TTR Tracks Significant Sales & Use Tax Changes Coming in Louisiana on April 1, 2016

Wednesday, March 23rd, 2016

The Louisiana Department of Revenue

McMinnville, OR, March 23, 2016.


Those that follow sales and use tax laws closely are aware that Louisiana recently passed significant changes affecting the application of sales and use tax. These changes go into effect April 1, 2016. While the Department of Revenue is working diligently to release more information to the public, there is a wealth of information already available through the Louisiana State Legislature's website. The following link provides direct access to the various acts that impact all taxes in Louisiana, not just sales and use tax:

Like all states, Louisiana has a specific way that sales and use tax applies to taxpayers in the state. Most notable about Louisiana's state-level sales and use tax is that it is actually three (3) separately imposed taxes. In short, Louisiana imposes a 2% tax under a statute numbered 47:302, and two (2) additional 1% taxes that are found in statutes 47:321 and 47:331. Collectively, these three (3) taxes are thought of as Louisiana's state-level sales tax of 4%.

The significance of these three (3) taxes was less important prior to April 1, 2016. More specifically, prior to April 1, 2016, these three (3) taxes were uniformly applied to transactions in the state. In short, any transaction taxable under one of these three (3) taxes was taxable under all of these three (3) taxes.

This changes as of April 1, 2016. In addition, a new 1% state-level sales tax has been added, bringing the total number of state imposed sales and use taxes to four (4), resulting in a total combined rate of 5%.

New Rules and a New State Tax of 1%

Passed under Louisiana's First 2016 Extraordinary Session, several acts were signed into law on March 14, 2016. Two of those acts -- Act 25 and Act 26 -- broadly impact sales and use tax. Of particular interest to taxpayers is that the four (4) state-level sales and use taxes will not apply uniformly to transactions after April 1, 2016. Here is a high-level breakdown:

  • 47:302 (the 2% state tax) reduces the current number of available exemptions to 32 exemptions through June 2018. Beginning July 1, 2018, everything goes back to normal for this tax.
  • 47:321 (the 1% state tax) reduces the current number of available exemptions to close to 31 exemptions through June 2016. Beginning July 1, 2016, everything goes back to normal for this tax.
  • 47:331 (the 1% state tax) reduces the current number of available exemptions to close to 32 exemptions through June 2016. Beginning July 1, 2016, everything goes back to normal for this tax. (For those that "really" pay attention in tax class, this is actually a .96% tax and a .04% tax found in 51:1286 that follows all rules of 47:331).
  • 47:321.1 (the new 1% state tax) provides for 65 exemptions through June 2018. Beginning July 1, 2018, this tax will no longer be imposed.

Notable Manufacturing Industry Changes

Purchases of manufacturing machinery and equipment are among the more impacted transactions. Beginning April 1, 2016, purchases of manufacturing machinery and equipment are:

  • Exempt from the 2% tax under 47:302;
  • Taxed at 1% under 47:321 through June 2018, after which they will go back to being exempt;
  • Exempt from the 1% tax under 47:331; and
  • Taxed at 1% under the new tax created by 47:321.1 through June 2016, after which they will be exempt.

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