We travel south this month to Louisiana, the Pelican State. It is the 19th smallest by area and the 25th most populous of the 50 states. Louisiana is known for its soulful music, amazing food and rich heritage. The state’s multicultural background comes together in the form of festivities and lively interactions with the locals. Its annual Mardi Gras festivities and extravagant floats bring visitors from all over the world.
Much of the state’s lands were formed from sediment washed down the Mississippi River, leaving enormous deltas and vast areas of coastal marsh and swamp. These contain a rich southern biota; typical examples include birds such as ibises and egrets. There are also many species of tree frogs, and fish such as the sturgeon and paddlefish. In more elevated areas, there are extensive areas of longleaf pine forest and wet savannas. These support an exceptionally large number of plant species, including many species of terrestrial orchids and carnivorous plants.
Business Climate
Louisiana’s population, abundance of oil and natural gas, agricultural products, and southern Louisiana’s medical and technology corridors have contributed to its growing and diversified economy. The state’s principal agricultural products include seafood (it is the biggest producer of crawfish in the world, supplying approximately 90%), cotton, soybeans, cattle, sugarcane, poultry and eggs, dairy products, and rice. Among its energy and other industries, chemical products, petroleum and coal products, processed foods, transportation equipment, and paper products contributed a significant amount to the state’s economy. Tourism and gaming are also important elements in the economy, especially in the Greater New Orleans area.
Tax Climate
The top individual income tax rate is 6% and the top corporate income tax rate is 8%.
Apportionment: Louisiana taxpayers apportion income tax using a single-factor sales weighted formula.
Louisiana uses market-based rules for the sourcing of services.
Sales Tax Structure
The state sales tax rate is 4.45%, but its many parishes can levy a local amount too. The combined rate can be as high as 9.95% in Winn Parish. A unique compliance challenge in Louisiana is that its parishes require the collection of tax at the parish level tax and then to remit separately from the state level sales tax. This can create quite a compliance burden currently.
The state has an economic nexus law where the threshold is $100,000 or 200 transactions. Gross revenue from the sales of products, electronically transferred products, or services into the state are included in this threshold. Exempt sales and exempt services are also included in the threshold. The threshold applies to the previous or current calendar year. This legislation was effective as of July 1, 2020. Louisiana requires a remote business to register, collect and remit sales and use tax within 30 days of surpassing the economic nexus threshold.
A marketplace facilitator that has economic nexus with Louisiana must collect and remit sales tax on all marketplace sales for delivery into the state. Marketplace facilitators should include all sales made through the platform when calculating the economic nexus threshold (more than $100,000 in sales or at least 200 transactions of tangible personal property, electronically transferred property, or taxable services into the state.) This legislation was effective as of July 1, 2020.
Digital and electronic products are included in the definition of “tangible personal property” and are therefore subject to sales and use tax. Louisiana imposes sales tax on the sales of prewritten software delivered electronically. Sales of custom computer software delivered electronically are subject to sales and use tax. Although Louisiana’s sales and use tax provisions do not currently specifically address the tax treatment of cloud computing arrangements like software as a service (SaaS). How products are produced, sold and delivered is critical to determining the tax status.
Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. Louisiana had a sales tax holiday on the weekend of September 3 through 5, 2021. The exemption applied to all consumer purchases of firearms, ammunition and hunting supplies.
Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Louisiana or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Call us to help you achieve the best tax efficiencies.
Random Facts
- The world famous “Mardi Gras” is celebrated in New Orleans. Mardi Gras (or “Fat Tuesday”) is an ancient custom that originated in southern Europe. It celebrates food and fun just before the 40 days of Lent: a Catholic time of prayer and sacrifice.
- Louisiana was named in honor of King Louis XIV.
- Louisiana does not have counties. Its political subdivisions are called parishes.
- Breaux Bridge is known as the “Crawfish Capital of the World”.
- Louisiana is the only state with a large population of Cajuns, descendants of the Acadians who were driven out of Canada in the 1700s because they wouldn’t pledge allegiance to the King of England.
