The Louisiana Department of Revenue (LDR) recently issued Louisiana Revenue Information Bulletin No. 25-022, 08/08/2025, announcing changes to the sales tax exemption for certain purchases made by construction contractors.
Exemption for certain construction contracts
During the 2025 Regular Session, the Louisiana Legislature extended the sales tax exemption to certain purchases by general contractors and their subcontractors when performing work pursuant to construction contracts for the state, local governments, or any agency, board, commission or instrumentality or political subdivision of the state (“public projects”). La. R.S. 47:305.7(A)(1)(b). However, for purposes of state sales and use taxes, pursuant to La. R.S. 47:305.7(A)(1)(c), the exemption will not apply to purchases related to payment in lieu of taxes (PILOT) agreements or similar agreements executed after July 1, 2025, unless the agreement is approved by the secretary of the LDR and the secretary of the Louisiana Department of Economic Development (LED).
Application requirements
Requests for approval of PILOT agreements should be submitted to the LDR by e-mail and must include certain information as provided in the guidance. Each request must be accompanied by a state fiscal return on investment (ROI) analysis and a “but-for report.” The ROI must be specific to the cost of the state exemption and net fiscal benefit to the state. The but-for report should answer whether, from a strictly financial perspective, the project would be financially feasible under current market conditions without the exemption of state sales and use tax. Any but-for report prepared for purposes of the local entity may be submitted for purposes of the state requirement if it contains an analysis exclusive to the exemption or abatement of state sales tax. Finally, the project owner, general contractor, and subcontractors who claim the exemption must certify that they have not filed for bankruptcy relief in the last 10 years and are current in their federal, state, and local tax filings.
Evaluation of request
The guidance states that submission of all required information does not guarantee approval and that each request will be evaluated to assess the impact on Louisiana. If approved, the request will be forwarded to the LED for consideration.
PILOTs
PILOT is an acronym for “Payment in lieu of Taxes.” PILOT agreements are a way for the State of Louisiana and its local governments to provide tax abatements to businesses to stimulate economic development. Through a PILOT agreement, an incentive is given to a private company through a governmental unit (usually a city, parish, port commission or industrial development board) whereby the governmental unit takes title to an economic development project for a term of years, and the project is leased back to the company once the project has actually been built or developed. The company generally receives the benefits of depreciation, while being responsible for paying maintenance, operation and insurance costs on the project. However, since the governmental unit has title to the economic development project, its property is exempt from local property taxes and state and local sales and use taxes on materials and equipment purchased during the construction of the project allowing for the contractual structuring of the PILOT payments (reduced tax payment). The level of tax abatement is negotiated between the private company and the government unit.
To qualify for the exemption from state and local sales and use taxes, the public entity must designate the general contractor and each sub-contractor on the project as a mandatary (agent) of the lessor for the purpose of purchasing construction materials and equipment. Prior to claiming the exemption from sales and use tax, the general contractor or their subcontractor shall obtain a certificate of exemption from the LDR which must include the job description, contract number, state or local government entity identifying information, and valid dates or a date range for the project. Local collectors shall accept certificates of exemption properly issued by the LDR and completed by the general contractor or their subcontractors.
For PILOT agreements executed after July 1, 2025, the parties must obtain approval by the secretary of the LDR and LED in order to qualify for the exemption from state and local sales and use taxes.
For more information regarding this topic, contact Liskow attorneys Caroline Lafourcade, Bob Angelico, and Kevin Naccari, and visit the Louisiana Industrial Insights Hub for further updates.