LDOR Proposes New Regulation On Sales Taxes On Contractor Provided Materials Incorporated Into An Immovable

The Louisiana Department of Revenue (LDOR) has issued notice that it has initiated rulemaking procedures to amend LAC 61:I.4372, Payment of Sales and Use Taxes by Persons Constructing, Renovating, or Altering Immovable Property. The proposed amendments are intended to clarify whether a contractor or its customer is responsible for sales and use tax on materials, supplies, and equipment furnished in connection with the construction, renovation, repair, or servicing of immovable property.

The proposed regulation specifically addresses down-hole services, hydraulic fracturing services, and inspection and repair services. Under the proposal, when a contractor separately invoices materials and collects sales tax from the customer, a presumption arises that the materials were transferred — or sold — to the customer before being incorporated into the immovable property. However, the customer may rebut this presumption by providing credible evidence demonstrating that the contractor’s collection of tax was inconsistent with the parties’ actual intent.

The regulation further provides that "credible evidence" includes a written statement signed by the contractor confirming that title or possession of the materials transferred to the customer only after the materials were incorporated into the immovable property. One example in the proposed regulation concludes that a contractual provision placing the risk of loss on the contractor until after the materials become a component part of the immovable property is sufficient to overcome the presumption.

Louisiana taxpayers that provide or purchase services involving the construction, repair, renovation, or alteration of immovable property should carefully review the proposed amendments, as well as their existing contracts and related documentation. In particular, parties should ensure that their agreements clearly and consistently address when title, possession, and risk of loss for materials, supplies, and equipment pass from the contractor to the customer. Clear contractual language may be critical in determining the proper sales and use tax treatment of materials used in connection with immovable property projects.

Anyone wishing to submit any comments, views or arguments regarding the proposed regulation may submit comments until 4:30 pm on August 10, 2026.