Louisiana rolled out sweeping changes to its sales and use tax laws starting January 1, 2025, aimed at modernizing its tax system and funding broader reforms. Under Act 10 (HB 8) and Act 11 (HB 10), the state is increasing the sales tax rate, expanding the tax base, and introducing new compliance requirements for taxpayers.
Key Sales Tax Changes
- State Sales Tax Rate Increase: The state sales tax rate will rise from 4.45% to 5%.
- Expansion to Telecommunications and Media Services: Services such as telecommunications, cable TV, direct-to-home satellite, video programming, and satellite digital audio radio will now be taxed at the 5% state rate. These services will remain exempt from local sales taxes.
- Taxation of Digital Products and Services: Digital products, including streaming, digital books, apps, games, and Software as a Service (SaaS) will be subject to sales tax. Custom computer software will also lose its exempt status and become taxable.
- Repeal of Certain Exemptions: Manufacturing machinery, equipment for named industries, and other items previously exempt will now be taxable. Additionally, several suspended exemptions, such as labor charges on out-of-state repairs and certain pollution control devices, will be permanently taxable.
- Vendor’s Compensation and Filing Changes:
- 1. State vendor’s compensation for timely filing will be capped at $750 per month, and local vendor’s compensation will be eliminated.
- 2. Parish tax returns will now include new line items for prescription drug sales and manufacturing machinery.
- Reorganization of Exemptions: Exemption statutes will be reorganized for clarity, with no substantive changes to their application. Louisiana Sales and Use
Detailed Taxation of Digital Products and SaaS
The updated law extends sales tax to digital goods and services, such as:
- Digital audiovisual works, e-books, and periodicals.
- Applications and digital games.
- SaaS and information services, including data retrieval and electronic delivery.
Exemptions remain for certain commercial uses, such as:
- Products and services used in manufacturing taxable goods.
- Transactions by FDIC-insured financial institutions for data processing.
- Healthcare providers’ purchases for managing medical information.
Local governments will adopt these changes, applying the same rules for digital goods.
Louisiana Sales and Use Tax Nexus and Filing Requirements
Out-of-state businesses exceeding $100,000 in retail sales to Louisiana customers may need to collect and remit both state and parish sales taxes. This includes marketplace facilitators and remote sellers.
Next Steps for Businesses
With these changes, businesses should:
- Review their operations and confirm compliance with Louisiana’s revised sales tax laws.
- Evaluate the taxability of their products, services, and exemptions.
- Adjust systems and processes to handle new filing and reporting requirements.
If you need guidance, Leyton’s State and Local Tax Team is here to help you navigate these complex updates.
