New Orleans lowers sales tax rate for diapers and tampons

New Orleans lowers sales tax rate for diapers and tampons

Diapers and feminine hygiene products are now exempt from half of the local sales tax in New Orleans, Louisiana. However, they continue to be subject to a 2.5% city sales tax and the 4.45% Louisiana state sales tax rate.

The New Orleans City Council announced the proposed exemption in August, saying it would lower the cost of “these essential items during the pandemic-induced economic downturn.” In fact, the council first proposed the exemption in 2019, before COVID-19 hit the United States, but it couldn’t act on the idea at the time.

Louisiana is a home rule state, so local governments can administer their own local sales taxes. Yet there are certain limits to local authority, especially with respect to taxation. Before New Orleans could exempt diapers and feminine products from a portion of the local sales tax, it needed the Louisiana Legislature to grant them the authority to do so.

During a December 2019 New Orleans City Council meeting, the council unanimously adopted a resolution “expressing support for the Louisiana State Legislature to introduce and pass legislation to allow local governments to grant tax exemptions on feminine hygiene products and diapers.” Governor John Bel Edwards signed the resulting bill into law on August 1, 2020. It authorizes political subdivisions to exempt purchases of diapers and feminine hygiene products from local sales and use tax “by ordinance or resolution,” through December 31, 2021.

By August 20, 2020, the New Orleans City Council had adopted a resolution exempting feminine hygiene products and diapers (adult and children) from City of New Orleans sales and use taxes. The resolution doesn’t mention specific rates, but according to Council Vice President Helena Moreno, the 5% city sales tax isn’t “completely eliminated” for these products because the council only has authority over half (2.5%) of the city’s sales and use tax. The remaining 2.5% funds the Regional Transit Authority and New Orleans Public Schools.

The 2.5% city rate will be in effect “so long as authorized by La. R.S. 47:337.10.2 or by any other applicable provision of state law.” For now, that means it will expire December 31, 2021.

According to the City Council, New Orleans is “the first city in Louisiana to grant a sales tax exemption on feminine hygiene products and diapers.” It won’t be the last. In fact, the East Baton Rouge Parish Metropolitan Council passed an ordinance to exempt them from city sales tax during its October 14, 2020, meeting. That exemption will take effect January 1, 2021.

Could an exemption from state sales tax be next?

In February 2019, Senator Jean-Paul (JP) Morrell introduced legislation (SB 4 and SB 5) seeking to eliminate the statewide sales tax on diapers and feminine hygiene products. While there was some support for the idea, the bills failed to win the votes needed to become law.

However, these products are exempt from state and local sales tax in a growing number of states, including California (temporarily), New York, and Washington.

Keep your finger on the pulse of sales tax news by following the Avalara blog.

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