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Analysis

Enacted Louisiana sales and use tax law amends tax rate and availability of exclusions/exemptions

Multistate Tax alert | August 7, 2018

This tax alert summarizes these law changes that are effective July 1, 2018.

Overview

On June 24, 2018, Governor John Bel Edwards signed House Bill 10 (H.B. 10),1 which includes the following modifications to Louisiana law:

  • Reduces the rate of the temporary state sales and use tax from 1 percent to 0.45 percent, and extends the sunset date of the temporary tax levy from June 30, 2018, to June 30, 2025.
  • Provides for restrictions on the applicability of certain exclusions and exemptions that apply to all state sales and use tax levies from July 1, 2018, to June 30, 2025.

Reduces the rate of the temporary state sales and use tax and extends the sunset date

H.B. 10 reduces the rate of the temporary state sales and use tax levied under La. Rev. Stat. § 47:321.1 from 1 percent to 0.45 percent.2 As a result, effective July 1, 2018, through June 30, 2025, the total sales tax rate applicable to transactions in the uniform base will be 4.45 percent. Effective July 1, 2025, the total sales tax rate will revert to 4.0 percent.

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Provides for restrictions on the applicability of certain exclusions and exemptions

In 2016, Louisiana enacted legislation which effectively expanded the state sales and use tax base levied on tangible personal property and certain services under La. Rev. Stat. §§ 47:302, 321, and 331 by suspending the availability of numerous exclusions and exemptions, through either June 30, 2016, or June 30, 2018.3

H.B. 10 provides that, effective July 1, 2018, through June 30, 2025, only certain enumerated exclusions and exemptions shall be available, with all others suspended.4 The following notable exclusions and exemptions are not included in the available list, the net result being the affected transactions are otherwise taxable:5

  • Labor charges on property repaired out-of-state and returned to Louisiana (La. Rev. Stat. § 47:301(3)(b)
  • Airplanes and airplane equipment to commuter airlines domiciled in Louisiana (La. Rev. Stat. § 47:301(10)(k))
  • Pollution control equipment (La. Rev. Stat. § 47:301(10)(l))
  • Custom computer software (La. Rev. Stat. § 47:301(16)(h))
  • Patient aids for home use prescribed by a physician (La. Rev. Stat. § 47:305(D)(1)(m))
  • Insulin without a prescription (La. Rev. Stat. § 47:305.2)

H.B. 10 also provides that the exemptions for steam, water, electric power or energy, natural gas, or other energy sources as provided in La. Rev. Stat. §§ 47:305(D)(1)(b), (c), (d), (g), and (h) shall be applicable to the taxes levied under La. Rev. Stat. §§ 47:321, 321.1, and 331 with respect to all taxpayers. Prior to this law change, these exemptions had been suspended for business utilities. However, business utilities shall remain subject to the 2 percent state sales and use tax levied under La. Rev. Stat. § 47:302.6

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Additional changes affecting certain telecommunication services

Beginning July 1, 2018, H.B. 10 amends the state sales tax rate on intrastate telecommunications services and prepaid calling cards, reducing the rate from 4 percent to 3.45 percent, and amends the state sales tax rate on the interstate and international telecommunications, reducing the rate from 3 percent to 2.45 percent.7

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Considerations

While this tax alert does not provide a comprehensive summary of all exclusion and exemption changes contained in H.B. 10, reference can be made to the updated exemption table recently posted by the Louisiana Department of Revenue on its website that includes an extensive list of transactions and the applicable sales tax rate factoring in available exemptions and exclusions.8

Taxpayers who may be impacted by H.B. 10 are advised to consult with their Louisiana tax advisors for further assistance.

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Contacts:

If you have questions regarding H.B. 10 or other Louisiana tax matters, please contact any of the following Deloitte professionals:

Scott Steinbring, partner, Deloitte Tax LLP, Houston, +1713 982 3555

Kristina Scoggins, manager, Deloitte Tax LLP, Dallas, +1 214 840 1141

Danny Fuentes, manager, Deloitte Tax LLP, Houston, +1 713 982 2338

Multistate Tax alert archive

The Multistate Tax alert archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.

View the list of archived Multistate Tax alerts.

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References

1 Act No. 1, 2018 3rd Extra Sess. H.B. 10 (Jun. 24, 2018). A copy of H.B. 10 is available here.

2 H.B. 10, Sec. 1., amending La. Rev. Stat. § 47:321.1.

3 Act No. 25, 2016 1st Extra. Sess. HB 61 (Mar. 15, 2016), Sec. 2.

4 H.B. 10, Sec. 1., amending La. Rev. Stat. §§ 47:302, 321, 321.1 and 331.

5 H.B. 10, Sec. 1.

6 H.B. 10, Sec. 1., amending La. Rev. Stat. §§ 47:305(D)(1)(b), (c), (d), (g), and (h).

7 Revenue Information Bulletin No. 18-017.

8 See Taxable Rate of Transactions for Exemptions and Exclusions for periods July 1, 2013, through June 30, 2025, available here.

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