Louisiana’s House Ways and Means Sub-Committee on State Tax Structure recently convened to review the state’s income, franchise, and sales tax structures. The group which is chaired by Representative Phillip DeVillier (R-41) is tasked through HR178 (2021 RS) to study Louisiana’s tax structure for the purpose of making recommendations with respect to eliminating the state’s tax levied on individual and corporate income and reforming state tax exemptions and credits ahead of the state’s 2023 Regular Legislative Session, which will be fiscal in nature.
On November 2nd, the sub-committee was provided an overview of Louisiana’s three major income tax sources: individual, corporate, and corporate franchise taxes. Secretary Kevin Richard and Deputy Secretary Luke Morris from the Louisiana Department of Revenue provided background on each of the taxes, highlighting the legislative changes that passed in 2021.
After the legislative changes passed in 2021, Louisiana’s current individual tax brackets are 1.85% for those making up to $12,500, 3.5% for those earning between $12,500 and $50,000, and 4.25% for Louisiana residents who make over $50,000 a year, with the thresholds doubled for those married filing jointly and surviving spouses. In 2021, a constitutional amendment was passed to cap the state’s individual income tax at 4.75%. The state’s corporate income tax brackets are 3.5% for those earning up to $50,000, 5.5% for those earning between $50,000 and $150,000, and 7.5% for businesses earning over $150,000. Beginning in 2023, the first tier of the state’s corporate franchise tax structure will have no taxes due on their first $300,000 of taxable capital and the second tier will have $2.75 due for each $1,000 in excess of $300,000 of taxable capital.
In fiscal year 2021, 40% of Louisiana’s revenue collections came from the state’s individual income tax, 6% came from corporate income tax, and 2% came from corporate franchise tax.
At a later meeting on November 14th, the sub-committee met to review Louisiana’s sales and use tax structure with officials from the Louisiana Department of Revenue, Legislative Fiscal Office, and the Remote Sellers Commission presented foundational information on the tax.
Currently imposing a 4.45% state sales and use tax, this Louisiana tax is levied on the sale or use of tangible personal property and eight specified services with some constitutional and statutory exclusions and exemptions. In addition to the state tax, each of the state’s 64 parishes levies a local sales tax which averages to be 5.10%. Combined, this 9.55% sales and use tax rate causes Louisiana to have the highest average rate in the nation.
Additionally, the state has the Louisiana Sales and Use Tax Commission for Remote Sellers, which collects both state and local sales taxes from remote or online sellers who sell to in-state residents. The Remote Sellers Commission utilizes an electronic filing system which provides these remote sellers with single filing monthly.
The next sub-committee meeting is scheduled for Wednesday, November 30th where the group will be reviewing severance tax, property tax, and excise tax. For any questions or concerns regarding this or any other legislative matters, please email mary.robinson@advantous.com.