In December 2024, Louisiana passed legislation that became effective on Jan. 1, 2025, making Louisiana sales tax applicable to “digital goods.”
Specifically, Act 10 of Louisiana’s 2024 Third Extraordinary Session expanded the state’s sales and use tax provisions to include “digital products” and defined them as:
Digital audiovisual works, digital audio works, digital books, digital codes, digital applications
and games, digital periodicals and discussion forums, and any other otherwise
taxable tangible personal property transferred electronically, whether digitally delivered,
streamed, or accessed and whether purchased singly, by subscription, or in any
other manner, including maintenance, updates, and support.
While the previous law already imposed a tax on various downloaded digital products, including digital books, audiovisual, audio, information services and games, the new law imposes a tax on digital products regardless of the delivery method.
The new law indicates that certain digital items are exempt from sales tax. Digital products used for commercial purposes in the production of goods and services sold to customers that are already subject to sales tax may be exempt from taxation, as would any products created for the internal needs of a business and not offered for retail sale. Financial institutions and licensed health care providers would also not pay tax on digital products used for specific business purposes. While digital products offered for free to would-be recipients are also not considered taxable sales, the product is not considered free if bundled or combined with other taxable products or services.
Regulations to better define what types of products are subject to Louisiana sales tax have not yet been issued but will likely be proposed and finalized in the coming years. Until they are issued in final form, taxpayers should rely on the language of the new legislation.
Please also note that effective Jan. 1, 2025, Louisiana’s state sales tax rate was increased from 4.45% to 5%. In addition, Louisiana counties (parishes) and municipalities impose and separately administer their own sales taxes at rates varying from 4.5% to 7%, thus making the potential combined sales tax rate in Louisiana 9.5%- 12%.
For more information on these changes to sales tax in Louisiana, please connect with one of our state and local tax specialists.
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