Louisiana may keep temporary sales tax increase
- Sales Tax News
- May 2, 2017 | Gail Cole
Faced with a “fiscal cliff,” Louisiana lawmakers in 2016 voted to increase the state sales tax rate by 1 percent. The increase was intended to be temporary, expiring July 1, 2018, and under Gov. John Bel Edwards’s proposed budget plan, it would expire as planned. Yet with few options for additional revenue, legislators are now considering keeping at least a portion of the penny tax past its expiration date.
House Bill 638, which would extend the sunset of the temporary one cent sales and use tax to June 30, 2023, does not have much support among lawmakers. Even its sponsor, Rep. Sam Jones, would rather not see the increase extended. Yet many legislators think an extension may be necessary. Sen. Blade Morrish is against the higher rate but acknowledges that “lawmakers might have no other solution.” And Rep. Julie Stokes said, “I think it’s fairly unavoidable that we’ll renew at least a part of the penny.”
Louisiana’s budget problems run so deep that no one solution will fix them all, and another option on the table is broadening sales tax. Two measures have been introduced in the state legislature that would extend Louisiana’s sales and use tax to many services, per the recommendation of a Task Force on Structural Changes in Budget and Tax Policy. Both House Bill 655 and House Bill 562 would tax the following beginning September 1, 2017:
- Credit reporting and debt collection services
- Data processing and storage services
- Information services
- Insurance services
- Immovable property services such as landscaping
- Personal services including escort services, massage parlors, and Turkish baths
- Security services
- Telephone answering services
The measures would also tax digitally or electronically delivered goods and services, such as apps, books, games, music, photographs, and videos. Gov. Edwards supports a broader sales tax, although he’d like to pair it with a lower rate.
Still another option under consideration is replacing corporate income and franchise taxes with a gross margins tax. If enacted, House Bill 648 would mean the end of numerous tax breaks that cost the state tens of millions in revenue annually. Tax breaks would also suffer under House Bill 562. A tax on commercial activity proposed by the governor last month all but died in the House Ways and Means Committee shortly after being introduced — HB 628 sponsor Rep. Sam Jones asked that it be voluntarily deferred.
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