When you engage in business in Louisiana, you’ll take on a variety of tax obligations. Below are some of the frequently asked questions about the state taxes that Louisiana imposes on small businesses through the Louisiana Department of Revenue and other arms of the state government.
What is the corporation income tax?
Louisiana’s corporation income tax applies to all corporations and business entities that:
- Generate income from Louisiana sources, and
- Are taxed as corporations for federal income tax purposes.
Entities that satisfy those criteria must file a corporation income return (see below for filing information) even if they don’t have any net income.
Corporations must pay tax on net income at the following corporation income tax rates:
- 3.5% on the first $50,000
- 5.5% on the next $100,000
- 7.5% on the excess over $150,000
What is the corporation franchise tax?
Unless specifically exempted, any corporation or business entity that’s taxed as a corporation for federal income tax purposes must file a Louisiana corporation franchise tax return if it:
- Is organized under Louisiana law,
- Is qualified to do business in the state or doing business there,
- Has a corporate charter within the state, or
- Owns or uses any capital, plant, or other property in Louisiana, whether owned directly or indirectly by or through a partnership, joint venture, or any other business organization of which the corporation is a related party.
An initial return covering the period beginning with the date the corporation first becomes liable for filing a return and ending with the next close of an accounting period must be filed on or before the 15th day of the third month after the corporation first becomes liable. The “initial” corporation franchise tax is $110.
After that, the corporation franchise tax is charged at a rate of $2.75 for each $1,000 or major fraction thereof in excess of $300,000 of capital used in Louisiana. It accrues on the first day of each accounting year, and the annual return for that period must be filed on or before the 15th day of the fifth month of that accounting year.
How are the corporation income taxes and franchise taxes paid?
Businesses file for both taxes on a combined tax return form, Form CIFT-62, after the initial return for the franchise income tax has been filed. The return looks back for the income tax and forward for the franchise tax. So, for example, a taxpayer would file in 2024 for its 2023 income taxes and in 2023 for 2024 franchise taxes.
Returns and payments are due on or before the 15th day of the fifth month following the close of an accounting period (May 15 for a calendar-year tax filer).
Taxpayers are required to file the return electronically for tax periods when their total assets have an absolute value equal to or greater than $250,000.
Mailed returns should be sent to:
Louisiana Department of Revenue
P. O. Box 91011
Baton Rouge, LA 70821-9011
Are any tax credits available?
Louisiana offers several tax credits that small businesses might be able to use to offset their state tax obligations, including the:
- R&D tax credit: Up to a 30% tax credit on qualified research expenditures incurred in Louisiana, with no cap and no minimum requirement
- Digital Interactive Media and Software Program: A 25% tax credit for in-state labor, and an 18% credit for eligible production expenditures
- Enterprise Zone Tax Credit: Either a $3,500 or $1,000 tax credit for each certified net new job created and either a state sales/use tax rebate on capital expenses or 1.5% investment tax credit for qualifying expenses
How are S corporations taxed?
Louisiana taxes S corporations in the same manner as regular corporations, with one exception. For federal income tax purposes, an S corporation will determine its items of income and expense in the same manner as if it were a regular C corporation. A corporation classified by the IRS as an S corporation can exclude all or part of its income from the corporation’s activities in Louisiana, depending on where the shareholders reside.
Shareholders who are Louisiana residents must file a Louisiana individual income tax return to report their portion of the income generated from the activities of the corporation. Generally, the portion of income that can be excluded is determined by the ratio of 1) the number of issued and outstanding shares of the S corporation’s capital stock owned by Louisiana resident individuals to 2) the total number of issues and outstanding shares.
Shareholders who aren’t Louisiana residents may elect to 1) file the individual nonresident and part-year resident return to report their share of the income derived from the activities of the S corporation, or 2) allow the corporation to pay the tax at the corporate income tax rate on their portion of the income. When electing the second method, the Subchapter S exclusion must not offset the net income to be reported on the corporation income and franchise tax return.
The franchise tax is imposed on an S corporation in the same manner as it is for a C corporation.
How are limited liability companies (LLCs) taxed?
That depends on how an LLC is taxed for federal income tax purposes. If a Louisiana LLC is taxed as a corporation for federal income tax purposes, it’s likewise taxed as a corporation for Louisiana income tax purposes. If it’s considered a partnership for federal income tax purposes, which is the most common situation, the LLC is also treated as a partnership for Louisiana income tax purposes.
For Louisiana franchise tax purposes, an LLC is treated and taxed in the same manner that it is treated and taxed for federal income tax purposes. If it’s taxed as a corporation for federal income tax purposes, it’s subject to franchise tax if it meets any of the four criteria (see above) that subject a corporation to the franchise tax — except that an LLC qualified and eligible to make an election to be taxed as an S corporation on the first day of the franchise tax period isn’t subject to franchise tax.
Can I get a filing extension for my combined return?
Yes. If you can’t file your tax return by the due date, you’ll automatically be granted an extension of six months to November 15, as long as you have timely requested an extension for federal income tax purposes. If so, you needn’t request an extension. (Note: You’re still required to pay on time; the extension applies only to the filing deadline.)
What is the partnership tax?
The partnership tax generally applies to partnerships that engage in business in Louisiana and have nonresident partners. A 4.25% tax is assessed on the total distributive shares for nonresident partners. These partners generally must be included on the Louisiana Composite Return, Schedule 6922. Such returns must be filed electronically.
Form IT-565, “Partnership Return of Income,” and payments are due on or before May 15th of the year following the close of a calendar year. For fiscal year taxpayers, returns and payments are due on the 15th day of the fifth month after the close of the fiscal year. As with corporate returns, an automatic extension of six months will be granted.
Are estimated tax payments required?
Taxpayers must pay estimated income tax if the corporation’s income tax less any credits for the taxable year can reasonably be expected to be $1,000 or more. If you must pay estimated tax, the percentage of the estimated tax must be paid on the 15th day of the following month based on the period in which the estimated tax payment requirement was met.
Do partnerships with no nonresident partners have any additional filing obligations?
Yes. All partnerships doing business in Louisiana or receiving any income from sources in the state must file Form IT-565. This is just an information return, though. No taxes are due because partnership owners pay taxes on their profits on their individual income tax returns.
Does Louisiana have a pass-through entity election?
Louisiana is among the states that have enacted a workaround so owners of pass-through entities can avoid the $10,000 limit on the federal income tax deduction for state and local taxes.
An S corporation or an entity taxed as a partnership for federal income tax purposes can elect to pay Louisiana income tax at the entity level, like a corporation. The election isn’t available to pass-through entities that file a partnership composite return (in other words, partnerships with nonresident partners).
Once the election is taken, shareholders, members, or partners of the entity can exclude the income that was taxed at the entity level and is included in their federal adjusted gross income. The election is effective for the entire taxable year for which it was made as well as all subsequent taxable years until the election is terminated.
The entity must make the election on Form R-6980, “Tax Election for Pass-Through Entities.” You can make the election:
- During the taxable year prior to the taxable year in which the election is first effective,
- During the taxable year in which the election is first effective, or
- On or before the 15th day of the fourth month after the close of the taxable year for which the election is first effective.
The election must be approved by shareholders, members, or partners with more than half of the ownership interest—as determined based on the owners’ capital account balances or ownership percentages.
Pass-through entities that receive an acceptance of the election from the Louisiana Department of Revenue will pay tax as follows:
- 1.85% on the first $25,000 of Louisiana net income
- 3.5% on the next $75,000 (not in excess of $100,000)
- 4.25% on the excess above $100,000
Electing entity-level taxation won’t, in and of itself, subject the electing entity to franchise tax liability.
Does Louisiana have sales and use taxes?
Yes. You must apply for a sales tax certificate, collect the proper taxes from customers, and file returns with the Louisiana Department of Revenue if you:
- Lease, rent, or sell tangible personal property in the state,
- Furnish taxable services in the state,
- Hold property in the state for resale,
- Maintain a business location in the state,
- Operate in the state through full-time or part-time resident or nonresident salesmen or agents,
- Maintain an inventory in the state of tangible personal property for lease or rental, or
- Deliver in a vehicle owned or operated by the seller.
The Louisiana state sales and use tax rate is 4.45% of the sales price (sales tax) or the cost (use tax). The taxable base includes:
- The total amount for which tangible personal property is sold, including any services rendered by the seller in connection with the sale,
- The gross amount charged for the lease or rental of tangible personal property, and
- The gross amount charged for taxable services.
What are the filing requirements for the sales and use tax?
Sales tax returns and tax payments are due on or before the 20th of the month following the close of the calendar month or calendar quarter in which the sale was made, the service rendered, or the purchased property was imported into the state for use—regardless of when the proceeds of sales are collected or payment to the seller is required.
If you have more than one business location in Louisiana, you may be able to file a consolidated sales and use tax return. Consolidated filers must file and remit electronically. They must also itemize all business locations reporting sales and use tax on the consolidated return, including the designated primary location and out-of-state locations when applicable.
Taxpayers whose sales tax liabilities average less than $500 per month after filing six returns may apply to file on a quarterly basis. You must file a return even if you have no reportable sales or purchases for a period. If you don’t, an assessment will be billed for that period.
Are there local sales and use taxes?
Sales and use taxes levied by political subdivisions of the state are in addition to the sales and use taxes levied by the state. Local sales tax rate information can be obtained from the website of the Louisiana Association of Tax Administrators.
Are Internet sales subject to the sales tax?
Internet sales are treated the same as catalog sales for sales tax purposes in Louisiana. If your business has a physical presence in the state or delivers by company vehicle into it, you should register for and charge Louisiana sales tax on the sales you make to Louisiana customers.
Businesses conducting internet sales that don’t 1) have a physical presence in Louisiana, or 2) meet economic nexus criteria (basically, a connection with the state sufficient to impose taxes) aren’t required to register with the Louisiana Department of Revenue. You can, however, voluntarily register as a Direct Marketer to collect and remit the combined state and local sales tax amount of 8.45% on all taxable purchases of property.
Are any exemptions to the sales and use taxes available?
Louisiana does have some exemptions that might excuse you from paying sales and use taxes. You must apply for the specific exemption you believe applies. Be aware that exemptions and exclusions for local sales and use taxes may differ from those available for the state sales and use tax.
Does Louisiana have any excise taxes?
Yes. Louisiana imposes the following excise taxes:
- Electric Cooperative Fee
- Hazardous Waste Disposal Tax
- Inspection & Supervision
- Liquors – Alcoholic Beverage Permits
- Liquors – Alcoholic Beverage Tax
- Natural Gas Franchise
- Retail Dealers Of Vapor Products
- Telecommunication Tax for the Deaf
- Tobacco Products Permits
- Tobacco Tax
- Transportation and Communication Utilities Tax
- Wines Shipped Direct to Louisiana Consumers
Are Louisiana employers required to withhold income tax?
Employers located in Louisiana must withhold state income tax from all employee wages earned in the state, regardless of whether the employee is a Louisiana resident (this is in addition to your federal income tax withholding responsibilities). To comply, you’ll need every new employee to complete Form L-4, “Employee Withholding Exemption Certificate.”
The amount of Louisiana income tax you should withhold is based on the state’s income tax withholding tables, as well as the withholding exemptions and the dependent credits reported on Form L-4. If the employee doesn’t fill out the certificate, you should withhold state income tax on all wages paid without any exemptions.
Withholding taxes are remitted according to the amount of total state income tax withheld from employees:
- Less than $500 monthly must be remitted quarterly
- Equal to or greater than $500, but less than $5,000, monthly must be remitted monthly
- Equal to or greater than $5,000 monthly must be remitted semi-monthly via electronic funds transfer
You’ll use Form L-1, “Employer’s Return of Louisiana Withholding Tax,” to report and reconcile state income tax withheld for each quarter. (Monthly filers should attach payments to Form L-1V, “Withholding Payment Voucher.”) Note that income taxes withheld in the last month of a quarter (March, June, September, December) should be submitted with the L-1 return for the respective quarter.
Each Form L-1 covers one period and must be filed by the last day of the month following the close of the period—except for semi-monthly payers. Semi-monthly payers must file Form L-1 by the 15th day of the month after the close of the quarter.
A quarterly return must be filed even if no taxes are withheld during the quarter. If wages paid to employees weren’t sufficient to require withholding, an L-1 return should be submitted with zero dollar amounts.
The due dates for reports for taxpayers with a quarterly or monthly payment frequency are:
- 1st Quarter: April 30
- 2nd Quarter: July 31
- 3rd Quarter: October 31
- 4th Quarter: January 31
The due dates for taxpayers with a semi-monthly payment frequency are:
- 1st Quarter: April 15
- 2nd Quarter: July 15
- 3rd Quarter: October 15
- 4th Quarter: January 15
Any employer that fails to withhold and pay amounts required to be withheld is liable for such amounts.
You can file Form L-1 on paper if you’re not required to file electronically. To file on paper, you may use the Form L-1 that was mailed to you, the version available online, or one printed through approved third-party software.
You can file electronically through the Louisiana Department of Revenue’s online service, Louisiana Taxpayer Access Point (LaTAP), or approved third-party software.
What are the Louisiana requirements for unemployment insurance taxes?
Every employer operating in Louisiana must complete and submit an employer application to receive an official determination of liability or non-liability for unemployment insurance taxes from the Louisiana Workforce Commission (you must also pay federal unemployment taxes). After the application is reviewed, you should receive one of the following, usually within two to four weeks of the application submission:
- Liability Notification: If you’re liable for unemployment insurance tax, you’ll receive an unemployment insurance tax Employer Account Number (EAN), also known as a State Identification Number (SID), that you’ll use to file and pay your taxes.
- Non-Liability Notification: No state account number is assigned.
Unemployment insurance taxes are due no later than the last day of the month immediately following the end of each quarter (the exception is for annual domestic filers, whose taxes are due January 31):
- 1st Quarter: April 30
- 2nd Quarter: July 31
- 3rd Quarter: October 31
- 4th Quarter: January 31
All employers must file wage reports and pay taxes electronically. Late taxes are assessed for penalties and interest.
A new employer liable for Louisiana unemployment taxes is assigned a tax rate based on the average rate for employers in the same industrial classification (NAICS code) according to the latest rate computation. After you serve the eligibility period, you’ll receive a rate based on your individual experience rating record. Your tax rate percentage is applied quarterly to your taxable payroll to determine your tax amount (also referred to as your “contribution”).
The rates for 2023 range from .09% to 6.20% of the wage base for each employee. The taxable wage base for 2023 is $7,700, meaning you pay unemployment insurance taxes only on the first $7,700 of an employee’s wages.
These contributions, except social charge deductions (charges applied to all employers, regardless of individual experience), are credited to your account. Tax rates are issued to all taxable employers on an annual basis, showing the contribution, payroll, and benefit charge amounts.
Benefit charges are the sum of your percentage of the unemployment insurance benefits paid to your former employees by the Louisiana Workforce Commission. Each quarter, you’ll receive a Quarterly Statement of Benefit Charges against your account.
For example, if 50% of the funds necessary for a claimant’s eligibility were earned from you, you’d be charged 50% of the benefits paid to the claimant each quarter.
Louisiana also accepts “Voluntary Contributions.” This is a one-time, non-mandatory payment allowed each year that may reduce your tax rate. You can contribute any amount. A Voluntary Contribution has no social charge assessment withheld, so it’s a totally “creditable contribution” payment option offered to employers solely to increase an account’s reserve.
Voluntary Contributions must be made within 30 days from the issue date of the rate notice. After the rate recalculation is processed based on the contribution, the employer is notified of the modified rate. But, if your account has a delinquent balance, a Voluntary Contribution payment won’t be applied and the Louisiana Workforce Commission won’t recalculate your rate.
Tax compliance is just one of the many things on small business owners’ plates. Gusto’s payroll service can ease some of the burden by making it easier to pay employees and automatically file your payroll taxes.