Louisiana was the first state to offer sales tax refunds to their international visitors. Unlike “duty free” shops at international airport departure terminals, Louisiana’s refund program is available at hundreds of stores throughout the state. International tourists must pay sales tax at the time of purchase and can then seek a refund later. The refund applies to tangible items purchased at tax-free stores and permanently removed from the United States. It does not cover sales taxes paid for personal services, such as hotels, restaurants, entertainment and transportation.
While many focus on the program’s influence on consumers, it also has an effect on retailers. To comply with reporting measures, businesses must often times develop new recordkeeping procedures, hire extra employees and, in previous years, pay fees.
In May, Louisiana enacted S.B. 51 to alleviate some of the costs incurred by retailers who participate in the program. For previous years, participating retailers were charged membership fees, which were set and adjusted by the Louisiana Tax Free Shopping Commission. The new legislation removes the Commission’s authority to charge such fees. Additionally, retailers who participate in the program will now register their location and the method of operating an international traveler's refund desk, including a system of record keeping for refund forms.
The new registration requirement reflects the fact that expenses incurred by the state are projected to be funded almost exclusively by international tourists instead of local retailers, according to the Louisiana Legislative Fiscal Office . Despite membership fees no longer being collected, the reduction in revenue from the fee is expected to be offset by growth in handling fee revenue charged to participating international tourists. Handling fees are charged when international tourists seek sales tax refunds.
The Fiscal Office determined that the bill is expected to reduce self-generated revenue by about $80,000 per year by eliminating the membership fee (approximately 800 participating retailers x $100 membership fee). However, even with the reduction, the Commission experienced increased revenue collections related to a flat-rate handling fee on sales tax refunds that has provided enough revenue to offset the proceeds of the membership fee.
Whether the removal of membership fees will have a lasting effect on state coffers remains to be seen. In the meantime, Louisiana businesses have a break on an annual fee.
Continue the discussion on Bloomberg BNA’s State Tax Group onLinkedIn: How effective are state tax holidays and how do they impact taxpayers?
For more information about this and other state tax issues, sign up for afree trial of the Bloomberg BNA Premier State Tax Library.
By Mark J. Kennedy
Follow us on Twitter: @BBNAtax
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)