Posted on: November 14 2011"Program is seen as a win-win on every aspect"
By: Ed Anderson, Time Picayune
November 13, 2011
BATON ROUGE -- Louisiana's Tax Free Shopping Program, which gives overseas visitors a chance to recoup some of the sales tax they pay on purchases made while visiting the Pelican State, was responsible for almost $73.7 million in spending during the fiscal year ending in June, according to a recent study. And because not all of the spending those tourists did in Louisiana qualified for the tax-free program, the state still collected almost $2.7 million in sales, hotel and excise taxes from them, according to the study, which was commissioned by the Department of Culture, Recreation and Tourism's Office of Tourism.
The study was based on a survey of 490 foreign visitors who responded in one of five languages: French, German, Portuguese, Spanish and Tagalog, the language of the Philippines. The study was conducted by the University of New Orleans' Hospitality Research Center.
Although the Louisiana Tax Free Shopping program is housed in the state Department of Revenue, Lt. Gov. Jay Dardenne, the state's chief tourism officer, said he sought the UNO study to get a better idea of how much is being spent in Louisiana by overseas visitors and from which countries they come.
He said he hopes to see a bump in the numbers next year after he promotes the 200th anniversary of Louisiana statehood to Louisiana's French-speaking friends in Canada and France.
Dardenne said the "positive feedback from consumers" participating in the survey indicates that "the limited resources we invested in the program are paying off exponentially."
In fact, the study shows the program generated enough additional spending -- spending beyond the confines of the Tax Free Shopping Program -- to more than make up for the sales tax revenue forfeited by the state.
During the fiscal year that ended in June, the Tax Free Spending program accounted for $60.8 million in direct spending, including $36.5 million on shopping. The direct spending generated by the program also included $13 million spent on hotels and $7.8 million spent on meals, purchases that did not qualify for sales tax refunds. The tax-free program applies to purchases made at participating merchants on "tangible items" -- such as electronics, clothing, sporting goods, books, fine art and jewelry -- but not on "personal services" such as restaurant tabs, hotel bills, entertainment or transportation.
The UNO study said that the "secondary visitor spending" -- or the ripple effect of the direct spending -- totaled $12.9 million, bringing the total impact to $73.7 million.
"The loss of sales tax attributable to qualifying LTFS (Louisiana Tax Free Shopping) purchases (last fiscal year), $1.5 million, is more than compensated by the state sales taxes generated by the additional economic activity," the study said. "Clearly LTFS is a successful program for the state of Louisiana."
Lining up retailers
Denise Thevenot, the tax-free program's executive director who started with the program as a clerk in 1990, said that more than 800 retailers now participate in the program, 90 percent of them in the New Orleans area. The rest, she said, are scattered among outlets in Baton Rouge, Lafayette and Shreveport.
She said Texas has a modified version of the program but no other state has implemented a tax-free shopping program for overseas visitors.
Thevenot said the last time a financial impact study was done on the program was in 2006 -- the year after Hurricanes Katrina and Rita hit south Louisiana. That study showed the program was responsible for spending of about $45 million.
To qualify, the international visitor must show a passport or other official photo identification when making a purchase and pay the full price and tax.
The visitor is given a voucher attached to the receipt or sales slip and can claim the tax refund at one of three New Orleans area locations: the Riverwalk Marketplace, Louis Armstrong New Orleans International Airport or Macy's at Lakeside Shopping Center, Thevenot said.
Three other locations outside of New Orleans -- the main branches of Capital One Bank in Lafayette and Shreveport and the Macy's Store at the Mall of Louisiana in Baton Rouge -- also serve as program refund centers, she said.
Program guidelines allow payment of up to $500 in cash; refunds of more than $500 are paid by check. Refunds can also be mailed to the visitor's home address. A "handling fee" will be deducted from the sales taxes refunded, based on the amount to be refunded and purchases made.
Reeling in spenders
The program was approved by the Legislature in 1988 and started operating in 1989 as a way to draw overseas visitors to Louisiana.
For at least the past two years, Thevenot said, tourists from Brazil and the Philippines have led all overseas spenders, with Mexican tourists a close third.
In 2010 tourists from Brazil spent $2.96 million in the state and applied for refunds on 2,916 transactions, while Filipino tourists spent $2.3 million and received refunds on 1,866 transactions.
"Brazil's economy is really good now," Thevenot said. "And, they (Brazilians) are just traveling."
Thevenot said the program issued 31,722 refunds on $25.2 million in retail sales during the 2010 calendar year. Those refunds were valued collectively at slightly more than $2 million. Through the end of September of this year, she said, the program issued 23,878 refunds on $21.1 million in purchases. The refunds issued through September of this year amounted to $1.7 million.
The Tax Free Shopping Program is currently marketed by the state tourism office and by convention and visitors bureaus in New Orleans and elsewhere.
Dardenne said the tourism office plugs the program when it makes pitches for overseas visitors or attends travel trade shows "but we don't have the resources" to do a full-blown promotional or ad campaign. Dardenne spokesman Jacques Berry said the tourism office will feature the tax-free program in existing ads or brochures but does not expect to launch a separate promotional campaign for the program.
The UNO study "reinforces our support for the program; it is a great incentive for the international visitor," Dardenne said. "It helps us track where our international visitors are coming from."
Some of the other findings of the UNO study based on the 490 surveys completed include:
Almost 45 percent of the respondents were first-time visitors to Louisiana.
95.6 percent of the visitors said they visited New Orleans; 17.5 percent said they visited Baton Rouge; 2.3 percent said they went to Lafayette; and 0.2 percent traveled to Shreveport.
11.3 percent came to Louisiana with the "primary purpose" of shopping while 47.6 percent said they came for "vacation/pleasure" and 18.5 percent came to the state for a trade show, convention or corporate meeting.
Foreign visitors spent an average of $2,112.15 per person in the state, excluding lodging.
About 70 percent of the visitors learned of the tax-free program while in the state and almost 24 percent heard about it in their home country .
More than 57 percent agreed that the tax-free program would be a reason to return to the state for another trip.
48.3 percent said they spent more than $500 in additional money because of the program. The average additional expenditure was $962.