Louisiana enacts tax legislation package
TAX ALERT |
Louisiana Gov. John Bel Edwards has signed into law multiple tax bills impacting the sales and use, corporate net income, and franchise taxes. Changes include the enactment of an affiliate nexus standard for sales tax purposes, temporary increase in the sales tax rate, and expansion of the types of entities subject to the state’s franchise tax. These bills are summarized as follows:
- H.B. 19, which expands the corporate franchise tax to apply to additional entity types, including partnerships, joint ventures, and limited liability corporations that elect to be treated as corporations for federal tax purposes, with the exception of LLCs that elect to be treated as S-corporations. Additionally, the bill increases the initial franchise tax to $110 from $10.
- H.B. 30, which, effective Apr. 1, 2016, expands the definition of “dealer” to include a remote seller with more than $50,000 in Louisiana receipts in a year that enters into an affiliate arrangement to solicit business with an in-state an independent contractor or other representative.
- H.B. 43, which, effective Apr. 1, 2016, limits a vendor’s compensation for the collection and remittance of sales taxes to $1,500 per month.
- H.B. 55, which, effective Jan. 1, 2016, creates an add-back requirement for intercompany intangible, interest, and management expenses for corporate income tax purposes. The bill includes “subject to tax”, “tax treaty”, “economic substance and business purpose”, and “conduit” exceptions that may be used to reduce the add-back amount.
- H.B. 59, which, effective July 1, 2016, expands the definition of “hotel” for state sales and use tax purposes to include short term rentals, such as those provided by Airbnb.
- H.B. 61, which limits the applicability of certain exemptions between either Apr. 1, 2016 and July 1, 2016, or Apr. 1, 2016 and June 30, 2018.
- H.B. 62, which, effective from Apr. 1, 2016, through June 30, 2018, applies an additional 1 percent sales tax to all sale’s currently subject to the state’s tax, as well as a number of transactions not subject to the state's 4 percent sales tax, including medical devices, freight charges, custom software, repairs to offshore drilling rigs, and vehicle rentals.
- H.B. 71, which, effective Mar. 10, 2016, reduces benefit of certain tax credits provided under the state’s Enterprise Zone program. Additionally, the bill removes eligibility for certain hotels.
Businesses that are subject to Louisiana’s the sales and use, corporate net income, and franchise taxes should review these law changes, as they may have significant impact on liability. Additionally, remote sellers making sales into Louisiana and which operate affiliate programs should consider whether they will be required to collect and remit sales tax going forward.