Louisiana made some significant — but temporary — changes to sales tax in April 2016, when the state was facing a staggering deficit. The legislature suspended many exemptions, trimmed sales tax holidays, and raised the state sales tax rate by 1 percent. When these initiatives expire on July 1, 2018, the state will fall off the fiscal cliff.
To stave off the looming billion-dollar deficit, Republican lawmakers have agreed to consider extending the extra 1 percent sales tax. Representative Thomas Carmody says the legislature will likely present that option to Governor John Bel Edwards, a Democrat. The governor, however, won’t have it.
The temporary sales tax increase “was to serve as a ‘bridge’ to allow time for the legislature to engage in comprehensive tax and budget reform in 2017,” according to the governor’s description of the fiscal cliff. Making it permanent is not a valid solution.
His path to a stable and predictable state budget includes recommendations from the Legislative Task Force, such as:
- Dramatically reducing the number of sales tax exemptions (state law currently provides more than 180 sales tax exemptions)
- Eliminating the extra 1 percent state sales tax
- Expanding sales tax to:
- Cable and satellite services
- Data processing services
- Debt collection services
- Information services
- Insurance services
- Repairs to real property
- Taxing business utilities at 4 percent and industrial users at 2 percent (currently the rate is 4 percent through June 30, 2018, when it’s scheduled to drop to 1 percent through March 31, 2019)
Gov. Edwards has called for a special session to address the looming fiscal cliff, which he says “will give us the opportunity to make reforms that we all know are needed in Louisiana to stabilize our budget and tax code making it more predictable and fair for Louisiana taxpayers.” It begins February 19, 2018.
Learn more about how sales tax changes challenge sales and use tax compliance for businesses in all states at Avalara Sales Tax 360.