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.
From the Louisiana Department of Insurance: Insurance Commissioner Tim Temple announced today that the Louisiana Department of Insurance (LDI) continues its work to develop a regulation creating benchmark discounts for Fortified roofs in Louisiana. The LDI is working with the National Association of Insurance Commissioners (NAIC) to develop the benchmark discounts using Louisiana-specific data, hurricane modeling and actuarial considerations. “With over 11,000 Fortified roofs in Louisiana and two years-worth of insurer experience with rating for those roofs in our state, now is an appropriate time for the LDI to establish benchmark discounts for homeowners insurance companies operating in our market,” said Commissioner Temple. “These benchmarks are being thoughtfully developed to help consumers receive the discounts they deserve for fortifying their homes while making sure insurers know the benchmarks reflect how much Fortified roofs actually mitigate their exposure to risk across Louisiana.” Like in Alabama’s Fortified benchmark discount structure, the LDI regulation would require Louisiana insurance companies to either meet the minimum benchmark discount established by the LDI or provide actuarial justification for why the company’s discount does not meet the benchmark. Louisiana is the fastest growing state for Fortified roofs in America. To date, over 11,000 Fortified roofs have been installed in Louisiana, including over 4,100 through the Louisiana Fortify Homes Program.
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