Louisiana’s Online Sales Tax System Faces Delay

The question of whether certain businesses should register with the state or local taxing authorities is slowing progress of an Internet sales tax system meant to go live Jan. 1.

by Mark Ballard, The Advocate / November 28, 2018

(TNS) Louisiana had planned to require online retailers in other states to collect sales taxes come Jan. 1.

But that’s not likely to happen as the commission setting up the system to do so is still arguing over definitions that would decide whether some businesses should register with state or with local taxing authorities.

Meeting the day after Cyber Monday and five weeks before the new mandatory taxes on sales internet sales were supposed to go into effect, the Louisiana Sales and Use Tax Commission for Remote Sellers continued Tuesday to try to untangle the details of what constitutes a “remote seller.” How that definition is written will decide whether state or local government will collect some of the sales taxes on products bought over the Internet from retailers not located in Louisiana.

Before the state can mandate out-of-state businesses to collect sales taxes, the commission needs to sort out the definitions, then approve a directive that will regulate how those online taxes are collected and distributed. The commission also must approve an enforcement mechanism to ensure internet retailers without a physical presence in Louisiana collect the taxes on their sales as required.

And the commission still hasn’t chosen a provider to set up the software so that vendors can easily tell how much tax to charge. That’s also waiting for the completion of the directive.

In the meantime, Louisiana Revenue Secretary Kimberly Robinson said the interim order will remain in effect. Approved shortly after the Louisiana Legislature earlier this year passed the law, the Louisiana Department of Revenue directive tells out-of-state website vendors how they can voluntarily register and start collecting sales taxes on their own.

Several major online vendors, like Amazon and Wayfair, already are collecting.

The current rate is 8.45 percent. This is broken into 4.45 percent to the state and 4 percent to the local governments. Also, online arms of stores located in the state, such as Wal-Mart and Apple, are required to collect sales taxes for their internet sales to Louisiana customers.

Once the commission approves the new procedures and enforcement mechanisms, taxes would be collected at the local rate based on where the item is sent. In Baton Rouge, the various local taxing jurisdictions charge 5 cents on every dollar of the purchase on top of the 4.45 percent collected by the state.

The law talks about “remote sellers” who have more than $100,000 in sales or more than 200 transactions, but doesn’t really define them in detail. For instance, an internet company selling clothing would have to register with the commission. But what happens if that out-of-state clothing dot.com is a subsidiary of a retailer selling hardware that has a local bricks and mortar store? The hardware store already is registered with the local government where the shop is located. Local collectors say a legitimate argument could be raised that the online clothing vendor should also be registered locally rather than with the state.

Local governments were given power in the state Constitution to collect sales and use taxes. State courts have held that laws appointing a mandatory agent to collect the taxes from retail stores interfere with that constitutional right. Louisiana is one of the few states that allows local jurisdictions – about 370 of them – to operate pretty much on their own.

If “remote sellers” are defined differently, then the state can collect the sales taxes, remit local governments’ portion. Centralizing on the state level would require businesses to file a single tax return for online sales and submit to a single audit, rather than dealing individually with all 64 parishes, plus scores of local governments, school boards and other jurisdictions.

A simplified system was one of the criteria the U.S. Supreme Court majority in Wayfair v South Dakota suggested as a way states could start collecting sales taxes from website sellers in different states and still be constitutional under the Commerce Clause.

©2018 The Advocate, Baton Rouge, La. Distributed by Tribune Content Agency, LLC.