Home News State tax changes in effect for individuals and businesses

State tax changes in effect for individuals and businesses

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Louisiana’s overall state sales tax rate decreased from 5 percent to 4.45 percent effective Sunday, July 1. 

The new rate, enabled by House Bill 10 of the third special legislative session, is to be levied upon the sale at retail, the use, the consumption, the distribution and the lease or rental of an item of tangible personal property; and upon the sale of services.

In the state’s third special session that ended June 24, state lawmakers approved a partial extension of the state’s temporary sales tax hike.

A 1-percent increase in the sales tax was scheduled to expire July 1, but after heated debate, legislators have approved an extension at a lower.45 percent increase.

The decision was one that was unpopular with many GOP legislators and ended up taking three special sessions and lots of wrangling.

“This is a compromise in every sense of the word,” said Democratic Gov. John Bel Edwards. “Republicans, Democrats and Independents have come together to fully fund TOPS, stabilize funding for higher education, and ensure that critical state services are not interrupted.”

Other tax changes include a state sales tax rate of 2 percent for business utilities.

This is a reduction as business utilities were currently taxed at 4 percent through June 30, 2018. That rate was scheduled to be reduced to 1 percent on July 1 through March 31, 2019, but as a result of HB 10, the rate on business utilities was set at the current 2 percent rate. It will run until June 30, 2025. Business utilities include steam, water, electric power or energy, natural gas, or other energy sources for non-residential use.

The Louisiana Department of Revenue has issued Revenue Information Bulletin 18-016 to provide an explanation of the provisions of HB 10.

According to Louisiana law firm, Kean Miller, HB 10 also removes various exemptions by listing those items that remain exempt, or will become exempt, which include but are not limited to:

  • Other constructions permanently attached to the ground (2% to 0%)
  • Sales of electricity for chlor-alkali manufacturing (3% to 0%)
  • Rentals or leases of oilfield property for re-lease or re-rental (3% to 0%)
  • Labor, materials, services and supplies used for repair, renovation or conversion of drilling rig machinery and equipment (3% to 0%)
  • Repairs and materials used on drilling rigs and equipment (3% –> 0%)
  • Sale of property for lease or rental (2% to 0%)

Food for home consumption, natural gas, electricity, water, prescription drugs, articles traded in on new articles, and gasoline remain nontaxable under the Louisiana Constitution.

The rate of state tax on purchases of manufacturing machinery and equipment was scheduled to be is currently 1 percent but is now fully exempt.

For the full list of changes in tax rates that took effect on July 1, 2018, see Louisiana Department of Revenue’s publication, R-1002(07-18).