LOUisiana's Tax systeM:
Disadvantaging the Equipment Rental Industry
The equipment rental industry is at a disadvantage in Louisiana—more so than in any other state. The heavy equipment rental industry is unique in that each piece of equipment will ultimately be sold (meaning it is inventory for resale). In most states, a taxpayer's rental fleet is deemed inventory and exempt from business personal property taxes, or the state has some type of reforms in place to reduce or eliminate the burden of the tax.
This isn't the case in Louisiana. Several recently-enacted provisions directly harm the industry and put it at a tax disadvantage compared to other industries:
- In the 2015 regular session, Louisiana disallowed the industry from utilizing the inventory tax credit with HB 664 (while other industries can still claim the credit). The inventory tax is a type of business personal property tax and is economically damaging and levied by very few states.
- In the 2016 special session, a new tax on the industry was imposed by eliminating the exemption against equipment purchased to be leased with HBs 61 and 62 (resulting in triple taxation under the sales tax).
The result has been overly-burdensome, multi-level taxation on the same piece of equipment, even if that equipment is only in the state for a short period of time. The existing system puts the in-state heavy equipment rental industry at a real economic disadvantage, and discourages the industry's investment in the state. To address this, Louisiana should implement one of the reform solutions used in other states.