Louisiana Sales and Use Tax Legislation Changes in 2025

State Tax Rate Change

Act 11 (HB 10) increases the state sales and use tax rate to 5% from 4.45%. The state tax rate of 5% will continue to December 31, 2029, and will change to 4.75% on January 1, 2030, absent any future legislative actions.

Act 11 also imposes an additional state sales tax of 5% upon all charges for telecommunications services, cable television services, direct-to-home satellite services, video programming services, and satellite digital audio radio services in the state. This 5% tax rate is in lieu of any sales and use tax that would be otherwise levied and collected by local governments.

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Vendor’s Compensation (State and Local)

Act 11 (HB 10) reduces the vendor’s compensation that the state allows for collecting and remitting sales tax from $1,500 to $750 per month and repeals the vendor’s compensation requirement for local taxes.

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Changes to Local Sales and Use Tax Returns

Act 11 (HB 10) requires sales tax collectors for parishes to modify their tax returns to provide a separate line item for sales of prescription drugs and a separate line item for the sale of manufacturing, machinery, and equipment. The parishes must modify their sales and use tax returns before January 1, 2025.

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Tax Base Expansion

The Louisiana Legislature has expanded the tax base in multiple ways—by imposing sales tax on new transactions, by eliminating existing exclusions/exemptions, and by permanently taxing transactions that are currently subject to suspended exclusions/exemptions.

I. Taxing New Transactions

Act 10 (HB 8) expands the tax base by imposing state sales and use tax on the sale or lease of “digital products.” All provisions where tangible personal property is taxed and is mentioned for sales and use tax purposes are amended to include “digital products.”

The bill defines “digital product” to mean digital audiovisual works, digital audio works, digital books, digital codes, digital applications and games, digital periodicals and discussion forums, and any other otherwise taxable tangible personal property transferred electronically, whether digitally delivered, streamed, or accessed and whether purchased singly, by subscription, or in any other manner, including maintenance, updates, and support. There are some limited exclusions and exemptions.

Act 11 (HB 10) enacts a new statute, Section 301.3, titled “Services,” that enumerates all services that are taxable in Louisiana. Taxable services that were listed in R.S. 47:301(14) have been transferred to the new statute but have been expanded to include the following new services:

• Providing prewritten computer software access services. The term “prewritten computer software access services” means charges made to customers for the right to access and use prewritten computer software, where possession is maintained by the seller or third party (e.g., Software as a Service).
• Providing information services. The term “information services” means electronic data retrieval or research; and collecting, compiling, analyzing, or furnishing of information of any kind, including, but not limited to, general or specialized news, other current information or financial information, by printed, mimeographed, electronic, or electrical transmission, or by utilizing wires, cable, radio waves, microwaves, satellites, fiber optics, or any other method now in existence or which may be devised; this includes delivering or providing access to information through databases or subscriptions.
  

II. Repealing Existing Exclusions/Exemptions

Act 11 (HB 10) repeals, among others, the following exclusions/exemptions:

• Separately stated transportation charges [Note: This elimination would make transportation charges billed by a dealer to be part of the taxable cost price or sales price].
• Leases or rentals of a crane and related equipment with an operator.
• Charges for repaired property that is delivered outside the state by either a common carrier or the United States Postal Service or that is delivered outside the state by the use of the dealer’s own vehicle or independent trucker.
• Sales or use of machinery and equipment used by a motor vehicle manufacturer (NAICS code 3361) or glass container manufacturer (NAICS code 327213).
• Separately stated charges to install board roads for oil field operators.
• Coin-operated vending machine sales [Note: This repeal changes the taxation point. Currently, sales to a dealer who purchases items for resale through a coin-operated vending machine are subject to tax and the subsequent resale is not. The elimination of the exclusion would make the subsequent resale from the vending machines taxable].
• Reduction of cost price for news publications distributed at no cost to readers.

III. Permanently Taxing Transactions Subject to Suspended Exemptions/Exclusions

In 2016, the Louisiana Legislature suspended numerous exclusions and exemptions with phase-in periods, and the suspension would have been lifted on July 1, 2025, thereby making those exemptions and exclusions effective again. Now, the Legislature has chosen to repeal them.

Act 11 (HB 10) continues, among others, the taxation of the following transactions:

• Separately stated labor charges on personal property repaired outside of Louisiana and returned to the state
• Machinery and equipment related to manufacturing, producing, or extracting unblended biodiesel
• Pollution control device or system approved by the Department of Revenue and the Department of Environmental Quality
• Leases and rentals of pallets which are used in packaging products produced by a manufacturer
• Custom computer software excluded from the definition of tangible personal property
• Interchangeable components used as a measurement while drilling (Valuation Method)
• Manufacturers’ direct payments to dealers for the purpose of reducing the sales price of the product
• Electric power or energy, or natural gas for use by paper or wood products manufacturing facilities
• Leases of motor vehicles by a licensed motor vehicle dealer or manufacturer that are furnished at no charge to a customer under the terms of a warranty agreement
• Sale of pelletized paper waste when purchased for use as combustible fuel by an electric utility or in an industrial manufacturing, processing, compounding, reuse, or production process
• Cellular phones or accessories given or sold to customers below cost in connection with the purchase of a service contract
• Newspapers excluded from the definition of tangible personal property
• Natural gas held, used, or consumed in providing natural gas storage services or operating natural gas storage facilities
• Sale or use of storm shutter device
• Sale of anthropogenic carbon dioxide for use in a qualified tertiary recovery project that is approved by the Department of Energy and Natural Resources

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Consolidation of Exclusions and Exemptions

Act 11 (HB 10) rewrites the Chapters for Sales and Use Tax by eliminating exclusions and exemptions from the definitions in R.S. 47:301 and moving them to newly-enacted exemption statutes. The overhaul would make it easier for taxpayers to locate the exemptions and apply them. They include:

Section 305 – Exemptions from Tax
Section 305.2 – Exemptions; Medical
Section 305.2 – Exemptions; Agricultural
Section 305.4 – Exemptions; Raw Materials for Further Processing
Section 305.5 – Exemptions; Manufacturing Machinery and Equipment
Section 305.6 – Exemptions; Schools and Educational Materials
Section 305.7 – Exclusions and Exemptions; Intergovernmental; Government
Section 305.8 – Exclusion; Funeral Directing Services
Section 305.13 – Exemptions; Purchases by Certain Religious Institutions
Section 305.16 – Exemptions; Purchases by Certain Nonprofit Organizations

The new statutes may provide more clarity as to whether the exemptions apply to the state and local taxing authorities.

As part of the rewrite, the Legislature adopted general sourcing rule and bundled transaction definition, which are patterned after the Streamlined Sales and Use Tax Agreement with certain exceptions and modifications.

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Tax Exemptions by Parishes

R.S. 47:337.8 currently provides that no state sales tax exemption enacted after or granted after July 1, 2003, shall be applicable to local taxes unless the exemption statute specifically included local tax. Act 11 (HB 10) amends the statute to restrict the applicability of the provision to exemptions enacted or granted after July 1, 2003, and before January 1, 2025.

R.S. 47:337.10 currently enumerates exemptions that are optional to local authorities. Act 11 (HB 10) amends the statute by deleting various exemptions from the list and making the following exemptions the only remaining optional exemptions after January 1, 2025:

• Prescription drugs
• Manufacturing machinery and equipment
• VEFG Inhibitors and complex biologics by Caddo Parish
• Capital equipment by qualifying radiation therapy centers

If you have any questions about these recent legislative updates, connect with a member of our DMA team:

Eleanor Kim, Tax Counsel
800-309-2110, ext. 1323
email: ehkim@dmainc.com

Garfield Grant, Vice President, Transaction Tax Practice Development
800-309-2110, ext. 2329
email: ggrant@dmainc.com