The Louisiana Board of Tax Appeals denied an amended refund claim filed by Spirit Airlines, Inc. (Spirit) due to its failure to properly register with the Louisiana Department of Revenue as an Interstate or Foreign Commerce Dealer, even though Spirit was registered as a dealer for purposes of collecting sales tax.
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the letter of the law
As stated in Louisiana statue La. R.S. 47:306.1, “[p]ersons, as defined in this Chapter, engaged in the business of transporting passengers … for hire in interstate or foreign commerce, whether by . . . aircraft or other means, may, at their option under rules and regulations prescribed by the collector, register as dealers and pay the taxes imposed by R.S. 47:302 A on the basis of the formula hereinafter provided.” (emphasis added).
The regulation continues by providing an optional formula, “[t]he amount of such purchases … shall be multiplied by a fraction, the numerator of which is Louisiana mileage operated by the taxpayer and the denominator of which is the total mileage, to obtain the taxable amount of tax basis.”
DEVIL IN THE DETAILS
Spirit’s position was that it should have been considered registered as a dealer as required by the regulation because it was registered as a dealer for sales and use tax purposes. However, Louisiana statute includes language that requires purchases made are done so in “strict compliance” with the rules and regulations of the collector. Specifically, “strict compliance” requires that a carrier wanting to apply the optional formula apply to the secretary for an interstate or foreign carrier dealer’s number, in addition to registering as a dealer for sales tax purposes.
Once registered as an interstate or foreign carrier, the carrier can submit a blanket certificate, For Hire Carrier, Form LGST 12, signed by and bearing the name, etc. of the buyer and avail themselves of the optional formula.
LESSON LEARNED
While many consider themselves experts in their given profession, perhaps even sector, there is no reason to go it alone. Local Subject Matter Experts (SME) may have been able to assist Spirit with its compliance in a timely manner, preventing the need for a refund. The preferred approach is to “right-size” tax liability - pay no more or less than what you owe.