It was the first of many meetings on Tuesday for the Sales Tax Streamlining and Modernization Commission, led by Representative Julie Stokes.
"This revenue base accounts for a large portion of how we support the services of our state. So we need to understand what our options are and how to modernize how we do sales tax in Louisiana," she explained.
Right now, the state taxes the sale of goods. And while those goods used to make up a large share of the market, they don’t anymore. Instead, people are buying more and more services. Scott Drenkard of the DC-based Tax Foundation says a modern system taxes those services.
Ideally, he says, "if you're going to do tax reform, you're bringing new transactions into the taxable arena. You can then bring the rate down overall."
Louisiana’s statewide sales tax is four percent. When combined with average local sales tax rates, it reaches nearly nine percent, the third highest in the nation.
It’s not about taxing more transactions, but the right ones.
"Sales taxes are consumption taxes, you only want to apply them at that final point of consumption," says Drenkard, and not to the purchases a business has to make in order to create a product.
Commission member Dannie Garrett uses a farmer to illustrate the idea. "The farmer who owns the cattle buys a pencil and a piece of paper so he can keep track of how many cows he has and how much milk they produce," he says. Under the model plan presented by Drenkard, sales tax would not apply to the pencil and pen, but only to the milk.
The Commission will meet five more times before the end of the year, with the goal of welcoming the state’s next Governor with recommendations for a new and improved sales tax system.