Opinion Number ( 1998 )

Dear Mr. Anzelmo:

You have requested an opinion from this office concerning the tax-exempt status of purchases made off of the East Jefferson General Hospital's (EJGH) purchase orders by EJGH's contractors-agents on EJGH construction projects.

You advise that EJGH has in certain construction projects designated its contractors/subcontractors as its purchasing agent, but that questions have now been raised by the Louisiana Department of Revenue as to the correct tax treatment of purchases made off EJGH's purchase orders by its designated contractors-purchasing agents.

You state that your office has been advised by representatives of the Louisiana Department of Revenue that the use of construction contractors as purchasing agents for public bodies on construction projects is disfavored because of the potential abuse of such an agency relationship by a contractor-purchasing agent.

It appears that the Louisiana Department of Revenue does not dispute that EJGH, as an instrumentality of the Jefferson Parish Hospital Service District No. 2, is excluded from the definition of a "person" who would be liable for the payment of both state and local sales and use taxes. La. R.S. 47:301 (8)(c).

It is, and has been, the opinion of this office that a contractor-agent of a tax-exempt body does not incur any sales or use tax liability when title and possession of materials and equipment purchased by it on behalf of the tax-exempt body passes directly from a vendor to that tax-exempt body. See: Opinion No. 96-309; Regional Mechanical Contractors, Inc. v. McNamara,536 So.2d 818 (La.App. 1st Cir. 1988).

We agree with you that the possibility of tax fraud by a contractor-purchasing agent does not serve as authority for the Department of Revenue to reject this method of tax-exempt purchases of materials by public bodies for their construction projects, and thus effectively deprive those public bodies of the tax exemption to which they are entitled to by law.

If you have any further questions concerning this request or it does not adequately address the matters that you have raised, please do not hesitate to contact our office.

Very truly yours,

RICHARD P. IEYOUB ATTORNEY GENERAL

BY: __________________________ ROBERT H. CARPENTER, JR. Assistant Attorney General

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