Louisiana

Understanding SaaS Taxability in Louisiana

Is SaaS Taxable in Louisiana?

As of January 1, 2025, Louisiana has enacted significant tax reforms affecting the taxation of Software-as-a-Service (SaaS) products. Previously, Louisiana did not impose sales tax on SaaS at the state level. However, recent legislative changes have expanded the sales tax base to include digital products and SaaS.

State Sales Tax Rate Increase

In addition to broadening the tax base, Louisiana has increased its state sales and use tax rate from 4.45% to 5%, effective January 1, 2025.

Local Tax Considerations

Louisiana’s tax system includes numerous local jurisdictions, each with distinct tax codes. While the state has expanded its sales tax to include digital products and SaaS, local parishes may have their own regulations and rates. Some parishes have pursued taxation of SaaS through audits and published guidance.

Determining SaaS Taxability in Louisiana

To assess whether your SaaS product is taxable in Louisiana:

Product Classification: Evaluate whether your offering qualifies as SaaS. SaaS is typically defined as a service where customers access software hosted on external servers without taking possession of it.
Legislative Updates: Stay informed about Louisiana’s tax laws, as changes can impact the taxability of SaaS products.

Nexus Thresholds in Louisiana

Establishing nexus in Louisiana depends on:

Physical Nexus: Having a physical presence, such as an office or employees, within the state.
Economic Nexus: Surpassing $100,000 in gross sales to Louisiana customers within a calendar year.

Sales Tax Compliance Checklist

To ensure compliance with Louisiana’s sales tax regulations:

Register for Sales Tax Permit: Businesses meeting nexus criteria must register with the Louisiana Department of Revenue to obtain a sales tax permit.
Collect and Remit Sales Tax: Once registered, businesses must collect the appropriate sales tax on all taxable products and services, including SaaS.
File Sales Tax Returns: Depending on sales volume, businesses may need to file returns monthly, quarterly, or annually. Accurate and timely filing is critical to avoid penalties.

Examples of Taxable vs. Non-Taxable Products in Louisiana

Taxable Products:
- Prewritten (canned) software sold and delivered electronically or via tangible media.
- Custom software developed for a specific client.
- Digital products such as movies, music, and e-books.
- SaaS products accessed via external servers.
Non-Taxable Products:
- Services that do not involve tangible personal property or digital access, such as consulting services.

Penalties for Non-Compliance in Louisiana

Failure to comply with Louisiana’s sales tax laws can result in:

Interest and Penalties: Late payments or failure to file returns may incur penalties and interest charges.
Audits: The Louisiana Department of Revenue may conduct audits to ensure compliance. Discrepancies could result in additional fines and assessments.

Maintaining accurate records and adhering to filing deadlines are essential to avoid these consequences.