Bulletin: LA2010002

Dear Associates:

The passage of Act 500 of the Louisiana 2009 Regular Legislative Session attempts to clarify a previous inconsistency under Louisiana law regarding the tax treatment of the sale of modular homes. This Act is effective January 1, 2010. The Louisiana Department of Revenue has disseminated its interpretation of this Act in Revenue Information Bulletin No. 09-047.

Under the provisions of Act 500, modular homes will now receive the same sales tax treatment as previously available to "manufactured homes". Under the previous law, there was question as to whether modular homes constituted "manufactured homes" as defined thereunder and thus, were entitled to the tax exemption previously afforded to manufactured homes. Act 500 makes clear that the applicable exclusion applies to all "factory-built" homes, which now specifically includes manufactured homes, modular homes and mobile homes, but not self-propelled vehicles such as recreational vehicles or travel trailers.

Factory-built homes must be used as a residence in order to qualify for the sales tax exemption of 54% of the retail sales price permitted under the new law. The Louisiana Department of Revenue has taken the position that rental property will not qualify for the reduced 46% taxable base. Under the new law, such factory-built homes will incur a sales tax based on 46% of the retail sales price of such home only if the owner "resides" in the home, according to the position taken by the Department of Revenue. A factory-built home which is used for any other purpose than as a residence is taxable at 100% of its sales price. Sales taxes are applicable only upon the initial sale of factory-built homes from the dealer to a consumer and no subsequent resale of such homes shall be considered taxable events. Furthermore, Act 500 closes the loophole previously available to manufactured home purchasers by clearly declaring that an act of immobilization of a factory-built home will have no effect on the taxability of the transaction. Under the previous law, purchasers of manufactured homes could avoid the incurrence of sales tax by execution of an Act of Immobilization at the time of purchase.

Agents must confirm that all sales taxes are paid on the initial transaction involving any factory built homes. The seller, namely the manufacturer or the dealer, is the party responsible to collect the tax from the purchaser and to remit the tax. Where a residential reduction is claimed, an affidavit signed by the purchaser should be obtained confirming residential status.

Lastly, Act 500 declares that sales taxes due upon the sale of "factory-built homes" shall be due and paid to the Louisiana Department of Public Safety and Corrections, Office of Motor Vehicles, on or before the 20th day of the month following the month of delivery of the factory-built home.

The failure to pay the applicable sales tax may result in an attachment being placed upon the factory-built home in favor of Louisiana Department of Public Safety, Office of Motor Vehicles or the Louisiana Department of Revenue. LSA. R.S. 47:312. Such attachment may be enforced against the factory-built home in accordance with Louisiana laws governing writs of attachment, La. C.C.P. art. 3501 et. seq., regardless of the fact that such home may no longer be in the possession of the dealer who has failed to remit the tax. LSA R.S. 47:312. Any attachment obtained by the collecting tax authority shall serve as a privilege upon the seized, factory-built home and relate back to the date the writ of attachment was issued. La. C.C. art. 3511.

If you have questions related to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

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