La. Legislature Reinstates Many Nonprofit Sales Tax Exclusions and Exemptions

July 11 2016 | Committees

Was It All a Bad Dream?
La. Legislature Reinstates Many Nonprofit Sales Tax Exclusions and Exemptions  
Effective July 1, 2016

Jaye Calhoun, NOBA Tax Law Committee Chair

In the second extraordinary session this year, the Louisiana Legislature reversed itself on a number of sales tax exclusions and exemptions impacting nonprofits, with an effective date of July 1, 2016. The Legislature passed HB 51 (Act No. 12), which reinstates many of the previously suspended tax exemptions and exclusions. (Effective July 1, 2016.) Thank you to the Louisiana Legislature for changing its position on tax collection by Louisiana's nonprofit organizations and educational institutions, as the prior legislation was generally believed to be poor public policy and was causing untold difficulties to many organizations, run by volunteers and operated on donations.  As the nonprofit and educational community scrambled to learn these new rules, many reached out to the state legislature to help educate them on the difficulties caused by, and unworkability of, the new laws. The Legislature responded appropriately.

According to Rep. Walt Leger III, Speaker Pro Temp: "As a result of some very last minute negotiations during the first extraordinary legislative session, there were a number of mistakes made in relation to the temporary 1 cent sales tax increase, as well as the legislation related to temporary suspension of several sales tax exemptions and exclusions. Because of the close to $950m shortfall for the 2016 budget year which ended on June 30, 2016, and the need for revenue to be generated quickly to fill this large budget gap, and the fact that revenue couldn't be raised constitutionally in the 2016 regular session, it was critical that the bills be implemented even though they were in an imperfect condition. This resulted in numerous non-profit entities, as well as some for profit companies being taxed in a way that the legislature did not intend.  The list included memberships dues to YMCAs, Girl Scout cookies, sales tax on non-profit events, and high school athletics events. The will of the Governor and the legislature was to resolve these issues in the 2nd extraordinary session, which we accomplished before midnight on June 23, 2016. It was disappointing that these mistakes occurred in the first place, but fortunately it could be resolved within a reasonable period of time."

While these "mistakes" were still state law for months of April, May and June of 2016 (the reinstatement was not retroactive), for subsequent tax periods, examples of exclusions and exemptions that have been reinstated include:

  • Membership fees or dues of nonprofit and civic associations
  • Sales of admissions to entertainment events sponsored by nonprofits
  • Sales of admissions to musical performances sponsored by nonprofits
  • Sales of admissions, parking fees, and sales of tangible personal property at events sponsored by nonprofits
  • Isolated and occasional sales by a person not engaged in business
  • Sales of specified medical devices and equipment (orthotics, prosthetics, contact lenses, etc.)

Nevertheless, any taxes collected by nonprofits during the three month period must be remitted to the State. The Department of Revenue anticipates issuing a revised form R-1002A which will provide the new tax rates. If you have questions or concerns, please contact your tax advisor.  

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