Tax Facts Index
TAX FACTS NEWSLETTER
East Baton Rouge Parish
Department of Finance
Vol. 17, No. 4
Sales Tax Clarification Regarding Collision
Recently, the Louisiana Department of Revenue
issued Revenue Ruling No. 06-007 regarding the sales tax treatment of Collision
Damage Waivers in connection with an automobile rental transaction. The specific
issue surrounds the question of whether optional Collision Damage Waiver charges
in connection with an automobile rental transaction are subject to sales taxes.
For example, a customer rents a vehicle from a vehicle rental agency and accepts
responsibility for any damage to the vehicle while under rent, and then returns
the vehicle in a damaged condition. Ultimately, the customer is liable for any
damages to the vehicle while in his possession. To avoid having to pay for such
repairs to a vehicle personally, a customer is given the option to purchase a
Collision Damage Waiver as specified in the rental contract. When the Collision
Damage Waiver terms are purchased, the vehicle rental agency forfeits their
rights to force the rental customer to pay for the physical damages. Collision
Damage Waiver terms are offered as an option, and a rental customer may rent a
vehicle without accepting these separately stated terms and charges.
The Uniform Local Sales Tax Code, in sections L.R.S. 47:337.6 (B) and L.R.S.
47:301(7)(a), authorizes local jurisdictions to levy a tax upon the gross
proceeds derived from the lease or rental of tangible personal property, where
the lease or rental of such property is an established business, or part of the
same is incidental or germane to the business. It also defines “lease or rental”
as the leasing or renting of tangible personal property and the possession or
use thereof by the lessee or rentee, for a consideration, without transfer of
the title of such property.
L.R.S. 22:2091.3(A) defines “ ‘collision damage waiver’ as any contract or
contractual provision, whether separate from or a part of a motor vehicle rental
agreement, whereby the lessor agrees for a charge, to waive any and all claims
against the lessee for any damages to the rental motor vehicle during the term
of the rental agreement.” According to L.R.S. 22:2091.2, “the collision damage
waiver portion of the rental agreement....shall not be considered insurance.”
Additionally, L.R.S. 22:2091.10 states, “The rates charged for the collision
damage waiver by a licensee under this Part shall be exempt from insurance taxes
and insurance taxation provided that sales taxes in effect in the locale of
rental contract issuance are applied, collected and remitted to the proper tax
As a result, it is the position of the Finance Department Revenue Division that
Collision Damage Waiver charges are to be included as part of the gross proceeds
derived from the lease or rental of a motor vehicle, because the Collision
Damage Waiver necessarily arises from the lease or rental of the vehicle, is
obtained through a contract with the lessor of the automobile, and the language
of L.R.S. 22:2091.10 expresses a clear legislative intent that Collision Damage
Waiver charges are subject to taxation. This decision is consistent with that of
the Department of Revenue.
Any questions regarding the sales taxability of Collision Damage Waivers may be
directed to the Revenue Division at 225-389-3084.
2006 Legislative Update
The Louisiana Legislature enacted several
measures affecting local sales and use taxes during its 2006 Regular Session.
Those measures include:
Act 291 (House Bill 958) specifies procedures for the resolution of
boundary disputes between taxing bodies regarding the collection of local sales
taxes on vehicles. The State will deposit the contested tax into a non-interest
bearing account. After the dispute is resolved either mutually or by judicial
means, the funds will be distributed to the appropriate taxing body. Any funds
remaining will be returned to the taxpayer. Effective August 15, 2006.
Act 411 (House Bill 1003) classifies prescription drugs purchased through
or pursuant to a Medicare Part D plan as exempt from the sales and use taxes
imposed by any local governmental subdivision, school board, or other political
subdivision whose boundaries are not coterminous with the state. Effective July
Act 608 (Senate Bill 546) eliminates all local sales and use tax on
Medicare Part B and D prescription drugs imposed by any local governmental
subdivision, school board, or other political subdivision whose boundaries are
not coterminous with the state. Effective July 1, 2006.
Act 765 (House Bill 594) amends Civil Code Article 466 to read as
Art. 466. Component parts of a building or
Things permanently attached to a building or other construction are its
Things such as plumbing, heating, cooling, electrical, or other installations
are component parts of a building or other construction as a matter of law.
Other things are considered to be permanently attached to a building or other
construction if they cannot be removed without substantial damage to themselves
or to the building or other construction or if, according to prevailing notions
in society, they are considered to be its component parts.
Effective June 29, 2005.
Sales Tax Due Dates
Following are the sales tax due dates for the fourth quarter
|For the Month of
||Tax Due Date
||January 22, 2007
Taxpayers may contact
the Revenue Division by phone or fax to receive assistance between the hours
of 8 a.m. and 5 p.m., Monday-Friday.
Fax Number: (225) 389-5369
The Tax Facts
Newsletter is issued quarterly by the Finance Department/Revenue Division.
Our mission is to provide taxpayers with information concerning developments
and policies regarding the collection of local sales and use taxes within
East Baton Rouge Parish. The Revenue Division invites any suggestions,
questions or comments that you would like addressed in future issues of
Tax Facts. Please send these items to:
City of Baton Rouge -
Department of Finance
P. O. Box 2590
Baton Rouge, LA 70821-2590
Attention: Steve Thomas
or send us an e-mail
Remember to mail your return
early! Returns bearing a U.S. postmark on or after the above delinquent
dates will be assessed penalty, interest, and loss of vendor's compensation.
Department of Finance - Revenue Division
222 St. Louis Street, Room 404
Baton Rouge, LA 70802
Proud Member of the Louisiana Association of Tax Administrators