David Cassidy, Partner
David.Cassidy@bswllp.com
Nicole Gould, Of Counsel
Nicole.Gould@bswllp.com
Louisiana Tax Alert
Tim Barfield , Executive Counsel to the Louisiana Department of Revenue, , provided a draft of Governor Jindal’s tax reform bill to the Louisiana House Ways and Means Committee on March 19, 2019. The bill is scheduled to be introduced in the Legislative Session which opens April 8.The bill is already receiving opposition from parties ranging from various advocacy groups, local governments, business leagues, and religious leaders so it is unlikely that the bill will make it through in its present form, if it makes it all. (Indeed the opposition to the bill is so strong at this point that there is already talk about the Governor convening a special session to take up tax reform.) We will update you as changes occur. The purpose of this bulletin is to alert you of the proposed tax changes so that you may anticipate how the bill may affect you and your business. The proposed changes are to:
- Repeal individual income tax which represents a significant portion of the state’s revenue.
- Repeal the corporate income and franchise tax. This change is presently in HB 178, but the Administration’s version is coming.
- Increase the state sales and use tax rate from 4% to 5.88%.
- Broaden the state (but not the local) sales and use tax to include services which are not currently taxed., “Service” is defined as “all activities engaged in for other person, natural or juridical, for a fee, retainer, commission, or other monetary charge or consideration, which involve predominantly the performance of a service as distinguished from the selling of property.”
- Repeal certain sales and use tax exemptions.
To determine the impact of the Governor’s proposal you should consider every transaction you or your business enter into. If any transaction is not among the exempt transactions set out below then, you will be required to pay or collect and remit tax on those services and transactions. Under the draft bill, a service is taxable even if that service was not the principal reason for you entering into a transaction.
Proposed Taxable Services:
All Services, unless specifically exempted, are taxable; however the administration has a “target” list of services to be taxed.
|
Mining
|
213113+ |
Support services for other mining |
|
Transportation
|
|
Transit and ground passenger transportation services |
| 487 + 488 |
Scenic and sightseeing transportation services and support activities for transportation |
| 492 |
Couriers and messengers services |
|
Professional Services
|
5412 |
Accounting, tax preparation, bookkeeping, and payroll services |
| 5413 |
Architectural, engineering, and related services |
| 5414 |
Specialized design services |
| 541511 |
Custom computer programming services |
| 541512 |
Computer systems design services |
| 541513 |
Other computer related services, including facilities management |
| 54161 |
Management, scientific, and technical consulting services |
| 54162+9 |
Environmental and other technical consulting services |
| 5417 |
Scientific research and development services |
|
Advertising related services |
| 54192 |
Photographic Services |
| 54194 |
Veterinary services |
| 54199 |
All other miscellaneous professional, scientific, and technical services |
|
Business Services
|
5613 |
Employment services |
| 5615 |
Travel arrangement and reservation services |
| 5611 |
Office administrative services |
| 5612 |
Facilities support services |
| 5614 |
Business support services |
| 5616 |
Investigation and security services |
| 5617 |
Services to buildings and dwellings |
| 5619 |
Other support services |
| 562 |
Waste management and remediation services |
|
Information
|
5152 |
Cable and other subscription services |
| 518 |
Data processing-hosting ISP-web search portals |
| 519 |
Other information services |
|
Financial Services
|
52429 |
Insurance related support services |
|
Entertainment
|
7111 |
Performing arts |
| 7113 |
Promotional services for performing arts and sports and public figures |
| 7115 |
Independent artists, writers, and performers |
| 712 |
Museum, heritage, zoo, and recreational services |
|
Personal Services
|
8121 |
Personal care services |
| 8129 |
Other personal services |
Proposed Nontaxable Services:
(1) Services already taxed will not be subject to the state’s 5.88% rate , but will instead to continue to be taxed at the old state rate, 4%, and local sales tax rate. Therefore, the following are exempt from the additional tax under the proposal:
- Furnishing of hotel rooms,
- Sale of admissions to certain events,
- Furnishing parking facilities,
- Certain printing services,
- The furnishing of cleaning or storage services for clothes, furs, rugs, and the like,
- Furnishing of cold storage, and,
- Repairing tangible personal property:
(2) Services performed by an employee for his employer are not taxable.
(3) Services performed directly for the state, a political subdivision of the state, the United States government, or the agencies of the United States government are not taxable.
(4) Purchases and resales of advertising time or space from media outlets.
(5) The following services enumerated in the North American Industrial Classification System, 2007, as prepared by the Statistical Policy Division of the Office of Management and Budget, Office of the President shall be exempt from the tax levied and imposed by this Chapter:
(a) Industry 23112 Support Activities for Oil and Gas Operations.
(b) Sector 22 Utilities.
(c) Sector 23 Construction.
(d) Subsector 481 Air Transportation.
(e) Subsector 482 Rail Transportation.
(f) Subsector 483 Water Transportation.
(g) Subsector 484 Truck Transportation.
(h) Subsector 486 Pipeline Transportation.
(i) Subsector 491 Postal Service.
(j) Industry 51913 Internet Publishing and Broadcasting and Web Search Portals.
(k) Sector 52 Finance and Insurance, except Industry Group 5242 Agencies, Brokerages and Other Insurance Related Activities.
(l) Subsector 531 Real Estate, except Industry 53113 Lessors of Miniwarehouses and Self-Storage Units and Industry 531130 Lessors of Miniwarehouses and Self-Storage Units.
(m) Industry Group 5411 Legal Services.
(n) Sector 55 Management of Companies and Enterprises.
(o) Sector 61 Educational Services.
(p) Sector 62 Health Care and Social Assistance.
(q) Industry Group 8122 Death Care Services.
(r) Industry Group 8131 Religious Organizations.
(s) Industry Group 8132 Grantmaking and Giving Services.
(t) Industry Group 8133 Social Advocacy Organizations.
(u) Industry Group 8134 Civic and Social Organizations.
(v) Industry Group 8139 Business, Professional, Labor, Political, and Similar Organizations.
Nicole Gould Frey
BSW Tax Blog 