Understanding Louisiana Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Louisiana.
Louisiana levies a statewide 4 percent sales tax on retail sales, leases or rentals of tangible personal property and on the furnishing of specified services. Specified services include lodging and associated storage and parking, admissions, printing, cleaning, cold storage, and repairs of tangible personal property, and telecommunications. In addition, make sure you contact your local governments in Louisiana because they are allowed to assess a local sales and use tax
In Louisiana, you are generally allowed a credit for sales or use tax paid in another state for tangible personal property used in Louisiana. The amount of the credit may not exceed the amount of the Louisiana tax.
Leases Are Subject to Tax
Almost all lease or rental transactions are subject to the sales and use tax. Lease or rental means the possession or use of tangible personal property by the lessee or renter for a consideration, without transfer of the title of the property. Rental-purchase agreements are considered to be sales for sales tax purposes. The tax due on such transactions is payable in equal monthly installments over the entire term of the agreement, rather than at the inception of the agreement.
Retailers and Wholesalers Are Required to Collect Tax
In Louisiana, the sales taxes are collected by the seller (referred to as a "dealer" in Louisiana) from the purchaser or consumer. Wholesalers are required to collect advance sales taxes from dealers. Wholesalers include manufacturers, jobbers, and suppliers selling to anyone (retailers) for sale at retail. Retail dealers who have made advance payments of sales tax to wholesalers can then deduct the payments from the total tax collected by them when the items are sold at retail. Invoices from the wholesalers showing the advance payment is required to support the deduction.
When it comes to sales and use tax, Louisiana is different than other states in many ways. If you are a retailer purchasing goods for resale you must pay the sales tax to your wholesaler. If you are a wholesaler selling goods to a retailer who will in turn sell the goods to individual customers, you as a wholesaler must collect sales tax from the retailer. Then, when the retailer sells the goods to the ultimate customers, it must collect sales tax from its customers. However, if you are the retailer, you will be able to take a deduction for the advance tax payments you paid to the wholesaler when you remit the sales taxes you collected from your customers to the revenue department.
Absorbing the tax is not permitted. In Louisiana it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Tax Permits Are Required
In Louisiana, dealers (sellers) must register for sales and use tax purposes. However, vendor registration is informally authorized in Louisiana, not specifically being a part of the law or related regulations. In Louisiana, dealers are asked to contact the Application Central Registration Unit within the Department of Revenue and Taxation. They will then be furnished an application form and directions as needed for completing registration. Once registered, dealers will be sent appropriate return forms.
Many Items Are Exempt from Tax
Louisiana has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Louisiana sales tax. Louisiana has many specific exemption certificates that may be obtained from the Department of Revenue and Taxation, Taxpayer Assistance Section.
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Wholesalers Must Collect Advance Sales Tax
Although wholesale sales technically are exempt from tax, wholesalers are required to collect advance sales taxes from dealers (purchasers) to facilitate collection of the tax at the retail level. Wholesalers include manufacturers, jobbers, and suppliers selling to anyone for sale at retail. Basically, if you are a purchaser that will be selling the majority of your goods at retail, you will have to pay your wholesaler the sales tax. As a retail dealer who has made advance payments of sales tax to wholesalers you can then deduct the payments from the total tax collected by them when the items are sold at retail.
Physical Presence Triggers Tax Liability
Louisiana has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Louisiana. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Louisiana? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Louisiana for purposes of taking and transmitting orders from Louisiana? If your employee or independent contractor goes into Louisiana to take or transmit orders, your business may have physical presence in Louisiana. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Louisiana for purposes of delivering property? Frequent deliveries in Louisiana by your trucks will give you physical presence in Louisiana.
Louisiana Provides a Sales Tax "Bracket System"
The following bracket system may be followed by sellers in computing the sales tax at the 4 percent tax rate. The tax is computed on each dollar and/or fraction of a dollar according to the following table:
|$0.01 to 0.12 ||no tax |
|0.13 to 0.37 ||$0.01 |
|0.38 to 0.62 ||0.02 |
|0.63 to 0.87 ||0.03 |
|0.88 to 1.12 ||0.04 |
|and so forth || |
Claiming refund for excess tax payments
When merchandise is returned to the dealer (retailer) or a service charge is refunded to a customer on which tax has already been remitted, the dealer applies for a refund by filing an amended return within three years. The refund form is obtained from the Department of Revenue and Taxation. If the tax has not yet been remitted and a refund is made to the customer, the dealer may deduct the tax in his or her current return.
Louisiana Imposes Use Tax on Out-of-State Purchases
The use tax is levied on the consumption, use, distribution, or storage of tangible personal property in the state. The use tax is a complementary tax and does not apply in situations where the sales tax is collected.