Opinion ID: 1669566
Heading Depth: 1
Heading Rank: 4

Heading: exemption of medical devices from local taxation

Text: LSA-R.S. 47:305 sets forth various exemptions from the sales and use taxes imposed by the state in Chapter 2 of Subtitle II of Title 47 of the Louisiana Revised Statutes. Among the exemptions is one for medical devices, found in LSA-R.S. 47:305(D)(1)(s), which, during the time period relevant to this litigation, [25] provided in pertinent part: (1) The sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of the following tangible personal property is hereby specifically exempted from the taxes imposed by this Chapter: .... (s) Any and all medical devices used exclusively by the patient in the medical treatment of various diseases or administered exclusively to the patient by a physician, nurse, or other health care professional or health care facility in the medical treatment of various diseases under the supervision of and prescribed by a licensed physician. The issue this court is called upon to resolve is whether the exemption from state sales and use taxes for medical devices, set forth above, applies to sales and use taxes imposed by local taxing authorities, including the present defendant. The district court ruled, and Willis-Knighton contends, that medical devices were exempt from local sales and use taxes under LSA-R.S. 47:305(D)(6), as the statute existed in 1985, and that a 1991 amendment to Subsection 6 did not alter the exemption. The court of appeal ruled to the contrary, concluding that the plain effect of 1991 La. Acts, No. 1065, § 1, amending Subsection D(6), was to remove any exemption from local sales and use taxes unless there was a clear indication that the exemption applied to local taxes, and that because Subsection D(1)(s) contains no such indication, the medical device exemption does not apply to local taxing authorities. After review of the relevant statutory provisions and consideration of the arguments of the parties, we agree with the court of appeal's conclusion and affirm that court's determination that local taxing authorities, including the present defendant, are not precluded from levying sales and use taxes on the sale of medical devices.
The applicability of the various exemptions enumerated in LSA-R.S. 47:305 to sales and use taxes levied by local taxing authorities is addressed in Subsection D(6) of the statute. At the time the medical device exemption was enacted by 1985 La. Acts, No. 901, Subsection D(6) (formerly Section 305(4)(f)) provided: The exemptions from the state sales and use tax provided in this Subsection shall be applicable to any sales and use tax levied by any local governmental subdivision or school board except as otherwise provided in this Subsection. The medical device exemption was not among those exemptions specified in LSA-R.S. 47:305(D)(4) as not applying to local taxing authorities; [26] therefore, by virtue of Subsection D(6), the exemption from state sales and uses taxes of sales of medical devices was arguably extended to local taxing authorities. See BP Oil Company v. Plaquemines Parish Government, 93-1109, p. 14 (La.9/6/94), 651 So.2d 1322, 1331, wherein we noted (in connection with a different exemption) that Section 305(D)(6)'s provisions prior to a 1991 amendment extended exemptions to sales and use taxes levied by local governmental authorities which extension clearly incorporated all of the exemptions listed in Section 305(D)(1), which, in this case, includes the exemption of sales of medical devices. However, Section D(6) was amended by 1991 La. Acts, No. 1065 to provide: The exemptions from the state sales and use tax provided in this Subsection in existence as of the effective date of Act 205 of 1978 shall be applicable to any sales and use tax levied by any local governmental subdivision or school board except as otherwise specifically provided in this Subsection. Without determining the validity of any exemptions placed in this Subsection subsequent to the effective date of Act 205 of 1978, all Acts after the 1991 Regular Session placing an exemption in this Subsection which is applicable to a political subdivision must, to be effective, specifically provide in the title and body of the bill that it is applicable to a political subdivision. The exemptions provided in R.S. 47:305(D)(1)(t) are hereby deemed to specifically comply with Act 205 of 1978. The medical device exemption was placed in Section 305(D) by Act 901 of 1985 and became effective commencing on September 1, 1985. Thus, the exemption neither existed as of the effective date of Act 205 of 1978, nor was it placed in the Subsection after the 1991 regular session. The precise issue we are called upon to address is whether the medical device exemption applies to local sales and use taxes paid under protest commencing in January 1998, subsequent to the effective date of the 1991 amendment. Willis-Knighton contends, and the district court ruled, that the 1991 amendment to Section 305(D)(6) affects only exemptions created after 1991. Willis-Knighton reasons that because the amendment is silent as to exemptions, such as the medical device exemption, enacted after 1978 but prior to 1991, the applicability of the exemption to local taxing authorities must be determined by the law in effect at the time the exemption was created. Because the law in effect in 1985, when the medical device exemption was enacted, extended the exemption to local taxing authorities, Willis-Knighton argues that the legislature intended that the medical device exemption apply at the local level.
At first glance the legislature appears to skirt the issue of the applicability of the medical device exemption to local sales and use taxes imposed after 1991 by the statement [w]ithout determining the validity of any exemptions placed in this Subsection subsequent to the effective date of Act 205 of 1978. LSA-R.S. 47:305(D)(6). However, basic and well-settled principles of statutory construction guide us in resolving the issue presented here. The first and foremost of such principles is that tax exemptions, being an exceptional privilege, must be expressly and clearly conferred in plain terms. McNamara v. Central Marine Service, Inc., 507 So.2d 207, 208 (La.1987); Showboat Star Partnership, 00-1227 at p. 10, 789 So.2d at 560. Exemption provisions are strictly construed against the taxpayer claiming the benefit of an exemption and must be unequivocally and affirmatively established by the taxpayer. Id.; Archer Daniels Midland Company v. Parish School Board of the Parish of St. Charles, 01-0511, p. 11 (La.11/28/01), 802 So.2d 1270, 1278. An examination of LSA-R.S. 47:305 during the relevant time period reveals that the statute contains no language that would clearly and expressly extend the medical device exemption to local taxing authorities. For example, Section 305(D)(1) instructs that [t]he sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of the following tangible personal property is hereby specifically exempted from the tax imposed by this Chapter.  (Emphasis supplied). The only tax imposed in this Chapter is the state sales and use tax. By the express language of Section 305(D)(1), therefore, the exemptions listed thereafter (including the medical device exemption) only apply to state sales and use taxes, unless there is another provision of law specifically providing otherwise. No such provision exists. Section 305(D)(6) is silent as to the applicability to local taxing authorities of exemptions, such as the medical device exemption, placed in the statute between the effective date of Act 205 of 1978 and the 1991 Regular Session. Absent a clear, unequivocal and affirmative expression that the exemption applies at the local level, it cannot be interpreted to extend to local taxing authorities. See McNamara, supra ; Showboat Star Partnership, supra . A second and equally well-settled principle of statutory construction that guides our determination in this instance is the rule set forth in LSA-C.C. art. 13, that laws on the same subject matter must be interpreted in reference to each other. As the court of appeal recognized in this case, two other statutes in effect at the time the medical device exemption was created directly address the applicability of the state sales and use tax exemption to local governing authorities. Act 205 of 1978 amended and reenacted LSA-R.S. 33:2716.1 and amended LSA-R.S. 47:302. The amended provisions of LSA-R.S. 33:2716.1 [27] state in pertinent part: (B) No exemption from the state sales and use tax granted subsequent to the effective date of this Act and granted pursuant to the provisions of Chapters 2 or 2-A of Title 47 of the Louisiana Revised Statutes of 1950 shall be applicable to any sales and use tax levied by any local governmental subdivision or school board unless the state exemption specifically provides that it applies to such sales and use tax levies. In the absence of any such specific application of the state exemption to sales and use tax levies of any local governmental subdivision or school board, any state exemption granted after the effective date of this Act and granted pursuant to the provisions of Chapters 2 or 2-A to Title 47 of the Louisiana Revised Statutes of 1950 shall be applicable only to the levy and collection of the state sales and use tax. In addition, the amended LSA-R.S. 47:302(E) provides: No exemption from the state sales and use tax granted after the effective date of this Act and granted pursuant to the provisions of this Chapter or Chapter 2-A of Title 47 of the Louisiana Revised Statutes of 1950 shall be applicable to any sales and use tax levied by any local governmental subdivision or school board unless the state exemption specifically provides that it applies to such sales and use tax levies. In the absence of any such specific application of the state exemption to sales and use tax levies of any local governmental subdivision or school board, any state exemption granted pursuant to the provisions of this Chapter or Chapter 2-A of Title 47 of the Louisiana Revised Statutes of 1950 shall be applicable only to the levy and collection of the state sales and use tax. These statutes, in effect when the medical device exemption was created by Act 901 of 1985, clearly state that an exemption from state sales and use tax will not apply to local sales and use tax levies unless the statute creating the state exemption specifically provides that it is to apply to local taxing authorities. Construing these provisions in pari materia with LSA-R. S. 47:305(D)(6) in its post-1991 amendment form makes it clear that the exemption from state sales and use taxes for sales of medical devices contained in Section 305(D)(1)(s) does not extend to local taxing authorities. There is simply no language in the statute, as required by LSA-R.S. 33:2716.1 and LSA-R.S. 47:302(E), that specifically extends the exemption to local taxing authorities. If anything, the effect of the 1991 amendment to Section 305(D)(6) was to correct the inconsistency that previously existed between the language in that Section and in LSA-R.S. 33:3716.1 and LSA-R.S. 47:302(E). Prior to the 1991 amendment, Section 305(D)(6) created a presumptionthat the exemptions enumerated therein would apply to local taxing authorities unless otherwise specifically statedthat was the reverse of the presumption created in LSA-R.S. 33:3716.1 and LSA-R.S. 47:302(E). The inconsistency in the language of the statutes was removed by the 1991 amendment to Section 305(D)(6), the plain effect of which, as the court of appeal correctly recognized, was to remove any exemption from local sales and use taxes unless the statute clearly states that it applies to local taxes. Subsection 305(D)(1)(s), the medical device exemption, contains no such clear statement. [28] Willis-Knighton contends that BP Oil Company v. Plaquemines Parish Government, supra , mandates a different conclusion. It argues that our decision in that case dictates a finding that the medical device exemption applies to local taxing authorities. Two appellate courts to consider the issue, the first circuit in Tenet Healthsystems Hospitals, Inc. v. Parish of St. Tammany, 99-0924 (La.App. 1 Cir. 6/23/00), 762 So.2d 1144, writ denied, 00-2518 (La.11/27/00), 775 So.2d 448, and the second circuit in the instant case, have rejected that contention, finding the precise holding in BP Oil Company distinguishable. We agree with that assessment. The BP Oil Company taxpayers sought refunds of local sales and use tax payments made for the period between January 1985 through October 1990. In addressing the applicability of the exemption from sales and use taxes of the petroleum refinery by-product coke-on-catalyst under LSA-R.S. 47:305(D)(1)(h), this court examined the language of LSA-R.S. 47:305(D)(6) as it existed during the time period that the taxpayers sought refunds, from 1985-1990. However, the precise language relied upon by this court was removed from the statute by the amendment effected by 1991 La. Acts, No. 1065, § 1. The instant case is the first occasion this court has had to consider the amended language of LSA-R.S. 47:305(D)(6). We find, as did the appellate courts in Tenet Healthsystems Hospitals, Inc. and in the decision below, that a plain reading of LSA-R.S. 47:305(D)(1)(s) and 305(D)(6) compels the conclusion that the effect of the 1991 amendment to Section 305(D)(6) was to remove any exemption from local sales and use tax unless there is a clear statement that the exemption is to apply to local taxing authorities. Section 305(D)(1)(s) contains no such statement; therefore, the medical device exemption does not apply to sales and use taxes levied by a local taxing authority. Because we find that a plain reading of LSA-R.S. 47:305 mandates the conclusion we reach herein, we do not find it necessary, as Willis-Knighton urges, to delve into the legislative history of the exemption to ascertain the legislative intent, that intent being made manifest in the words of the statute. [29] LSA-R.S. 1:4; LSA-C.C. art. 9; Cacamo v. Liberty Mutual Fire Insurance Co., 99-3479, 99-3480, 99-3481, p. 7 (La.6/30/00), 764 So.2d 41, 45. Finally, and in the alternative, Willis-Knighton asserts that if the legislature did not in fact extend the medical device exemption to local taxing authorities, then the provisions of LSA-R.S. 47:305(D)(1)(s) are unconstitutional under La. Const. art. VI, § 29(D), which prohibits the legislature from enacting an exemption that does not uniformly apply to levies of sales and use taxes by the state and its political subdivisions. The issue of the constitutionality of LSA-R.S. 47:305(D)(1)(s) was first raised by Willis-Knighton by virtue of a Second Motion for Partial Summary Judgment filed in the district court, a copy of which was served on the Attorney General. However, the scheduled hearing on the motion was continued on motion of the defendant Commission on the representation that, among other grounds, consideration of the constitutional issue was premature until such time as the district court ruled on whether the medical device exemption was applicable to local taxing authorities. The case proceeded to trial and the district court, in fact, determined that the medical device exemption extended to both the state and its political subdivisions. Therefore, the constitutional issue was never ruled on by the district court. It was not addressed by the court of appeal. Although we find that the constitutional issue was properly raised, this court is not the proper forum in which to address the issue in the first instance. See Vallo v. Gayle Oil Company, Inc., 94-1238, p. 9 (La.11/30/94), 646 So.2d 859, 865-866. Because the constitutional issue was apparently pretermitted, the appropriate procedure is to remand the case to the trial court for consideration of the constitutionality of LSA-R.S. 47:305(D)(1)(s) in light of La. Const. art. VI, § 29(D). See Palacios v. Louisiana and Delta Railroad Inc., 98-2932, p. 13 (La.7/2/99), 740 So.2d 95, 102. We will remand the case accordingly.