Income Tax in Louisiana?

[Praesul Presul]

Per the Advocate this morning some of the key points in this proposal:

"Among the key points:
• Many tax filers could be required to file reports estimating the amount of sales tax they failed to pay on purchases, such as Internet transactions. They would pay the actual amount or what Barfield called a “safe harbor” amount.
• Businesses may get a cap on the percentage of sales tax collections they are allowed to keep as compensation for collecting the revenue for the state.
• Sales tax holidays would disappear although international visitors still would get a break on their purchases.
• The Jindal administration expects to collect roughly $1 billion by taxing professional and business services, including tax preparation, scientific research, travel arrangement and waste management."

That's always my way around high sales tax - order on-line. Not sure how I feel about that one.

Plus I use all the sales tax holidays especially the firearms one in Sept. I seriously brag to out of state friends about that one as it's a great way to get powder and primers cheap - no tax, no shipping no hazmat.

 

[jms]

My opinion ,I doubt this will pass in it;s present form . Too many people who live on government income will be required to pay extra sales tax that they now don't have to pay with state income tax. Being retired that would put me in that category.

 

[Captain_Morgan]

I think doing away with or drastically reducing income tax and replacing it with a tax on spending is a good thing. I think getting rid of the tax holidays is bad thing, however.

 

[eagle359]

How does the plan treat money that I have paid income tax on when I spend it? That seems like double taxation to me.

 

[Emperor]

My opinion ,I doubt this will pass in it;s present form . Too many people who live on government income will be required to pay extra sales tax that they now don't have to pay with state income tax. Being retired that would put me in that category.

I would be for exempting folks that have legitimate pensions or have made it to Social Security income, somehow. But, for those that just want to bitch about this dramatic proposal to end the bleeding becuase you may have to actually contribute some money back to the state in the way of goods and services; what do you want?

Did you not just see where the Cypriot Parliment actually voted on a proposal to take money from citizens bank accounts to off set the "free ****" that has them on the verge of bankruptcy?

This crap needs to stop. Maybe this is not the best answer, but it's a start. We cannot continue to live under financial shortfalls everywhere.

 

[Knave]

How does the plan treat money that I have paid income tax on when I spend it? That seems like double taxation to me.

How would it be any different from the money you spend on sales tax after paying income tax already?

 

[Sugarbug]

They already ask you if you have made purchases online that you didn't pay sales tax on (maybe just federal).

 

[eagle359]

How would it be any different from the money you spend on sales tax after paying income tax already?

The intent is to replace the income tax with a HIGHER sales tax. If I have paid income tax on my money I would be taxed again when I paid the inflated sales tax.

 

[Praesul Presul]

They already ask you if you have made purchases online that you didn't pay sales tax on (maybe just federal).

Correct. I am assuming they would be more aggressive about it if that is the only place they get tax dollars AND I will be more aggressive ordering on-line hence more to report.

 

[dixiejarhead]

I'll pay the sales tax.

 

[PPBart]

They already ask you if you have made purchases online that you didn't pay sales tax on (maybe just federal).

No, that's a question on the state income tax return.

 

[jms]

I would be for exempting folks that have legitimate pensions or have made it to Social Security income, somehow. But, for those that just want to bitch about this dramatic proposal to end the bleeding becuase you may have to actually contribute some money back to the state in the way of goods and services; what do you want?

Did you not just see where the Cypriot Parliment actually voted on a proposal to take money from citizens bank accounts to off set the "free ****" that has them on the verge of bankruptcy?

This crap needs to stop. Maybe this is not the best answer, but it's a start. We cannot continue to live under financial shortfalls everywhere.

Jindal said his proposal was;t written in stone. If seniors on Social Security were exempt , how would that be decided at the cash register in sales tax situation. At present all my income including my VA comp is completely income tax free. Of course sales tax isn't exempt .

 

[Xenon]

It's currently a requirement to report your internet purchases and pay a "sales or use tax" to louisiana.

I was on board until the taxation of services was included in the proposition. This will put the small town professionals out of business. It will also mean that people will go out of state for their services where they wouldn't have to pay the sales tax. The sales tax through history has fundamentally been a tax on movable property, while immovable property and services were exempt. Next thing you know, they will be taxing the immovable property and you can add 11% to the next house you buy...

If you think your pest control guy, contractor, lawyer or accountant charges too much now, wait until you add another 10.63% to it (in my parish). Pretty ridiculous if you ask me (and I know you didn't).

Several other states have tried to pass a sales tax on services recently. None have accomplished it that I am aware of...but none have coupled it with the repeal of the income tax. An interesting approach.

Has anyone seen a mention of whether the franchise tax will stay intact or will be modified to be more like Texas'? FYI Texas has a franchise tax that applies to gross income (instead of your customary franchise tax base). Most deductions don't (generally) count against the gross when figuring the tax due.

 

[dixiejarhead]

It's currently a requirement to report your internet purchases and pay a "sales or use tax" to louisiana.

I was on board until the taxation of services was included in the proposition. This will put the small town professionals out of business. It will also mean that people will go out of state for their services where they wouldn't have to pay the sales tax. The sales tax through history has fundamentally been a tax on movable property, while immovable property and services were exempt. Next thing you know, they will be taxing the immovable property and you can add 11% to the next house you buy...

If you think your pest control guy, contractor, lawyer or accountant charges too much now, wait until you add another 10.63% to it (in my parish). Pretty ridiculous if you ask me (and I know you didn't).

Several other states have tried to pass a sales tax on services recently. None have accomplished it that I am aware of...but none have coupled it with the repeal of the income tax. An interesting approach.

Has anyone seen a mention of whether the franchise tax will stay intact or will be modified to be more like Texas'? FYI Texas has a franchise tax that applies to gross income (instead of your customary franchise tax base). Most deductions don't (generally) count against the gross when figuring the tax due.

Bear with me here, not trying to be a smartass just want to understand.

How will charging and collecting sales tax on services be any worse than an income tax that is already there on income generated from your business?

People are not going to go out of state for services. You going to go to mississippi to get your hair cut? Lawn done? House painted? If an out of state company comes into the state for a job, they would have to pay sales tax too. I don't see the disadvantage as stated by many businesses.

Add back in your state income tax and then figure your profit margin. figure out what costs will be and cut your margin by that percent (the differance between the sales tax collected and the income tax you no longer pay) and people will still be doing business with you. On out of state contracts, I can see it cutting profits a little, however with more people having money in their pocket you just may see an increase in business as well.

I do believe however that they should jettison the sales tax on services idea in general and just up the sales tax 4% instead of 1.88. Let EVERYONE who visits our state share the burden. Just my opinion.

 

[gunz4me]

They already ask you if you have made purchases online that you didn't pay sales tax on (maybe just federal).

There is a spot for that on your Louisiana State Income Tax Return.

There is also a consumer use tax form that you can fill out to self-report and pay sales tax for your online transactions: http://www.revenue.louisiana.gov/sections/taxforms/default.aspx?code=CSM&year=2011

EDIT: My biggest concern is how will the Department of Revenue handle the additional workload? I'm already having fits with them now, and I hate to see how bad it will be with more sales tax to deal with.

 

[Xenon]

You are assuming that all businesses are profitable at all times. There are many now that do not pay an income tax or pay very little.

I can't see that adding the sales tax on services that the businesses pay for, coupled with the sales tax they will have to charge their customers will increase the volume of their own business or reduce their out of pocket costs. It may however bring the larger businesses to the state who are looking the avoid the 5-10% tax that makes a huge difference to their bottom line.

I was thinking more along the lines of larger services that do not have to be performed on site where the provider can avoid LA nexus. But you are right, several wouldn't be avoidable.

I've also been thinking about the logistics of collection of the sales tax for the service providers. Will the state provide any means for deferred payments/collections/remittance?

For example: If an individual runs up a large legal bill for a civil suit that isn't collected (or isn't collected for several years) but the atty isn't working on contingency and is instead billing hourly. The atty invoices $50k and the client can't pay immediately. Will the atty be obligated to remit ~$5k sales tax when the services are invoiced? What if the client never pays? Would he be out his time and the sales tax collectible upon the invoice that he fronted out of pocket? Would they allow refunds/credits later for bad debts?

I just don't see this being good for small business until many more of the logistics are worked out. There are already several movements to get certain service industries exempt from the legislation. I think that will be worse in the long run for the public opinion of the proposition.


~Xenon

 

[dixiejarhead]

You are assuming that all businesses are profitable at all times. There are many now that do not pay an income tax or pay very little.

I can't see that adding the sales tax on services that the businesses pay for, coupled with the sales tax they will have to charge their customers will increase the volume of their own business or reduce their out of pocket costs. It may however bring the larger businesses to the state who are looking the avoid the 5-10% tax that makes a huge difference to their bottom line.

I was thinking more along the lines of larger services that do not have to be performed on site where the provider can avoid LA nexus. But you are right, several wouldn't be avoidable.

I've also been thinking about the logistics of collection of the sales tax for the service providers. Will the state provide any means for deferred payments/collections/remittance?

For example: If an individual runs up a large legal bill for a civil suit that isn't collected (or isn't collected for several years) but the atty isn't working on contingency and is instead billing hourly. The atty invoices $50k and the client can't pay immediately. Will the atty be obligated to remit ~$5k sales tax when the services are invoiced? What if the client never pays? Would he be out his time and the sales tax collectible upon the invoice that he fronted out of pocket? Would they allow refunds/credits later for bad debts?

I just don't see this being good for small business until many more of the logistics are worked out. There are already several movements to get certain service industries exempt from the legislation. I think that will be worse in the long run for the public opinion of the proposition.


~Xenon

Ok, I see your point and agree. They just need to dump that provision and up the total sales tax and call it good.

 

[PPBart]

...Several other states have tried to pass a sales tax on services recently...

Anybody know how states like TN, TX,WA, others without state income tax handle this? Do they sales-tax services?

 

[dixiejarhead]

Anybody know how states like TN, TX,WA, others without state income tax handle this? Do they sales-tax services?

http://taxes.about.com/od/statetaxes/a/tax-free-states.htm

Should get you started. I know Washington has taxes on prepared food that are higher than non prepared food.

http://www.rr.com/finance/finance/article/rr/57120512/82953635/Seven_States_with_No_Income_Tax

 

[Xenon]

Sales Tax Increasingly Applies to Pure Service Businesses

Currently, many states exclude service providers from sales and use taxes. However, a number of state lawmakers have begun to re-examine the exclusion of service from sales tax liability because they realize that a potentially large source of revenues is going uncollected. So as you might expect, these lawmakers are working on changing their laws to treat some, if not all, services as taxable.

For instance, in Hawaii, New Mexico and South Dakota, a sales tax is imposed on all services provided. In the other states, lawmakers have taken a piecemeal approach and included some types of services as taxable while leaving others not taxable.

http://www.bizfilings.com/toolkit/sbg/tax-info/sales-taxes/sales-tax-in-service-industries.aspx

It appears New Mexico has a gross receipts tax, not a sales tax as the article states. They tax every dollar collected.

Earlier this year, Professor John Mikesell of Indiana University estimated that sales taxes in the United States on average apply to about 40 percent of the economy. That is, 40 percent of personal income is subject to sales tax. In the four states noted, the percentages are significantly higher: New Mexico (60% included in tax base), South Dakota (67% included in tax base), Wyoming (99% included in tax base), and Hawaii (108% included in tax base). Hawaii in particular is astonishing as that means the tax base is larger than the economy, resulting in multiple taxation of the same product or service.

Another article that touches on them http://taxfoundation.org/blog/sales-tax-word-warning-hawaii-new-mexico-south-dakota-and-wyoming

I don't know how those states handle the services based sales tax, but may have an itch to find out later. Notice that all of these states still have an income tax...interesting