Louisiana Sales Tax Proposal Is Dead
LOUISIANA REALTORS • May 16, 2017
Louisiana sales tax proposal for Netflix, landscaping, massages, other services is dead
The Times-Picayune • New Orleans, La • May 15, 2017
By: Julia O’Donoghue
Louisiana legislation to start taxing a variety of products and services -- everything from Netflix and Spotify to landscaping and massages -- is dead for the current legislative session, its sponsor says. Rep. Gene Reynolds, D-Minden, pulled the sales tax bill from consideration by a House committee on Monday (May 15) after delaying it for weeks.
"At some point in time, you have to deal with reality," said Reynolds, the House Democratic Caucus chairman. "I didn't want to waste time and have my political capital spent" on legislation that wasn't going to pass.
It was another blow to Democratic Gov. John Bel Edwards' efforts to maintain public services without huge spending cuts to help close a projected $1.3 billion budget deficit in the fiscal year that begins July 1, 2018. Reynold's House Bill 655 was the last major, remaining piece of Edwards' tax package, after other elements were voted down by the House Ways and Means Committee or abandoned by sponsors before that panel could vote on them.
Expanding the sales tax to new areas has been suggested for Louisiana by liberal and conservative tax experts alike, and was one of the strongest recommendations made earlier this year by a task force that was set up by the Republican-controlled Legislature. Reynolds' bill was meant to generate revenue that could replace existing money produced by Louisiana's current sales tax rate. The general concept is to lower the sales tax but apply it to more goods and services.
The proposal would have applied the sales tax to streaming entertainment services such as Netflix, Hulu, satellite radio, Spotify and Amazon Prime. A number of other of services -- massages, landscaping, certain types of debt collection and insurance appraisals, among them -- also would have been newly subjected to the sales tax. The expanded tax was supposed to go into place Oct. 1.
It would have produced about $153 million for the fiscal year that starts July 1. In budget years after that, it would have produced about $202 million, according to an analysis done by the legislative fiscal office.
That would not fully replace the $880 million lost when the state sales tax falls in mid-2018 from 5 percent to 4 percent. It would have covered slightly less than one quarter of the sales tax revenue reduction.
Louisiana wasn't the only state to look at taxing Netflix, Amazon Prime, Hulu, Spotify and similar services. Pennsylvania implemented a similar tax last year. Several California cities and Alabama have also considered "Netflix tax".
The proposal to expand the sales tax to these services is an attempt to adjust to consumer purchasing patterns. People used to buy or rent videos at a retail store and pay sales tax on the transaction. Now, they are streaming that content online and not paying sales tax.
"Most state sales tax laws are really old and outdated. They were written in the 1930s," said John Buhl, media manager with the Tax Foundation, a nonpartisan, conservative think tank during an interview in April. "As the economy changes, we are seeing states' sales tax bases shrink."
Outside of streaming services, here are some other items that the Reynolds' bill would have taxed:
· Massage parlors, escort services, Turkish baths, steam baths
· Debt collection, though this would not include child support debts or some debts collected by attorneys. Exceptions would also be included for some trusts.
· Credit reporting services, including services that assemble credit histories and ratings for individuals
· Insurance services, including the assessment of insurance losses, damage and appraisal. This also would include insurance inspections, investigations, analysis and research, as well as insurance claims adjustments and processing.
· Landscaping, lawn maintenance and rubbish, solid waste and garbage collection. Janitors, custodial services and pest control also would be taxes.
· Data processing, including some payroll and some business accounting services. This also would apply to word processing, data entry, data production and data search, whether done by a human being or machine.
· Security services
· Telephone answering services
· Information services, including electronic data retrieval and specialized news services such as those for financial information. Newspaper, radio and television stations approved by the Federal Communications Commission would be excluded.
Week three of the Regular Session kept real estate issues in the conversation, even as lawmakers continued to focus heavily on workforce, tax and insurance policy. On the property tax front, measures to reshape assessments and exemptions, including proposals for a new blight rehabilitation exemption and additional relief for seniors, remain parked in the House Ways and Means Committee as stakeholders work through fiscal and local government concerns. These bills matter because they will influence long-term carrying costs, redevelopment incentives and how tax burdens are shared across residential and commercial property. Homestead related legislation, including parish level authority to increase the exemption amount, is also in the queue, signaling that the broader structure of Louisiana’s homestead system is officially on the table, not just the dollar figure. For homeowners and buyers, this debate goes directly to affordability. For local governments, it raises revenue stability and service delivery questions. There also has been movement on several identical pieces of legislation that would instruct parish assessors to develop a process for homeowners to permanently register for the homestead exemption for the duration that they own and live on the property. We are actively tracking legislation that will directly shape how investor activity and non-traditional transactions are recognized and regulated in Louisiana’s real estate market. This includes HB 468 by Troy Hebert , a key component of the Louisiana REALTORS® legislative package that targets the wholesale of residential real estate, which was heard in the House Commerce Committee on Monday. The bill is currently positioned for a floor vote early next week. As drafted, HB 468 represents a major step in the right direction for consumer protection in Louisiana, advancing needed guardrails through potential disclosure, registration, and practice standards that could redefine how assignment contracts and “off-market” transactions intersect with licensed brokerage activity. In parallel, HB 292 by Delisha Boyd passed the House on final reading, 86-3, and is on its way to the Senate. Together, these measures represent a coordinated policy effort to bring greater structure and transparency to emerging transaction models, while preserving the integrity of the traditional brokerage framework. Finally, the broader policy backdrop remains important: the Governor continues to push income tax changes and cost of living relief, while business and industry groups are prioritizing insurance, workforce and energy — each a key driver of long run housing demand and investment. As these debates evolve, we’ll keep you updated on what moves, what stalls and what it all means for your clients, your pipeline and private property rights across Louisiana. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.
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