## Facts

- Willis-Knighton Medical Center operated nonprofit hospitals in Caddo Parish, Louisiana, and paid local sales and use taxes administered by the Caddo-Shreveport Sales and Use Tax Commission.
- The Commission assessed taxes the hospital paid under protest, and the hospital filed a refund suit covering two sets of transactions.
- First, the hospital sought refunds for taxes imposed on sales (and similar transfers) of certain medical devices provided to patients for treatment under physician prescription and supervision; the hospital argued these items were excluded or exempt under La. R.S. 47:305(D)(1)(s).
- Second, the Commission taxed repair and maintenance charges related to large diagnostic equipment in the hospitals, including nuclear cameras. The hospital contended the equipment had become “component parts” of the buildings and therefore immovable property under La. Civ. Code art. 466, which would make the charges non-taxable as work on immovable property.
- The district court ruled for the hospital on key parts of the refund claim, including treating the nuclear cameras as immovables.
- The Louisiana Second Circuit Court of Appeal reversed in relevant part, concluding the hospital was not entitled to refunds for the challenged taxes.
- The Louisiana Supreme Court granted certiorari to decide whether the diagnostic equipment constituted component parts of the hospitals (immovables) under Civil Code article 466 and to address the claimed tax treatment of the medical devices.

## Issues

1. Whether sales of the challenged medical devices used by patients under physician prescription and supervision were excluded from local sales and use tax under La. R.S. 47:305(D)(1)(s), entitling the hospital to refunds.
2. Whether the nuclear cameras and related diagnostic equipment were “component parts of a building” and therefore immovable property under La. Civ. Code art. 466, making repair and maintenance charges non-taxable.
3. Whether La. Civ. Code art. 466 should be applied based on its text and definition of “permanently attached,” or whether courts may apply an additional “societal expectations” approach.
4. Whether the constitutionality of La. R.S. 47:305(D)(1)(s) required further proceedings in the district court.

## Decision

- The Louisiana Supreme Court affirmed the Second Circuit’s ultimate judgment denying the hospital’s requested refunds.
- On the immovable-property question, the court held La. Civ. Code art. 466 is applied as written: an item is a component part of an immovable only if it is “permanently attached,” meaning it cannot be removed without substantial damage to the item or to the immovable.
- Applying that standard, the court concluded the nuclear cameras and related equipment did not qualify as component parts of the hospitals and remained movable property; therefore, the taxes on repair and maintenance charges were not refundable on the theory that the work was on immovable property.
- The court rejected use of a “societal expectations” test and rejected reading article 466’s paragraphs as creating independent categories that would avoid the “permanently attached” requirement.
- Although the court affirmed the no-refund result reached by the court of appeal, it remanded to the district court to consider the constitutionality of La. R.S. 47:305(D)(1)(s).

## Legal Principles

- Statutory tax exclusions and exemptions are construed narrowly against the taxpayer; the taxpayer bears the burden to show the transaction fits the statutory language.
- Under La. Civ. Code art. 466, a thing is a “component part” of an immovable only if it is “permanently attached,” defined as not removable without substantial damage to the thing or the immovable.
- Courts applying article 466 rely on the article’s text and its definition of permanent attachment, not an added “societal expectations” approach.
- High cost, inconvenience, or technical effort needed for removal does not establish permanent attachment absent substantial damage as defined by article 466.
- An appellate affirmance on the merits may be paired with a remand when a constitutional challenge to the governing statute remains unresolved in the trial court.

## Conclusion

The Louisiana Supreme Court affirmed the denial of Willis-Knighton’s claimed local sales and use tax refunds, holding that the hospital’s nuclear cameras and similar diagnostic equipment were not “component parts” of its buildings because they were not permanently attached within the meaning of La. Civ. Code art. 466; the court also left in place the no-refund outcome on the medical-device claim while remanding to the district court to address the constitutionality of La. R.S. 47:305(D)(1)(s).


Willis-Knighton Medical Center v. Caddo-Shreveport Sales and Use Tax Commission, 903 So. 2d 1071 (2005)