2025 Fiscal Session Updates – Sales Tax
The 2025 fiscal session just wrapped up. While we were expecting numerous additional sales tax changes on top of what was passed in last November’s special session, the primary sales tax bill ended up being the bill used to “clean up” the changes made in the special session. Below are some of the main takeaways.
HB578 (Emerson)
- Included significant cleanup of Title 47 to ensure that wherever there was a reference in the statutes to tangible personal property, that reference also included the term “digital products”.
- Added an exclusion for the resale of services for both state and local taxes.
- Amended the digital products and services exemption for health care facilities to include computer software, prewritten computer software access services, and information services (under the act passed in the 2024 special session, the exemption language only covered digital products).
- States that the Department of Revenue shall promulgate rules and regulations for the implementation of the digital products and services exemption by December 31, 2025 (see hot topic below for more information).
- Added that any local ordinances or resolutions in effect before 1/1/25 related to the manufacturing machinery and equipment exclusion shall remain in effect regardless of the fact that the exclusion has been converted to an exemption and relocated to a different statute.
- Added an exemption for digital products and services used in the maintenance or operation of commercial vessels
- Extended the exemption for purchases made by state and local governmental entities to include purchases made by contractors that perform construction projects for such entities.
- Provides for an exemption on repairs to tangible personal property when the repair property is delivered to a common carrier for transportation outside of the state.
- Provides for an exemption from state and local tax for the lease or rental of motor vehicles by licensed motor vehicle dealers when used in the performance of their obligation under warranty agreements.
- Added back numerous exemptions for non-profit organizations, some of which include exemptions related to Sickle Cell Disease, Habitat for Humanity, qualifying radiation therapy treatment centers and admissions charges to certain events sponsored by non-profits.
*Please note, all of the above changes apply retroactively to January 1, 2025.
SB 162 (Reese)
- Amends definition of “dealer” for the purpose of imposing sales and use tax. Extends local vendor’s compensation deduction to remote sellers. Extends definition of marketplace facilitator. Establishes an economic threshold to which a marketplace facilitator is deemed a dealer
- “Dealer” is further defined to mean: any person who is engaged in business in Louisiana through participation in the retail sales market within the state through any means whatsoever or who otherwise avails himself of the substantial privilege of carrying on business within the state, including through virtual or economic contacts.
- Inserts the term “digital products” into the definition of “dealer” (in place of “products transferred electronically”).
- Cleans up and makes uniform economic nexus thresholds in tax imposition statutes with respect to remote sellers and marketplace facilitators ($100,000 sales threshold).
- Requires Remote Sellers Board to allow local vendor’s compensation at each jurisdiction’s specific rate.
ACT 215 / HB 654 (Beaullieu)
- Beginning January 1, 2026, all sales and use tax exemptions, exclusions, credits, or rebates enacted by the legislature shall be applicable to state and local taxing jurisdictions.
HB 500 (Beaullieu)
- Provides for a mediation option in response to a final assessments at the local level; outlines the process and deadlines for the mediation. For mediation procedures to be binding, all parties must agree in writing.
- Expands powers and duties of ULSTB with regard 2 private letter rulings and other policy advice.
SB 112 (Jackson-Andrews)
- Restores local vendor’s compensation. Extends deduction to remote sellers.
- The rate of vendors compensation shall be specified in local ordinance.
SB 243 (Reese)
- Clarifies that the sale of prescription drugs to an individual enrolled in any Louisiana Medicaid program is exempt from state and local sales and use tax
HOT TOPIC:
As a result of the November 2024 Special Session, effective 1/1/2025, information services, prewritten computer access services and digital products are subject to state and local sales and use tax. There is a business-to-business (B2B) sales tax exemption that also took effect on January 1, 2025, under La. R.S. 47:305.12(A). The 3-prong test below must be met in order to qualify for the exemption.
- Purchased or licensed exclusively for commercial use, and
- Used directly in producing goods or services for sale, and
- Your business’s sales are subject to state sales tax or the insurance premium tax.
There seems to be significant disagreement related to what constitutes “used directly in producing goods and services for sale.” What does that mean? In some cases, we have seen businesses try and use the exemption certificate (R-85011) but vendors are refusing to accept the certificate. Per HB 578 that was just passed, the Department of Revenue should be issuing guidance within the next 6 months related to this issue. If you have questions or want to discuss whether a digital product or service qualifies, please reach out to our sales tax professionals.