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BATON ROUGE - The Department of Revenue has published two Revenue Information Bulletins to help clarify for taxpayers and businesses the sales tax and withholding tax changes that took effect January 1, 2003.
“Our offices have received many calls from taxpayers and businesses seeking clarification of the tax changes implemented under the Louisiana constitutional amendment known as the “Stelly Plan,” which was passed by voters in November 2002,” says Revenue Secretary Cynthia Bridges. “Our department has published two Revenue Information Bulletins (RIBs) that are available on our Internet website at www.rev.state.la.us.”
Bridges says RIB #02-020 addresses sales tax rate reductions and exemptions applicable to food for home consumption, and to natural gas, electricity, and water for residential use. In addition, she says RIB #02-022 provides new withholding tax formula examples. “Also available on our website are withholding tax tables and instructions for employers, wage bracket tables and instructions, and the computer formula method for withholding tax,” Bridges points out.
Under the Stelly Plan amendment, sales tax on food for home consumption, and sales tax on natural gas, electricity, and water for residential use was lowered from 3.9 cents per dollar to 2 cents per dollar on January 1. Sales tax on these items will be completely eliminated beginning July 1, 2003. To replace state revenue lost by the elimination of these taxes, tax rates in individual income tax brackets were adjusted upward, beginning with tax year 2003. Because returns for tax year 2003 individual income taxes will be filed after January 1, 2004, employer’s withholding tax tables were revised and the new rates went into effect on January 1, 2003.
“The calls we’ve received indicate clarification is needed for some taxpayers and businesses,” Bridges says. “For example, many taxpayers are under the mistaken impression that sales tax on all food was lowered by the amendment. In reality, only food for home consumption is affected. That is defined as food needing further preparation before consumption or being packaged in multiple servings. Single food servings, food served in restaurants, and all other items are still taxed at the full 4 cents per dollar state sales tax rate. Taxpayers should also remember that local sales taxes are also added to purchases and were not affected by the Stelly Plan amendment.”
Bridges says another misconception is the elimination of sales tax on drugs. “Prescription drugs have always been exempt from state sales tax,” Bridges says. The Stelly Plan amendment only put that exemption into the state constitution.” Bridges points out that over-the-counter drugs are not exempt from sales tax and the full state and local sales tax rates apply to those items.
Bridges says passage of the Stelly Plan amendment also mandated revision of the employer’s withholding tax tables for individual income tax. The withholding changes are important to the taxpayer. It allows the amount of tax owed by the individual to be spread out over the year, which reduces the amount a taxpayer might be faced with at tax filing time. Bridges points out that the total increase in a taxpayer’s yearly withholding will be approximately the same amount as the savings realized from the elimination of sales taxes under the Stelly Plan amendment. She adds that only upper bracket taxpayers making approximately $80,000 or more per year are expected to pay more in total state taxes.
Taxpayers with questions about tax changes implemented under the Stelly Plan amendment may contact any of the following regional offices of the Department: Alexandria, 900 Murray Street, Room B-100, (318) 487-5333; Baton Rouge (Headquarters Office), 617 North Third Street, (225) 219-7356; Baton Rouge (Regional Office), 8549 United Plaza, Suite 200, (225) 922-2300; Lafayette, 825 Kaliste Saloom Road, Brandywine III, Suite 150, (337) 262-5455; Lake Charles, One Lakeshore Drive, Suite 1550, (337) 491-2504; Monroe, 122 St. John Street, Room 105, (318) 362-3151; New Orleans, 1555 Poydras Street, Suite 900, (504) 568-5233; Shreveport, 1525 Fairfield Avenue, (318) 676-7505; and Thibodaux, 1418 Tiger Drive, (985) 447-0976.
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