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FOR IMMEDIATE NEWS RELEASE NEWS RELEASE # 25 FROM: CLERK OF SUPREME COURT OF LOUISIANA

The Opinions handed down on the 1st day of April, 2005 , are as follows:

BY WEIMER, J. : 2004-C- 0473 WILLIS-KNIGHTON MEDICAL CENTER v. CADDO-SHREVEPORT SALES AND USE TAX COMMISSION (Parish of Caddo) For the reasons expressed herein, we affirm the decision of the second circuit court of appeal. However, we remand this matter to the district court for consideration of the constitutionality of LSA-R.S. 47:305(D)(1)(s). AFFIRMED; CASE REMANDED TO DISTRICT COURT. KIMBALL, J., concurs in part and dissents in part and assigns reasons. JOHNSON, J., concurs in part and dissents in part with reasons. TRAYLOR, J., concurs in part and dissents in part and assigns reasons. KNOLL, J., concurs in result and assigns reasons. WEIMER, J., assigns additional reasons.

04/01/2005

SUPREME COURT OF LOUISIANA
No. 04-C-0473 WILLIS-KNIGHTON MEDICAL CENTER VERSUS CADDO-SHREVEPORT SALES AND USE TAX COMMISSION
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, SECOND CIRCUIT, PARISH OF CADDO

WEIMER, Justice This is a suit for refund of sales and use taxes paid under protest. We granted certiorari to address the taxpayer's contention that the court of appeal erred in determining that no refund was due for taxes levied on sales of medical devices used by patients to treat diseases under the supervision of and prescribed by their treating physicians and on repairs and maintenance to medical equipment allegedly incorporated into the structure of taxpayer's buildings so as to become immovable property. In addressing the latter issue, we are called upon to resolve a significant controversy related to the proper interpretation of LSA-C.C. art. 466 and its definition of a component part. See and compare, Equibank v. United States Internal Revenue Service, 749 F.2d 1176 (5th Cir. 1985) and Prytania Park Hotel, Ltd. v. General Star Indemnity Co., 179 F.3d 169 (5th Cir. 1999). See also, John A. Lovett, Another Great Debate?: The Ambiguous Relationship Between the Revised Civil Code and Pre-Revision Jurisprudence as seen through the Prytania Park Controversy, 48 Loy. L. Rev. 615 (2002) (hereinafter Lovett) and articles cited at footnote 6, infra.

After careful review of the issue, we conclude that Article 466 must be applied as written. The article requires only that a component part of an immovable be "permanently attached," a term defined in the article as that which cannot be removed without substantial damage to itself or to the immovable to which it is attached. In reaching this conclusion, we expressly reject the societal expectations test as a means of determining component parts of immovables, and a disjunctive reading of the two paragraphs of Article 466 as creating two independent types of component parts. Finding no error in the ultimate result reached by the court of appeal, we affirm the decision of that court and remand the matter to the district court for further proceedings consistent with our ruling herein. FACTS AND PROCEDURAL BACKGROUND Willis-Knighton Medical Center (Willis-Knighton) operates three not-for-profit hospitals in Caddo Parish, and in connection therewith pays sales and use taxes collected by the Caddo-Shreveport Sales and Use Tax Commission (the Commission). By letters dated December 18, 1996, March 6, 1997, and December 16, 1997, respectively, Willis-Knighton wrote the Commission to request a refund or credit for sales and use tax it allegedly overpaid from December 1992 through December 1996. Basically, Willis-Knighton claimed an exemption or exclusion from local sales and use taxes for its purchases of food for resale to patients, medical devices, albumin and other blood products, and for repairs and maintenance on immovable medical equipment. The Commission denied the requests for a refund or credit in early January 1998. Shortly thereafter, Willis-Knighton filed its monthly tax return for the period December 1 through December 31, 1997. In conjunction therewith, it advised the Commission that $47,221.37 was being paid under protest. On January 29, 1998, Willis-Knighton filed the instant suit, demanding a refund of the $47,221.37 paid

under protest. It also demanded $568,984.09 for the alleged overpayments between December 1992 and December 1996. In the suit, Willis-Knighton claimed that it owed no local sales and use taxes for the following: (1) albumin and other blood products, allegedly exempt under statutes that define "human tissue transplants" to include "blood, or blood products" transplanted into a recipient individual, LSA-R.S. 47:301(10)(d), LSA-R.S.33:2717; (2) medical devices used by patients to treat diseases under the supervision of and prescribed by their treating physicians, allegedly exempt under LSA-R.S. 47:305 (D)(1)(s); and (3) repairs and maintenance on medical equipment allegedly incorporated into the structure of Willis-Knighton's buildings so as to become immovable and thus not taxable under the relevant provisions of the city and parish ordinance, which apply only to repairs of tangible personal property. See,

Shreveport, LA, Ordinances, Appendix B, Sales and Use Tax

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