Louisiana’s mind-boggling sales tax system – Wacky Tax Wednesday
It sometimes seems there’s a sales tax exemption or special rate for every product under the sun. Some examples: Many Alabama localities have special rates for food sold for human consumption and admissions to places of entertainment; Colorado localities can offer special rates for beetle wood products and low-emitting vehicles weighing over 10,000 pounds; and six states offer reduced sales tax rates for food for human consumption.
Louisiana takes exemptions and reduced rates to a whole new level.
There are more than 180 state sales and use tax exemptions in Louisiana. A couple of years ago, state lawmakers came up with an elaborate plan to temporarily eliminate some of them, or provide reduced rates in their stead. Acts 25 and 26 of 2016 produced a 25-page chart of temporarily reduced or eliminated exemptions and their path back to taxability, with rate changes for many goods and services slated for July 1, 2016, July 1, 2017, and July 1, 2018.
The goal of this ambitious project was to stave off an alarming budget deficit. It did delay the crisis but didn’t solve it, so the legislature met for an umpteenth special session last month to hammer out another plan. This time, the list of exemptions and exclusions spans close to 20 pages and covers July 1, 2013 through June 30, 2025.
It must be seen to be believed — or understood — but here are a few examples of what it includes (starting from July 1, 2015 rather than July 1, 2013). The rates below are for the state sales tax and do not include any applicable local sales taxes:
Description | 7.1.2015–3.31.2016 | 4.1.2016– | 7.1.2016– | 7.1.2017– | 7.1.2018– |
Repair of a vehicle by a licensed motor vehicle dealer subsequent to the lapse of a warranty when the repair is performed at no cost to the owner of the vehicle | 0% | 5% | 3% | 3% | 4.45% |
Manufacturer’s rebates given on new vehicles | 0% | 4% | 2% | 2% | 0% |
Purchases of electrical power or energy, or natural gas for use by paper or wood products manufacturing facilities | 0% | 5% | 3% | 3% | 2% |
Sales of water for nonresidential use. Does not apply to water sold in containers, such as a jug, bottle, or carton. | 1% | 5% | 4% | 4% | 2% |
Rentals of motion picture films to commercial theaters | 1% | 5% | 4% | 4% | 4.45% |
Sales of food products by Girl Scouts, Boy Scouts, Big Brother, and Big Sister organizations | 0% | 4% | 0% | 0% | 0% |
Catalogs distributed in the state free of charge | 1% | 5% | 4% | 4% | 4.45% |
Tickets to dance, drama, or performing arts performance sponsored by domestic nonprofit organizations | 1% | 5% | 4% | 4% | 4.45% |
Sales of admissions to entertainment events sponsored by domestic nonprofit charitable, religious, and education organizations | 1% | 5% | 1% | 1% | 0% |
Louisiana Tax Free Shopping Program (sales tax holiday) | 0% | 1% | 1% | 1% | 0% |
Governor John Bel Edwards wants to simplify sales and use tax in Louisiana. He explained why in his 2018 Second Special Session Remarks (May 22, 2018): “The four existing pennies of sales tax have over 180 exemptions on them. To make matters worse, each penny is taxed different. … Let’s simplify the system, reduce the number of exemptions that we hand out, and make this entire process easier for businesses.”
It’s a nice dream, but since he’s taken office, Louisiana sales tax has become arguably more complex. If you don’t believe me, check out the full exemption table.
Although sales and use tax is inherently complicated, compliance doesn’t have to be it. Learn more about how tax automation software helps simplify it here.
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