Local and parish taxing authorities — whether they like it or not — are going to have to forgive taxes on the sales of guns and hunting equipment for a holiday that the state created then opted out of last month.
Suspending Louisiana’s three sales tax holidays — to the surprise of some legislators — was part of a deal that was slammed together to keep state government from careening off the fiscal cliff.
Friday, Aug. 3, was supposed to be the start of a tax-free weekend for Louisiana consumers colloquially dubbed the “back-to-school” state sale…
The legislative compromise that ended a long-standing impasse on the budget left local officials asking if they would still have to hold a Second Amendment sales tax holiday on Sept. 7-9, even though the state will still charge sales taxes on all purchases.
The answer is yes.
“I don’t know whether it was an oversight or what. But it is what it is,” said Karen White, executive counsel for the Louisiana Municipal Association. The sales tax holiday must be held, at least by the locals.
“It’s one of those unintended consequences,” Roger Bergeron, executive director of the Louisiana Uniform Local Sales Tax Board, said Tuesday. “And it has caused an awful lot of confusion.”
Lawyers are vetting a statement that the board will release later this week basically telling local taxing authorities that the sales tax holiday must go on.
Unlike the other two annual sales tax holidays — one for hurricane preparedness, the other for school supplies — wording that requires local participation is written into the 2009 state law that created the Second Amendment holiday. That’s not the case for the other two holidays.
Local governments, school boards and other taxing authorities stand to lose about $500,000 from exempting sales taxes on consumer purchases of firearms, ammunition and hunting supplies.
Coming as it does near the start of hunting season, the holiday provides a much-needed boost, said Jim McClain, of Jim’s Firearms, a retail store in Baton Rouge.
“It’s a huge event for us. It helps start off our season,” McClain said Tuesday. He buys more inventory, more advertising in preparation. “We were really gearing up for a real good weekend.”
Now McClain is not so sure. Customers could be as unsure about the sales tax holiday as the retailers have been.
The Louisiana Department of Revenue hasn’t been clear in its explanations about how Act 1 of the third special legislative session applies to the Second Amendment tax holiday law.
In its guidance memo, the state agency wrote local sales tax exemptions “will not be impacted.”
Louisiana Department of Revenue: Cessation of State Sales Tax Holiday
Asked what that meant in terms of whether to hold the holiday or not, the Revenue Department emailed a statement largely repeating what its bulletin stated.
Bergeron, of the Sales Tax Board, is forgiving, however. The Revenue Department handles state taxes and is wont to wade into issues involving local taxes.
Louisiana, almost alone among the 50 states, separates its state and local taxing systems. That’s where the problem lies, said Robert Scott, head of the Public Affairs Research Council of Louisiana and member of legislative task force that studied the state’s tax system.
“If this is the only case where (the compromise legislation) has created problems between the locals and the state, I would be surprised,” Scott said Tuesday.
Scott, who generally favors uniform collections, said the Louisiana sales tax system is riddled with laws that dictate different amounts, different applications depending on the taxing jurisdiction.
“When you have a sales tax structure as complicated as ours, inconsistencies like this are almost inevitable,” Scott said. “You have to be more than careful. You have to be meticulous.”
Lawmakers created confusion by the way they backed into the compromise, said Mark West, executive director of the Louisiana Association of Tax Administrators.
Legislators spent months arguing over how to fill a huge deficit expected when the fifth penny of the 5-cent sales tax expired. The compromise filled the gap by setting the sales tax rate at 4.45 percent of every dollar and suspending all the tax exemptions — except for about 110 tax breaks that were listed in bill. The sales tax holidays weren’t listed, therefore were suspended, but not for local authorities because of the wording in the Second Amendment holiday law.
“The way they handled it was awkward. And that awkwardness is causing a lot of confusion,” West said. “But I am quite comfortable in saying that the Second Amendment tax holiday still applies to local governments.”