Governor John Bel Edwards recently issued a press release highlighting his 2017 legislative agenda. While some of the highlights including reducing the gender wage gap and tackling the opioid substance abuse epidemic, a portion of the proposal will affect Louisiana’s complicated sales tax system, which accounts for approximately one third of Louisiana’s revenues. The agenda proposes to eliminate the “5th Penny” from the state’s sales tax, which would account for a decrease of $880 million from the state’s revenue. Louisiana’s state sales tax of 5% is actually made up of several different levies with different exemptions. The Legislature passed the most recent levy of 1%–the fifth penny–in a 2016 Special Session. The fifth penny was already scheduled to expire on July 1, 2018, but had combined with Louisiana’s local sales and use taxes to create some of the highest sales and use tax rates in the country. The fifth penny had already been subject to a round of legislation last year as confusion over the tax led to many rulings and revised rulings from the Louisiana Department of Revenue.
To make up for the lost revenue, the Governor proposes “clean[ing]” the existing pennies, and expanding the sales tax to include services. While Louisianans might fret over an increase of sales tax on services, the inclusion is predicted to raise less revenue overall when combined with the expiration of the fifth penny.
Additionally the governor is proposing a Commercial Activity Tax on taxable gross receipts greater than $1.5 million at a rate of 0.35%. Louisiana is not alone in proposing a gross receipts tax this year, however this may be a case of the grass being greener on the other side as one of the success stories, Texas, is considering scrapping theirs.