January 6, 2025

Most business owners do not fully understand how Sales and Use Tax are applied to their
respective business(s). Any business may be subject to one or the other, it just depends. We will dive into
Sales and Use Tax in Louisiana and its surrounding parishes. By definition, “Sales tax is the tax on the
receipt of tangible personal property.” Businesses that sell tangible personal property must collect sales
tax on behalf of the government entities. It is also involuntarily enforced by government entities. Some
business owners asked me if they operate without charging sales tax because they do not want to worry
about paying sales tax every month. The problem is that the law states that a seller of tangible personal
property must collect sales tax for the governmental entities. In Louisiana and most states, Sales and Use
Tax are reported to both the State and the Parish (county).

Business owners tend to view sales tax as a tax on the business because it is remitted (paid) out
of the business bank account. Yes, it does come from the business’s bank account, but it is money added
to the business’s sales price. When a business owner is determining his/her sales price for the tangible
good, they expect a certain amount of profit for each item. For example, a bakery sells cakes for $30 and
the materials to make the cake cost $10. The business would have made a $20 profit on the sale of each
cake. But when you ring the cake up in the POS system it includes Louisiana’s Sales Tax of $1.34 (4.45%)
and Orleans’s (your parish may be different) Parish Sales Tax of $1.50 (5%) for a total of $32.84. The $2.84
is collected for the government and it does not belong to the business. Some small business owners tend
to look at their business bank account and they use that to spend on qualifying expenses needed for the
business. However, they did not calculate how much they should remit before they started spending.
Creating the belief that they are using their money to pay Sales Tax.

. There is no way around remitting Sales Tax, but for certain businesses, there are loopholes
around it. For example, an event planner provides a service but may itemize the invoice by listing the
chairs, tables, services, etc., and the price for each specifically. The problem with this scenario is that the
tangible products are subject to sales tax since they are itemized (chairs, tables, etc. are tangible personal
property. If the business owner instead listed the total combined price of everything then it is not subject
to sales tax. It is always good to have an accountant to assist you with these types of tax loopholes.
Use tax is unfamiliar to most people. Use tax is the purchase of tangible personal property from a
different parish and/or state with a lower sales tax rate than the location of where the tangible comes to
rest. For example, if my accounting firm ordered a desk from Office Depot in Jefferson Parish (4.45%) and
it was shipped to my office in Orleans Parish (5%), I would owe Orleans Parish government the difference
which is 0.55% in Use Tax from that purchase. If my office were in Jefferson Parish and I bought the desk
in Orleans Parish I would not owe any Use Tax, nor would I be able to file a refund for the difference.
Believe it or not Use Tax is collectible on individuals too, but how can you police that? Most places to be
liable for use tax are banks, law firms, accounting firms, hotels, restaurants, etc.

When purchasing tangible personal property to eventually sale, business owners should obtain a
resale certificate for the state and parish. The resale certificate allows the business owner to not pay sales
tax on purchases of tangible personal property they later will sale. Result being, no double taxation. You
cannot use the resale certificate at every store. Mainly recognized places where you can open a business
account will recognize it. Please use integrity when making purchases with the resale certificate.

Just because you are in the service industry does not automatically exclude you from sales/use
tax. The upside to all these taxes is that they are tax deductible. Imagine deducting thousands of dollars
off your business income for something you were supposed to do anyway. Sounds too good to be true
but it is legit. More available deductions are better than not having enough deductions. Remember,
Orleans parish has some sales tax laws that may be different and will supersede what the state sales tax
laws imply. So, if you have Nexus in Orleans Parish check with your nearest accountant who is familiar with sales tax.