COVID-19 inspires calls to suspend taxation in Louisiana

At a time when Louisiana is facing an enormous budget deficit because of the new coronavirus (COVID-19), some lawmakers in the Pelican State are calling for a reprieve in taxation.

Louisiana is currently expecting to bring in $843 million less tax revenue than planned because of the pandemic. Yet rather than looking for ways to increase tax revenue at this time, several lawmakers believe taxes should be suspended.

HCR 72, introduced by Representative Alan Seabaugh, calls for the state to temporarily suspend the following state taxes June 1, 2020, through August 31, 2020:

• Corporation franchise taxes
• Income taxes on estates or trusts
• Individual and corporate income taxes
• Severance taxes
• State excise taxes on alcoholic beverages, tobacco products, gasoline, diesel fuels, and special fuels
• State sales and use taxes

Several other measures, introduced by other lawmakers, call for more limited relief. HCR 65 would suspend severance taxes on oil, natural gas, distillate, and condensate. HCR 43 and SCR 26 seek to suspend certain corporation franchise taxes.

These bills are unlikely to gain much traction. As the Center on Budget and Policy Priorities notes, “To balance their budgets —  as they must — states will need to make cuts or find enough revenue to close” projected shortfalls. Further cutting tax revenue, even temporarily, would be a step in the wrong direction.

On the other hand, the Louisiana Department of Revenue is moving forward with a plan to increase sales tax collections. The state appears to be on track to start enforcing economic nexus on July 1, 2020.

Under the plan, remote sellers with more than $100,000 in gross revenue from sales of tangible personal property, products transferred electronically, or services delivered into Louisiana in the current or previous calendar year, or at least 200 separate transactions of the same, must register with the state and start collecting Louisiana sales tax.

Louisiana was one of the first states to enact economic nexus, which it did before states had the authority to tax remote sales. Today, it’s one of few states not enforcing economic nexus.

Louisiana has a self-described “jungle of a sales tax system,” with parishes overseeing their own “sales tax collection, audits, rates, and even interpretations of what is taxed.” As The Public Affairs Research Council of Louisiana notes, “No other state has this degree of local independence and control of its sales tax system,” though Colorado comes close.

The Louisiana Sales and Use Tax Commission for Remote Sellers has been working toward simplifying compliance for remote sellers. It also supports a plan to make marketplace facilitators responsible for collecting and remitting sales tax on third-party sales.

Learn more about state efforts to tax remote sales in this seller’s guide to nexus laws and sales tax collection requirements.