Louisiana Suspends Sales Tax Exemptions

There’s been a lot in the news lately about Louisiana’s fiscal woes and sales tax increases. The state rate is increasing by 1% on April 1, 2016, when rates on automobiles, alcoholic beverages, cigarettes and telecommunications services will also rise. The state will start collecting sales and use tax on certain remote sales on April 1, and is expanding tax to transient guest accommodations (i.e. Airbnb rentals) beginning July 1, 2016. All these changes should help provide more revenue for Louisiana, which it needs.

In addition to expanding and increasing sales tax, Louisiana is also temporarily suspending a number of state sales and use tax exceptions and exemptions under Act 25. These include, but are not limited to, the exemption for Girl Scout cookies, food for certain school lunch programs, occasional sales, and certain fire fighting equipment.

Some of the goods and services temporarily subject to tax will be subject to the temporary 1% increase (for a state rate of 5%); for others the 4% state rate applies. Most goods and services, but not all, will resume the 0% state sales tax rate by July 2018.

Not impacted by state rate increase

Rates for a number of temporarily taxed goods and services will steadily decrease as follows:

• 4%: April 1, 2016 – June 30, 2016
• 2%: July 1, 2016 – June 30, 2018
• 0%: July 1, 2018 – March 31, 2019

Affected products include the following:

• Donations of food to qualified food banks by retail dealers
• Food items for non-public school lunch or breakfast programs participating in the national program
• Girl Scout Cookies (and other food products sold by Girl and Boy Scouts and Big Sister and Brother organizations)
• Isolated or occasional sales of tangible personal property
• Sales of any human tissue transplants, including human bones, blood, cornea or organs
• Textbooks and course-related software purchased by certain private postsecondary academic institutions
• Toys to be donated to children when purchased by federally exempt nonprofits

Impacted by the state sales tax rate increase

Tax on a number of goods and services will drop at a slightly different rate due to the temporary sales and use tax increase imposed under Act 26:

• 5%: April 1, 2016 – June 30, 2016
• 3%: July 1, 2016 – June 30, 2018
• 0%: July 1, 2018 – March 31, 2019

The above rate schedule applies to many goods and services, including by not limited to the following:

• Aircraft manufactured in Louisiana with a seating capacity in in excess of 8 persons
• Electric power or energy or natural gas purchased for use in paper or wood manufacturing facilities
• Leases of educational materials and equipment used for classroom instruction by approved schools
• Lease or rental of pallets used in packaging products produced by a manufacturer
• Purchases of fire-fighting equipment by volunteer fire departments or public fire departments
• Room rentals at camp and retreat facilities owned by nonprofit organizations
• Room rentals at certain homeless shelters (charge must be less than $20 per day)
• Separately stated labor charges on property repaired out-of-state

The list of exceptions and exemptions affected by Acts 25 and 26 is quite lengthy but well worth a look if you do business in Louisiana. See it here.

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