The cited sections of Chapter 2 of Title 47 are commonly referred to as the “Louisiana General Sales Tax” law (LGST). Its origin dates back to the 1950’s when the Legislature originally enacted a sales tax imposition statewide.
Section 301 “Definitions” is in many ways the crux of the LGST. It contains the controlling meaning and interpretation of words and phrases used throughout the ensuing sections of the law. Over the years this section has grown from a basic few terms to multiple, complex enactments by a succession of legislative measures.
Perhaps no other intrusion on the purpose of the definitions was the Legislature’s device of moving favored exemptions into the category of “definitions”, thereby providing them a safe harbor when state finances were dire and suspension of exemptions was the preferred way to raise revenues quickly and temporarily.
The Louisiana Streamline and Modernization Commission, during its study of the
complexities of the state’s sales tax scheme, recognized the true nature of definitions
intended to be “exclusions” as a distinction from those the Legislature intended to be “exemptions”. In its draft of recommendations, the Commission sought to restore the integrity of Section 301.
Section 47:302 is where the state imposes its 2% levy on the sales and use of certain
tangible personal property, the lease or rental of certain tangible property, and the sale of a set of defined services. Additional state sales tax impositions can be found at RS 47: 321 (1%), 331 (1%) and 331.1 (0.45%). When combined they total the current state sales tax rate on taxable goods and services of 4.45 percent.
The LGST is cluttered with the legislature’s largesse in sharing a portion of its sales tax on the service of providing hotel rooms with local governmental entities, mostly
Tourist and Visitor Commissions. The disposition of those funds at the local level is codified in sections 47:302.2 through 302.56
Sections 47:303 and 303.1 provide requirements for the collection of state sales tax by persons defined as “dealers” and specific instructions for dealers with respect to state and local sales taxes on motor vehicles, motor boats, off-road vehicles, health and fitness clubs, auctioneers and taxpayers which have received direct pay authorization.
Likewise, Section 304 Treatment of tax by dealer imposes additional fiduciary requirements, responsibilities and prohibitions in accounting for the collection of state and local sales tax.
While Section 47:305 is entitled “Exclusions and exemptions from the tax”, it is where most of the original exemptions from state and local sales tax are housed. One true “exclusion” lies in subsection 305 E., which announces “it is not the intention of any taxing authority to levy a tax….on exports….and bona fide interstate commerce”. This was the legislature’s way of saying “we can’t tax this even if we wanted to”.
Two major changes from the original set of exemptions itemized in Section 305 occurred in 1978 and 2003. During times when the state coffers were flush with
Severance tax collections resulting from the so called “oil boom”, it was a common practice for the legislature to generously grant sales tax exemption to favored constituencies. In doing so they were also giving away local revenue sources at the same time.
Local political organizations (LMA, Police Jury Associations and others) began
lobbying efforts to stem the tide of these losses, resulting in the passage of Act 205 of 1978. Future exemptions granted by the legislature would only apply to local taxing authorities if the act specifically stated such. In later years, after legislatures
became more reluctant to grant this “exception”, local taxing authorities were pressed into having to rely on the “local option” strategy rather than outright oppose every new proposed exemption.
During the development of the Uniform Local Sales Tax Code, following a drafting compromise, new terminology was introduced into the lexicon of state and local sales tax exemptions. “Solely for the purpose of state sales and use tax” was inserted in exclusion and exemption provisions of the LGST to clearly earmark which provisions applied to state sales tax levies and which were applicable to local taxes or to both state and local taxes.
Subsequent to RS 47:305 some seventy-one additional exemptions have been added to the LGST. As part of its working draft, the aforementioned Streamline and Modernization Commission outlined numerous recommendations for outright repeal of outdated exemptions and consolidation of similar subject matters into one simplified enactment.