Court: Louisiana Court of Appeal; February 9, 1988; Louisiana; State Appellate Court
The City of New Orleans sought to impose use taxes on equipment purchased out of state and installed in a defendant's plant. The trial judge dismissed the City's claim, determining that the equipment became immovable under LSA-C.C. Art. 4671 and thus was not subject to use tax. The court affirmed this decision. Relevant City Code provisions state that a tax is levied on the sale, use, and storage of tangible personal property within the city, at a rate of two percent. The tax applies to tangible personal property imported from other jurisdictions, with the tax attaching only once the property has "come to rest" in the city. The City argued that the tax should apply when the purchaser exercised control over the equipment, asserting that control was established upon purchase and shipment to New Orleans. However, the court rejected this argument, emphasizing that the key issue was the nature and intended use of the equipment, not merely its delivery. Under Chapter 56 of the City Code, tangible personal property is defined as property perceptible to the senses, explicitly excluding stocks and similar securities.
Alvin A. Baumer, president of Baumer Foods, testified regarding custom-designed equipment used in the manufacturing of sauces and condiments at their plant. The equipment is permanently integrated into the plant's processing system, with some pieces resting on metal pads, others welded, and some attached to large fiberglass tanks, making removal impossible without welding tools. Baumer indicated that upon arrival, the equipment is typically installed within a week, forming an immovable assembly line that performs no function outside this context. On February 6, 1987, Baumer filed a declaration stating that all machinery and equipment at the plant are component parts of the operation and deemed immovables under LSA-C.C. Art. 467. Consequently, the court concluded that the equipment is not tangible personal property and thus not subject to the use tax under 56-129. The court distinguished this case from McNamara v. D.H. Holmes Co. Ltd., where printed catalogues were classified as tangible personal property and subject to tax. The City argued that LSA-R.S. 47:301(14)(g)(ii) defines "tangible personal property" to include machinery declared immovable, suggesting a similar definition should apply under the City Code. The court rejected this argument, clarifying that the state statute pertains to repair equipment and that the City’s definitions do not align with the case’s context. The court affirmed the trial court's judgment, upholding the classification of the equipment as immovable. The court noted the ambiguity in the City’s claim regarding when the tax attaches but stated this distinction was not critical for resolving the dispute.
