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Louisiana Governor Proposes Sales Tax Hike, Internet Sales Tax

 The new governor of Louisiana has a plan to solve the state's fiscal woes.

Louisiana is currently facing a $750 million budget shortfall for FY 2016 and a potential $1.9 billion shortfall for FY 2017.  Newly elected Governor John Bel Edwards (D) is not mincing words: the state, he says, is “in a fragile position.” To help solve these fiscal woes, the governor is proposing a 1% state sales tax rate increase and a tax on all Internet sales. Taxes on alcohol, telecommunications, tobacco, and lodging booked through online travel companies (OTC), Airbnb, etc., would also eventually rise.

In his report, Stabilizing Our Budget, the governor lists the following options to address budget shortfalls in 2016 and 2017:

  • “Clean Penny” state sales tax: Add 1 cent to existing 4-cent state sales tax, maintaining the constitutional exemptions for groceries, prescription drugs, and residential utilities.
  • Require Internet sales tax collection and remittance by retailers
  • Establish a 5% flat tax rate for monthly landline and cell phone state telecommunications (up from the 2% interstate and 3% intrastate rates).
  • Raise tobacco tax to $1.08 per pack of cigarettes (currently $0.86 per pack)
  • Repeal business utilities sales tax exemption and index to price of natural gas

Other long-term options include:

  • Renew auto excise tax on vehicle rentals (expired in 2014)
  • Increase excise taxes on alcoholic beverages
  • Extend hotel sales tax to rooms booked by Online Travel Companies, Airbnb, etc.

That’s a lot of proposed tax hikes, and they could bring in sorely needed revenue. If the state sales tax rate increases by 1% on April 1, 2016, an additional $216 million in sales tax revenue could be collected by June 30, the end of the fiscal year. The proposed tobacco tax hike could bring in millions more.

In announcing his plan, Governor Edwards said, “Raising taxes is not my first, second, or even third option when seeking to fill the state’s budget shortfall. We must enter a season of shared sacrifice — enormous sacrifice — to fix the systematic budget problems in Louisiana. If we do this hard work together, Louisiana will be stronger over the long-term.” Since tax hikes require approval by at least two-thirds of both chambers and the Legislature is controlled by Republicans, the governor will have to work hard to sell this idea of sacrifice to those sitting on the other side of the aisle.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.