Opinion ID: 2536857
Heading Depth: 2
Heading Rank: 2

Heading: The Distinction Between Exclusions and Exemptions

Text: As cogently explained by Judge McDonald in his dissent below, the real issue in this case is whether the applicable statutes provide for an exemption or an exclusion. If an exemption, then the taxes are due; if an exclusion, they are not. Harrah's, 22 So.3d at 934 (McDonald, J., dissenting). [6] Although the question may be simply stated, the answer is not simply derived. Unfortunately, the Legislature has not provided a statutory definition of either an exemption or an exclusion. [7] According to the leading Louisiana sales tax treatise, a tax exemption is a provision that exempts from tax a transaction that would, in the absence of the exemption, otherwise be subject to tax. That is, there has been a statutory decision not to tax a certain transaction that is clearly within the ambit and authority of the taxing statutes to tax. Bruce J. Oreck, Louisiana Sales & Use Taxation (2d ed.1996), § 3.1. An exclusion, on the other hand, relates to a transaction that is not taxable because it falls outside the scope of the statute giving rise to the tax, ab initio. Transactions excluded from the tax are those which, by the language of the statutes, are defined as beyond the reach of the tax. Id. Oreck's definitions have been widely adopted by Louisiana courts. [8] There are also two seemingly contradictory jurisprudential maxims at play. Tax exemptions are strictly construed in favor of the State and must be clearly and unequivocally and affirmatively established by the taxpayer. Vulcan Foundry, Inc. v. McNamara, 414 So.2d 1193, 1197 (La.1982). Exclusions, on the other hand, are construed liberally in favor of the taxpayers and against the taxing authority. Wyesco of Louisiana, LLC v. East Feliciana Parish School Board, 2000-1322, p. 5 (La.App. 1 Cir. 9/28/01), 809 So.2d 401, 404, citing Tarver v. World Ship Supply, Inc., 615 So.2d 423, 426 (La. App. 4 Cir.1993), writ denied, 616 So.2d 672 (La.1993). In this case, however, both maxims favor Harrah's, who argues §§ 4:168 and 4:227 are not exemptions, but exclusions.