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Sales Tax Change Becomes Effective July 1, 2003

Merchants should make plans to reprogram cash registers

June 12, 2003

BATON ROUGE -The sales tax rate on food for home consumption and on electricity, natural gas, and water sold to consumers for residential use will be reduced from 2 percent to fully exempt on July 1, 2003, as provided for by Article VII, Section 2.2. of the Louisiana Constitution, which was passed by voters in November 2002.

Revenue Secretary Cynthia Bridges says merchants should begin plans now to have their cash registers reprogrammed in time to meet the deadline and to facilitate a smooth transition. The tax rate on these items was reduced from 3.9 percent to 2 percent on January 1, 2003. At that time, some smaller merchants failed to have their cash registers reprogrammed in time, which resulted in some inconveniences for their customers. A few merchants also requested a more detailed definition of the term "food for home consumption" so they could properly administer the reduced rate.

In response to those requests, the Department published Louisiana Administrative Code 61:I.4401 as an emergency rule that defines the exemption in more detail. The Department also issued Revenue Ruling No. 03-002 on June 11 to explain how the exemption will be applied. Both the emergency rule and the Revenue Ruling are available on the Department''s Internet website at http://www.rev.state.la.us. The emergency rule was also published in the April 20, 2003 Louisiana Register (Vol. 29, No. 4).

The Revenue Ruling details application of the following standards that must be applied in order to determine an item''s eligibility for the sales tax exemption: (1) the product must be a food product as provided for in the statute; (2) the product must not have been prepared by the seller; (3) the food product must not be sold by restaurants, drive-ins, snack bars, candy and nut counters, private clubs, other establishments that provide facilities for the on-premises consumption of food, or by any other persons or businesses who sell food that is intended for immediate consumption; and, (4) the food product must be sold for home consumption. The ruling also discusses sales by grocery stores, delis, meat and seafood markets, convenience stores, etc.; sales by bakeries and doughnut shops; sales by restaurants or cafes within grocery stores; sales of food to schools, hospitals, nursing homes, mental institutions, and rooming houses; and, advance sales tax collection by wholesale dealers.

Questions concerning the food-related sales tax exemption may be submitted through the Department''s webpage at http://www.rev.state.la.us by clicking on "Contact Us", and on Tax Questions/Suggestions. Further information may also be obtained by contacting any of the following regional offices of the Department: Alexandria, 900 Murray Street, Room B-100, (318) 487-5333; Baton Rouge (Headquarters Office), 617 N. Third St, (225) 219-7356; Baton Rouge (Regional Office), 8549 United Plaza Blvd., 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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