Sales Tax Slice: Will Louisiana’s ‘Clean Penny’ Rate Increase Expire on June 30?

The fate of Louisiana’s sales tax rate is up for debate once again. On May 22, the state legislature convened a second special session to address several concerns—chief among them, the June 30 sunset of its temporary 1 percent sales tax hike. If this increase, created in 2016 by Acts 25 and 26, is left to expire, the state is estimated to lose $1.4 billion worth of future revenue.

The legislation responsible for raising this rate also imposed temporary tax obligations on sales that had been traditionally exempt in the state, such as those made by nonprofits. These levies were coupled with a series of dates for which the 5 percent rate would be reduced and eventually eliminated. June 30 also happens to be the final phase-out date for most of these taxes.

During this second special session, Louisiana’s legislature is also wrestling with how to reduce the state’s overwhelming number of exemptions and exclusions. “Clean penny” advocates (subscription required) hold this particular issue paramount, pushing the removal of exemptions as a leading solution to the state’s budgetary woes.

Several attempts to resolve the matters of rate assignment and exemption clean-up have already failed. H.B. 11, which proposed to reduce the 1 percent increase to 0.5 percent, was unable to advance past committee last week. However, H.B. 27, which proposes to reduce the 1 percent hike to one-third of 1 percent, passed the House on May 28. Though this shows promise, passing another temporary extension scrapes at an even thornier battle, led by the governor, over permanently expanding the sales tax base to include more services.

It remains to be seen whether legislators can settle the sales tax issue by June 4 to avoid another special session.

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: Do you think the Louisiana Legislature will be able to strike a deal?

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