Louisiana to raise sales tax rate and tax digital products

Louisiana is increasing the state sales tax rate and broadening sales tax to select digital products and services effective January 1, 2025. If your business collects and remits Louisiana sales tax, here’s what you need to know.

House Bill 10 increases Louisiana’s state sales and use tax rate to 5% from 4.45% starting January 1, 2025. 

The Louisiana state sales tax rate has been 5% before: It temporarily increased from 4% to 5% on May 1, 2016, then dropped to 4.45% on July 1, 2018. The sales tax rate was on track to drop further starting July 1, 2025. Instead, it will return to 5% on January 1.

Under HB 10, the sales and use tax rate will decrease to 4.75% starting January 1, 2030.

House Bill 8 extends Louisiana sales and use tax to the following digital products:

• Digital audiovisual works
• Digital audio works
• Digital books
• Digital codes
• Digital applications and games
• Digital periodicals and discussion forums

Louisiana sales tax also applies to “any other otherwise taxable tangible personal property transferred electronically, whether digitally delivered, streamed, or accessed and whether purchased singly, by subscription, or in any other manner, including maintenance, updates, and support.”

Computer software, prewritten computer software access services, information services, or digital products purchased or licensed exclusively for business use or health care use remain exempt from Louisiana sales and use tax provided certain conditions are met.

HB 8 specifies that a “sale” or “use” of digital products means “the first act within this state by which the taxpayer, as a consumer, views, accesses, downloads, possesses, stores, opens, manipulates, or otherwise uses or enjoys the product.” For prewritten computer software, a “sale” or “use” means “the first act within this state by which the taxpayer, as a consumer, uses, enjoys, or otherwise receives the benefit of the service.”

The sales tax changes are part of a broader tax reform package adopted during a special legislative session that ended the Friday before Thanksgiving. Yet in announcing the tax reform package, Governor Jeff Landry didn’t mention sales tax. Instead, he focused on the fact that Louisiana is lowering income taxes, upping the standard deduction, and abolishing the corporate franchise tax.

Landry hailed the tax package as “a huge step” toward overhauling the state’s “outdated and bloated tax code.” That’s one way of looking at it. The Institute on Taxation and Economic Policy calls it “deeply regressive” and says it could “worsen the inequity already rampant in Louisiana’s tax system.”

Both bills have been delivered to the governor, who’s expected to sign them.

If you’re registered to collect Louisiana sales tax, you have just a few weeks to implement these changes. Automating sales tax compliance with cloud-based software like Avalara AvaTax can help.