Louisiana to provide a sales tax holiday in November

The Louisiana Legislature has unanimously approved legislation creating a one-time state sales tax holiday. It will take place November 20–21, 2020.

According to the fiscal note for House Bill 26, “The proposed holiday has the same applicability as the currently suspended Louisiana Annual Sales Tax Holiday, which is typically held during the first weekend in August.” Louisiana suspended its three annual sales tax holidays in 2018 to prevent the state from falling off a fiscal cliff. The annual tax-free periods aren’t scheduled to resume until June 30, 2025.

During the one-time sales tax holiday, the state sales and use tax won’t apply to the first $2,500 of the sales or cost price of any consumer purchases of tangible personal property, with the exceptions of vehicles subject to license and title, and meals furnished for on-premises consumption. 

For the exemption to apply, one of the following must occur:

• Title or possession is transferred from the seller to the customer at the point of sale
• A customer selects an eligible item and the seller sets it aside and places it on layaway for future delivery to the customer
• A customer makes final payment and withdraws an item from layaway that may have been placed in layaway before the sales tax holiday
• A customer orders and pays for an eligible item and the seller accepts the order for immediate shipment — even if delivery is made after the sales tax holiday — provided the customer hasn’t requested delayed shipment

Eligible items purchased with rain checks qualify for the exemption, “regardless of when the ‘rain checks’ are issued.” However, sales tax will apply if a rain check is issued during the sales tax holiday and the otherwise eligible item is purchased after the tax-free period has concluded.

No additional tax is due when eligible items purchased during the sales tax holiday are exchanged after the tax-free period, provided the exchanged item is “essentially identical” to the original purchase (e.g., it’s a different size or color).

However, if a customer returns an eligible item after the sales tax holiday and receives credit toward the purchase of a different item, tax is due on the new transaction.

Finally, sales tax will not be refunded on eligible items returned within 60 days of the conclusion of the sales tax holiday unless the customer provides a receipt proving the state sales tax was paid, or the retailer has other documentation proving the tax was paid.

Although the first draft of the bill would have permitted local governments to exempt qualifying items from local sales tax, the final version of HB 26 doesn’t allow local governments to provide a local sales tax holiday during the state sales tax holiday.

All retailers registered to collect and remit Louisiana sales tax must comply with the sales tax holiday, including those based in other states. For online sellers, automating sales tax collection and remittance helps ensure the proper amount of sales tax is collected.

The November sales tax holiday was created “to provide relief for recovery as a result of Hurricane Laura and the COVID-19 pandemic.” After starting 2020 with a projected surplus, Louisiana was expecting a deficit because of COVID-19 when Hurricane Laura hit. One of the most powerful storms to ever make landfall, Laura caused billions in damage to buildings, crops, forests, and utility systems.

The sales tax holiday won’t help the state recoup sales tax revenue lost when the pandemic forced retailers to close, but it will provide some relief to taxpayers struggling to make ends meet.