47:606(D)
4
See generally LA R.S. 45:1177
5
19 U.S.C. 18c; 19 U.S.C. 81o
6
See LA R.S. 47:287.95(H) and 47:606(D)
2
3

A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued 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.

Revenue Ruling No. 19-001
April 17, 2019
Page 3 of 3

Ruling
Inspection and Supervision Fees are due by pipe lines on gross receipts from their business
conducted wholly within Louisiana, including movement of oil which begins or ends in a Foreign
Trade Zone located in Louisiana.

Kimberly L. Robinson
Secretary

A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued 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.