The Louisiana Board of Tax Appeals recently ruled that sales tax was due on the purchase of a chemical catalyst.
The taxpayer was a business that manufactured polymers for resale. When making the polymers, the taxpayer used a catalyst to cause a chemical reaction that affected the polymers' structure. While traces of the catalyst ended up in the finished product, this was not the intent behind using it.
Louisiana provides a tax exclusion for the sale of materials for further processing into articles of tangible personal property for resale. To qualify for the exclusion, a product must be purchased for the purpose of becoming part of the end product. The ruling determined that the purpose of the catalyst was to cause a chemical reaction, not to become part of the end product.
The ruling also determined that the taxpayer's purchase of water for use in a cooling tower was exempt from tax. In Louisiana, the sale of water is exempt. However, tax applies to the sale of any water put in bottles, jugs, or containers. The ruling determined that piped water that ends up in a cooling tower is not put in a container. As a result, the water was exempt.