June 29, 2018
Louisiana extends additional sales tax at a reduced rate, makes exemptions, exclusions uniform
On June 24, 2018, Louisiana Governor John Bel Edwards signed into law HB 10 (Act 1, 3rd special session), to extend the additional one cent sales tax enacted in 2016 (i.e., the Clean Penny),1 but at a lower rate. Effective July 1, 2018 through June 30, 2025, the rate of the additional sales tax is 0.45%, bringing the total state sales and use tax rate down to 4.45% (from 5%). Louisiana parishes and cities may impose their own sales tax rates so the actual state and local rate will be much greater. Additionally, as Louisiana's total sales tax rate is a compilation of a variety of rates from different acts, the new law generally makes exemptions and exclusions among these various sales tax laws uniform among the various rates (except those applicable to business utilities) imposed from July 1, 2018 through June 30, 2025.
Beginning July 1, 2018 through June 30, 2025, Louisiana will impose a 0.45% tax on the sale at retail, use, consumption, distribution, and lease or rental of tangible personal property, and on the sale of services. The other sales and use tax rates — 2% imposed by La. Rev. Stat. Sec. 47:302; 1% imposed by La. Rev. Stat. Sec. 47:321; 0.97% imposed by La. Rev. Stat. Sec. 47:331; and 0.03% imposed by La. Rev. Stat. Sec. 51:1286 — remain unchanged. Dealers and wholesalers must collect the tax at the accumulated rates among the various statutes.3 In RIB No. 18-016, the Department said dealers charging the total 5% rate on or after July 1, 2018, must remit the excess tax collected to the Department, reporting the excess on Line 8 of the Sales Tax Return Form R-1029.
From July 1, 2018 through June 30, 2025, the total sales tax rate for business utilities is 2% as provided by La. Rev. Stat. Sec. 47:302; business utilities are exempt from the other sales tax levies. The 2% tax is imposed on the sale at retail, use, consumption, distribution and storage of steam, water, electric power or energy, natural gas, or other energy sources for non-residential use.
Exemptions and exclusions
Effective beginning July 1, 2018 through June 30, 2025, the exemptions and exclusions that are repealed or re-enacted uniformly across the different sales and use tax provisions are voluminous. Among the long list of exemptions that are now uniform are those for prescription drugs, gasoline and other motor fuels subject to the state excise tax on fuel, sales to the US government, certain installation charges, sales of certain agricultural products, certain professionals' work product, certain materials and services related to rigs, and many more. For a full list of the exemptions, and when they apply (pre- and post- July 1, 2018), see the Department's exemption table.
Louisiana dealers and wholesalers should adjust their sales and use tax rates to correspond to the reduced rate beginning July 1, 2018. Furthermore, compliance with Louisiana's sales and use tax could be somewhat simplified for taxpayers due to the Act's requirements than most exemptions and exclusions are now uniform among the various state sales tax statutes. Based on the high number of exemptions and exclusions that have been repealed or amended beginning July 1, 2018, however, taxpayers should examine their current exemptions and exclusions in their systems to determine whether they are still, or now are, eligible for exemptions or exclusions under the newly enacted uniform provisions.
1 The Clean Penny sales tax enacted in 2016 expires on June 30, 2018.
2 La. Dept. of Rev., Pub. LA R-1002, Taxable Rate of Transactions for Exemptions and Exclusions for periods July 1, 2013 through June 30, 2025 (reissued June 26, 2018).
3 La. Dept. of Rev., Rev. Bulletin No. 18-016 (June 24, 2018); La. Dept. of Rev., News Release: New state sales tax rate goes into effect July 1 (June 24, 2018).