General Taxability Changes
On March 14, 2016, House Bills 61 and 62 (Acts 25 and 26 respectively), were signed into law by Louisiana Governor, John Bel Edwards, as part of the First Extraordinary Session of the Louisiana Legislature. This legislation expanded the sales tax base in Louisiana to encompass nearly every previously excluded and most of the previously exempt transactions. Additionally, this legislation enacted a new code section that increased the sales and use tax rate by one percent. These changes, were not to last long: on July 1, 2016, many of these changes expired and items that had been taxable at the full rate of 5% became taxable at a reduced rate. Most reduced rated items began taxing at a 3% rate; however, “other constructions permanently attached to the ground” became taxable at a 2% rate (this refers to leased property), and manufacturing machinery and equipment became taxable at a 1% rate.
Of course, some of the changes enacted during the First Extraordinary Session made items taxable that the legislature decided should remain fully exempt. These items were changed, once more, with the signing of House Bill 51 (Act 12), which was signed on June 28, 2016, as part of the Second Extraordinary Session of the Louisiana legislature. This change reinstated full exemptions for:
- Orthotics and prosthetics
- Hearing aids
- Prescription eyeglasses and contact lenses
- Ostomy, colostomy and ileostomy devices and equipment
- Kidney dialysis machines, parts, materials and supplies for home use under a physician’s prescription
- Butane, propane, or other liquefied petroleum gases for private, residential consumption
- Occasional sales
Last week, the state published an updated sales tax return, which provides further guidance as to what products are impacted by the July changes. Sovos is reviewing this new information and monitoring any further changes that may come in order to ensure that our clients will continue to collect, process, and remit their Louisiana Sales Tax.
Notably absent from the list of items being restored to full exemption under Act 12 are sales tax holiday eligible items.
Louisiana Sales Tax Holidays, 2016
Although, the hurricane preparedness sales tax holiday, generally held in May, was canceled this year, Louisiana is holding its annual sales tax holiday today (Friday, August 5) through tomorrow (Saturday, August 6). Louisiana has also announced that it will be holding the Second Amendment holiday from Friday, September 2, through Sunday, September 4.
In years past, the August holiday has provided a full exemption from state sales tax on the first $2,500 of the purchase price of most individual items of tangible personal property for non-business use, with the full state sales tax being due on the portion of the purchase price of any individual item in excess of $2,500. Similarly, the Second Amendment holiday has provided a full exemption for eligible items purchased during the holiday period.
Unlike prior years, the sales tax holidays for 2016 will not provide a full exemption for eligible items. Pursuant to House Bills 61 and 62 (Acts 25 and 26 respectively), sales tax holiday eligible items will be subject to a 3% rate which amounts to a 2% reduction from the full 5% state rate.
While local jurisdictions are required to participate in the Second Amendment holiday in September, the August holiday applies only to the state sales tax, not to any sales taxes levied by parishes, municipalities, school boards, or other political subdivisions of the state unless local jurisdictions opt into the holiday, which they are permitted to do. Typically, only St. Charles Parish, and St. John the Baptist Parish participate in the holiday. This year, only St. Charles Parish is participating. For those eligible items purchased in St. Charles Parish, they will be fully exempt from local tax, and will be subject to 3% state tax.
To stay up to date with all sales tax holidays, check out our handy guide and sign up to the Sovos blog for more important updates.
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