Bridges v. NATIONAL FINANCIAL SYSTEMS, INC.
2007 WL 861122, 960 So. 2d 202 (2007)
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Rule of Law:
Structures designed and intended for temporary use and to be moved from one place to another are classified as corporeal movables (tangible personal property) under the Louisiana Civil Code, and leases of such structures are subject to state sales and use tax, regardless of their temporary attachment to land.
Facts:
- National Financial Systems, Inc. (NFS) leases modular banking units to financial institutions for temporary branch locations in Louisiana.
- The units are large, heavy structures built on steel frames, which are placed on concrete slab foundations and connected to utilities for the duration of the lease.
- Lease agreements, typically for one to two years, characterize the units as 'portable' and 'temporary in nature' and include separate fees for transportation, setup, and removal.
- To install a unit, it is attached to the slab with straps and bolts, and on-site additions like canopies and ramps are constructed.
- Upon lease termination, the on-site additions are removed, utilities are disconnected, and the main unit is lifted onto wheels and transported away.
- After a lease ends, NFS attempts to lease the same modular unit to another client.
- Between January 1, 1998, and December 31, 2000, NFS received lease payments for its units in Louisiana but did not collect or remit any lease taxes to the state.
Procedural Posture:
- The Louisiana Department of Revenue audited National Financial Systems, Inc. (NFS) and determined it owed lease taxes.
- Cynthia Bridges, Secretary of the Department of Revenue (the State), filed suit against NFS in a Louisiana trial court to collect the taxes, penalties, and interest.
- NFS answered the lawsuit, denying that any taxes were due.
- The State filed a motion for summary judgment on the issue of whether the leases were taxable transactions.
- The trial court granted a partial summary judgment in favor of the State, ruling the leases were taxable but not determining the amount owed.
- The trial court designated its partial judgment as final and appealable.
- NFS's motion for a new trial was denied by the trial court.
- NFS, as appellant, appealed the trial court's judgment to the Court of Appeal of Louisiana, First Circuit.
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Issue:
Are modular banking units, designed for temporary use and intended to be moved, considered corporeal movables ('tangible personal property') under Louisiana law, making their leases subject to state sales and use tax?
Opinions:
Majority - McClendon, J.
Yes, modular banking units are considered corporeal movables, and their leases are subject to state sales and use tax. The taxability of the lease depends on whether the units are classified as 'corporeal movables' (tangible personal property) or 'immovables' under the Louisiana Civil Code. While the trial court incorrectly relied on the terms of the private lease contracts to make this determination, the correct analysis rests on the Civil Code's property classifications. Under the code, a 'building' classified as an immovable possesses a degree of permanence. These modular units, by contrast, are not intended to be permanent; their normal and intended use is to be moved from one location to another as temporary facilities. They are distinguishable from structures in prior cases that were deemed immovables because those were designed for permanent installation. Therefore, the modular banking units fit the definition of corporeal movables in LSA-C.C. art. 471 as things 'that normally move or can be moved from one place to another,' making their lease a taxable transaction.
Analysis:
This decision clarifies the distinction between movable and immovable property for tax purposes in the context of modern modular construction. It establishes that the intended permanence of a structure is a key determinant of its legal classification, overriding its physical attachment to land at any given time. The ruling provides a significant precedent for state tax authorities, allowing them to levy lease taxes on a wide range of temporary structures, such as portable classrooms and construction site offices. It also affirms the principle that private contractual agreements classifying property do not bind the state in tax matters; classification is determined by objective legal standards found in the Civil Code.
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