DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part of the
legislative instrument. The keyword, one-liner, abstract, and digest do not constitute part of the law
or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 12 Original 2016 Second Extraordinary Session Stokes
Abstract: Changes the apportionment percent for apportionable income derived for certain
transportation and service industry sectors to a single ratio calculation.
Transportation By Aircraft
Present law provides that the La. apportionment percent of any taxpayer whose net apportionable
income is derived primarily from transportation by aircraft shall be calculated from the average of
the following ratios:
(1)The ratio of the value of immovable and movable property, other than aircraft, owned by the
taxpayer located in La. to the value of all immovable and movable property, other than
aircraft, owned by the taxpayer used in the production of apportionable income.
(2)The ratio of gross apportionable income derived from La. sources to the total gross
apportionable income of the taxpayer.
Proposed law changes present law to provide that for taxable periods beginning on or after Jan. 1,
2016, the La. apportionment percent of these taxpayers shall be computed by using the single ratio
as provided in (2).
Present law provides that gross apportionable income from La. sources shall include all gross
receipts derived from passenger journeys and cargo shipments originating in La. and other items of
gross apportionable income or receipts derived entirely from sources in La.
Transportation Other Than Aircraft Or Pipeline
Present law provides that the La. apportionment percent of any taxpayer whose net apportionable
income is derived primarily from transportation other than by aircraft or pipeline, shall be calculated
from the average of the following ratios:
(1)The ratio of the value of immovable and movable property owned by the taxpayer located
in La. to the value of all immovable and movable property owned by the taxpayer used in the
production of apportionable income.
(2)The ratio of gross apportionable income from La. sources to the total amount of gross
apportionable income of the taxpayer. Proposed law changes present law to provide that for taxable periods beginning on or after Jan. 1,
2016, the La. apportionment percent of these taxpayers shall be computed by using the single ratio
as provided in (2).
Present law provides that gross apportionable income from La. sources shall include all income
derived entirely from sources within the state and a portion of revenue from transportation partly in
and partly outside this state, prorated with deference given to the proportion of service performed
in La.
Present law further provides that the value of immovable and movable property owned by the
taxpayer used in La. shall include the value of property regularly situated in this state plus a pro rata
of the value of all rolling stock and other mobile equipment owned by the taxpayer used in the
production of apportionable income, with deference given for the mileage operated and traffic
density inside and outside of this state.
Present law provides for special provisions for trucking companies.
Service Enterprises
Present law provides that the La. apportionment percent of any taxpayer whose net apportionable
income is derived primarily from a service business in which the use of property is not a substantial
income-producing factor shall be calculated from the average of the following ratios:
(1)The ratio of the amount paid by the taxpayer for salaries, wages, and other compensation for
personal services rendered in La. to the total amount paid by the taxpayer for salaries, wages,
and other compensation for personal services in connection with the production of the net
apportionable income.
(2)The ratio of the gross apportionable income of the taxpayer from La. sources to the total
gross apportionable income of the taxpayer.
Proposed law changes present law to provide that for taxable periods beginning on or after Jan. 1,
2016, the La. apportionment percent of these taxpayers shall be computed by using the single ratio
as provided in (2).
Present law provides that gross apportionable income from La. sources shall include revenue from
services performed in this state, and any other gross income derived entirely from sources within this
state.
Manufacturing And Merchandising
Present law provides that the La. apportionment percent of a taxpayer whose net apportionable
income is derived primarily from the transportation by pipeline or from any business not included
in other provisions of present law (manufacturing and merchandising) shall be calculated from the
average of the following three ratios: (1)The ratio of the value of the immovable and movable property owned by the taxpayer located
in La. to the value of all immovable and movable property owned by the taxpayer used in the
production of the net apportionable income.
(2)The ratio of the amount paid by the taxpayer for salaries, wages, and other compensation for
personal services rendered in this state to the total amount paid by the taxpayer for salaries,
wages, and other compensation for personal services in connection with the production of
net apportionable income.
(3)The ratio of net sales made in the regular course of business and other gross apportionable
income attributable to this state to the total net sales made in the regular course of business
and other gross apportionable income of the taxpayer.
Proposed law changes present law to provide that for taxable periods beginning on or after Jan. 1,
2016, the La. apportionment percent of taxpayers whose apportionable income is derived primarily
from transportation by pipeline or from any business not included in other provisions of present law
shall be computed by using the single ratio as provided in (3).
Present law provides that since Jan. 1, 2006, the La. apportionment percent of any taxpayer whose
net apportionable income is derived primarily from manufacturing or merchandising shall be
computed by a single ratio of net sales made in the regular course of business and other gross
apportionable income attributable to this state to the total net sales made in the regular course of
business and other gross apportionable income of the taxpayer.
Proposed law retains present law as it relates to the apportionment ratios for manufacturing or
merchandising sectors.
Sourcing of Sales
Proposed law requires sales other than sales of tangible personal property to be sourced to La. if the
taxpayer's market for the sale is in this state. Further provides specific provisions for the sourcing
of sales to La. as follows:
(1)In the case of a sale, rental, lease or license of real property or rental, lease or license of
tangible personal property, if and to the extent the property is located in the state.
(2)In the case of sale of a service, if and to the extent the service is delivered to a location in the
state.
(3)In the case of lease or license of intangible property, including a sale or exchange of property
where receipts from the sale or exchange derive from payments contingent on the
productivity, use or disposition of the property, if and to the extent the intangible property
is used in the state.
(4)In the case of the sale of intangible property where the property sold is a contract right, government license, or similar intangible property that authorizes the holder to conduct a
business activity in a specific geographic area, if and to the extent that the intangible property
is used in or otherwise associated with the state.
Proposed law provides that if the taxpayer's customer is an individual, the taxpayer shall source
receipts from the sale of a service as follows:
(1)If the customer is a natural person and the service is a direct personal service, the sale shall
be sourced to the state where the customer received the direct personal service.
(2)Services that are not direct personal services that are delivered to customers who are natural
persons with a La. billing address shall be sourced to this state.
(3)If the sourcing methodology in proposed law fails to clearly reflect the taxpayers market in
this state, the taxpayer may utilize, or the department may require, the use of other criteria
and methodologies to approximate the taxpayer's market in this state. Proposed law specifies
requirements for a taxpayer to follow if an alternate approach is utilized and consequences
if a taxpayer fails to fulfill those requirements. Proposed law provides that if the taxpayer's customer is an entity unrelated to the taxpayer, the
taxpayer shall source receipts from the sale of a service as follows:
(1)If a service is provided to an unrelated entity and the service has a substantial connection to
a specific geographic location, the income shall be sourced to La. if the geographic location
is in this state. Service receipts that have a substantial connection to geographic locations
in multiple states shall be reasonably sourced between those states.
(2)If the service provided to an unrelated entity does not have a substantial connection to a
specific geographic location, sales from services delivered to unrelated entities shall be
sourced to the commercial domicile of the taxpayer.
(3)If the sourcing methodology in proposed law fails to reflect the taxpayers market in this state,
the taxpayer may utilize, or the department may require, the use of other criteria and
methodologies to approximate the taxpayer's market in this state. Proposed law specifies
requirements for a taxpayer to follow if an alternate approach is utilized and consequences
if a taxpayer fails to fulfill those requirements.
Proposed law requires the secretary of DOR to promulgate rules in accordance with the APA
concerning the sourcing of the sales of services between related entities.
Proposed law defines a "related entity" and "related party" for purposes of calculating the sourcing
of sales.
Proposed law authorizes a taxpayer to petition for and requires DOR to participate in non-binding
mediation when a taxpayer is subjected to different sourcing methodologies regarding intangibles
or services by La. and one or more other state taxing authorities.
Proposed law provides that if the taxpayer is not taxable in a state to which a sale is assigned or if
the state of assignment cannot be determined or reasonably approximated then the sale shall be
excluded from the numerator and the denominator of the sales factor.
Applicable to all taxable periods beginning on and after Jan. 1, 2016.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 47:287.95(A), (C)(1), (D), and (F)(2)(b); Adds R.S. 47:287.95(L) and (M))