Louisiana, renowned for its vibrant culture and economic diversity, boasts a tax system that reflects its distinctive identity. From corporate income taxes to sales taxes, the state presents a tapestry of regulations that warrant exploration. Whether you’re a business owner, a tax professional, or someone eager to comprehend the fiscal dynamics of Louisiana, this brief guide sets the stage for a deeper understanding of Louisiana taxes
Join us as we unravel the complexities, shedding light on some of the factors that shape Louisiana’s tax environment. From minimum franchise taxes to sales tax nuances, this introduction serves as a stepping stone for a more comprehensive understanding of the tax landscape in the Pelican State.
Louisiana corporations are subject to a tiered tax structure based on net income, with rates as follows:
For Subchapter S Corporations and other pass-through entities opting for the Pass-through Entity Tax Election, net income is calculated as if filing a C-corporation return at the federal level. The corresponding tax rates for such entities are:
There is not a minimum income tax in Louisiana, but there is a minimum franchise tax.
Louisiana tax returns and payments must be submitted by the 15th day of the fifth month following the conclusion of the accounting period, with May 15 being the deadline for a calendar year.
Louisiana employs an economic presence standard to establish whether a corporation has nexus with the state. This means that an out-of-state corporation may be liable for Louisiana income tax if it actively seeks the advantages of an economic market in the state, irrespective of lacking a physical presence within Louisiana.
In Louisiana, having an employee or contractor can trigger nexus for a corporation. If a corporation has employees or independent contractors conducting certain activities within the state, it may be considered to have nexus, leading to potential tax obligations in Louisiana.
Yes, Louisiana offers various corporate income tax credits to eligible businesses. Some common corporate income tax credits in Louisiana include:
Ease the inventory tax burden with this credit, offering relief for businesses managing inventory.
Fuel innovation and technological advancements by taking advantage of this credit, encouraging businesses to invest in research activities.
Promote job creation and economic development through this incentive, providing tax advantages to eligible businesses.
Any corporation or entity taxed as a corporation for federal income tax purposes that meets the following provisions, must file a Louisiana corporation franchise tax return:
A Louisiana limited liability company (L.L.C.) is treated and taxed in the same manner as it is for federal income tax purposes, subject to two exceptions:
For periods before January 1, 2023, the rate is $1.50 for each $1,000 or major fraction thereof up to $300,000 of capital employed in Louisiana and $3 for each $1,000 or major fraction thereof beyond $300,000.
For periods starting on or after January 1, 2023, the rate is $2.75 for each $1,000 or major fraction thereof in excess of $300,000 of capital employed in Louisiana.
The initial corporation franchise tax is $110. Details on capital employed and tax computation can be found in the Form CIFT-620 instructions.
The Initial Franchise Tax Return should be submitted on or before the 15th day of the third month after the corporation becomes liable. Similarly, the Annual Return is required to be filed on or before the 15th day of the fifth month of each accounting year, given that the franchise tax accrues from the first day of the accounting year.
The current state sales tax rate in Louisiana is 4.45%. Please note that additional local sales taxes may apply in specific jurisdictions, and it can be as high as 11.45%.
Nexus can be established through either physical presence or economic nexus. A seller with physical presence is termed a Dealer, subject to standard state and local sales tax collection and remittance obligations. On the other hand, a seller lacking physical presence but with economic nexus is categorized as a Remote Seller. Direct Marketers presently opt to voluntarily register, collect, and remit sales and use tax through the Louisiana Department of Revenue (LDR) using specific application and reporting forms.
Remote Sellers are obligated to collect and remit use tax if, in the previous or current calendar year, they accumulate gross revenue exceeding $100,000 from sales of tangible personal property delivered into Louisiana or engage in 200 or more separate transactions for delivery into the state.
On the LDR website there is an extensive FAQ page discussing remote sellers for sales tax purposes. Remote sellers are broken into two categories:
Defined as out-of-state sellers with cumulative annual gross receipts exceeding $50,000, inclusive of affiliated gross receipts, for sales delivered into Louisiana per calendar year, must adhere to the dual reporting requirements outlined in LA R.S. 47:309.1. Annual gross receipts calculation includes all receipts from retail sales of tangible personal property or taxable services delivered into Louisiana or where the beneficial use of the service occurs in Louisiana.
A Remote Retailer can be exempted from LA R.S. 47:309.1 reporting requirements by voluntarily registering, collecting, and remitting sales tax on deliveries into Louisiana. This relief starts on the collection date, with the preceding portion of the calendar year subject to the reporting requirements.
Sellers lacking physical presence in Louisiana, may voluntarily collect sales tax at an 8.45% rate as long as the Direct Marketer doesn’t meet economic nexus thresholds or establish physical presence in the state. In the event a Direct Marketer establishes physical presence in Louisiana later on, they are reclassified as Dealers.
Louisiana sales tax includes transactions involving the sale of tangible personal property or taxable services. However, specific exemptions exist for certain categories of transactions. Some notable inclusions and exclusions are as follows:
Generally services are not taxable in Louisiana, however taxable services encompass:
Louisiana initially issued a bulletin declaring the taxability of remotely accessed software. However, this bulletin is currently on temporary suspension as the state undergoes a thorough review of the taxation of digital products. The suspension is particularly relevant to transactions where customers pay access or subscription fees for the use, without ownership, of a website or software.
If you are involved in selling a substantial amount of SaaS in Louisiana, seeking a Private Letter Ruling might be necessary to obtain clarification on the taxability status of your product within the state. But most likely the state will come out with guidance on digital asset taxation in the near future that will show SaaS as being taxable.
Louisiana employs a tiered tax structure for corporations, ranging from 3.5% on the initial $50,000 of net income to 7.5% on amounts exceeding $150,000. Subchapter S Corporations follow a different scale, starting at 1.85% on the first $25,000 of net income.
While there is no minimum income tax, Louisiana imposes a minimum franchise tax.
Corporate tax returns must be submitted by the 15th day of the fifth month following the close of the accounting period, typically May 15 for calendar year companies.
Louisiana relies on an economic presence standard, meaning corporations may be subject to income tax if they actively benefit from the economic market in the state, irrespective of physical presence.
Yes, Louisiana offers various corporate income tax credits, including those for inventory, research and development, and job creation.
The current state sales tax rate is 4.45%, but it can be as high as 11.45% depending on local municipalities.
Sales tax nexus can be established through physical presence or economic factors. Remote Sellers and Direct Marketers have specific thresholds and reporting obligations outlined by the Louisiana Department of Revenue.
If you have questions about Louisiana or any state taxes, book a consultation today. View our services page for more information on the various types of consultations and tax optimization services available at Optic Tax.
