Attorneys Frederick T. Haas and William W. Sentell obtained a favorable ruling from the Louisiana Supreme Court in a long-running tax dispute. Messrs. Haas and Sentell represented the tax payer. The high court ordered that use taxes paid under protest in 2010 be returned to the tax payer, with interest.

The decision establishes a legal precedent which confirms a significant tax benefit to shipowners and the shipbuilding industry in Louisiana.

The issue was whether the owner of an inland-marine drilling barge, which was rendered unseaworthy after a 13-hour fire, could claim an exemption on sales taxes for materials used in the rebuilding of the vessel.

Sales taxes were not charged in Jefferson Parish where the vessel was reconstructed. However, the tax collector for St. Mary Parish imposed use taxes on the barge owner when the rig was returned to service in St. Mary Parish.

In the original administrative proceedings before the tax collector, Messrs. Haas and Sentell argued that the costs of reconstruction were exempt from sales and use tax under a little-known regulation promulgated by the Louisiana Department of Revenue in 1989. That regulation interpreted an exemption statute enacted in the late 1950s, which was specifically intended to aid the Louisiana shipbuilding industry by exempting the costs of constructing a vessel.

The tax collector rejected the barge owner’s arguments and the matter was litigated in the 16th Judicial District Court for the Parish of St. Mary and the First Circuit Court of Appeal.

The Supreme Court granted writs after the First Circuit affirmed a summary judgment invalidating the regulation. Adopting the same  fundamental arguments that Messrs. Haas and Sentell first presented in the administrative phase, the Supreme Court reversed the First Circuit’s ruling and rendered summary judgment in favor of the tax payer.

The tax payer was also represented by tax specialists Robert Angelico and Cheryl Kornick of Liskow & Lewis. The case is Coastal Drilling Co. v. Dufrene, No. 2015-C-1793 (La. 3/15/16); — So.3d —. The full Supreme Court opinion is available here.

UPDATE: On May 2, 2016, the Louisiana Supreme Court denied a petition for rehearing filed by the tax collector.