Louisiana’s Remote Seller Law Poses Compliance Challenges

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By Paul Stinson

Remote sellers face a high likelihood of unwittingly running afoul of Louisiana’s state and local sales tax compliance requirements, in the wake of the state’s new economic nexus statute, a New Orleans lawyer told Bloomberg Tax.

“You will have essentially vendors who have never had to comply with Louisiana’s reporting requirements in the past having to do it in one day,” Matthew Mantle, a tax partner at Jones Walker LLP, told Bloomberg Tax.

“Because the levels of complexity are so great in Louisiana, it’s almost impossible to get it right in one day,” said Mantle, referring to the requirements imposed by the state’s new remote seller law— Act 5—signed into law June 12 by Gov. John Bel Edwards (D).

The new law requires out-of-state individuals and businesses that sell at least $100,000 of goods or services in the state or engage in 200 or more separate transactions to collect and remit sales tax. The requirement would go into effect immediately following a U.S. Supreme Court ruling in favor of the state in South Dakota v. Wayfair.

The Wayfair case is a direct challenge to the court’s 1992 ruling in Quill Corp. v. North Dakota prohibiting states from imposing sales tax collection obligations on vendors lacking an in-state physical presence.

State/Local Uniformity Issues

Louisiana’s uniformity issues and the would-be immediacy of the law’s enactment following a favorable Wayfair ruling for the states spells a raft of compliance headaches for remote retailers, Mantle said.

“You’ve got a Louisiana system which has very big uniformity problems between the state and local taxing jurisdictions with regard to rates, tax base, and tax interpretation,” he said.

“In addition, there are 60+ autonomous local collectors who at times disagree with the department of revenue, even with regard to items/transactions that are considered ‘uniform’ at the state and local level,” Mantle said.

“As a result, sales tax compliance in Louisiana can be one of the most complicated in the country,” he continued.

Remittance Boost Expected

Louisiana lawmakers passed the law amid efforts to navigate an anticipated $648 million budget shortfall following the June 30 expiration of multiple temporary tax provisions, including an additional 1 percent sales tax. The revenue impact from the remote seller law remains unclear, but it is expected to be positive, according to a fiscal note.

A state revenue official told Bloomberg Tax that collection and remittance efforts are expected to go up in the wake of the new law.

“With the passage of Act 5 and the impending South Dakota v. Wayfair decision, the Department expects more remote retailers to voluntarily collect and remit sales tax,” Luke Morris, assistant secretary of revenue, Office of Legal Affairs, said in a June 14 emailed statement.

Although the state doesn’t have an estimate for the number of remote retailers meeting the economic nexus statute under the 2018 measure, “the Department does anticipate that several remote retailers will qualify,” Morris said.

He based those comments on data from enforcement of a 2016 law ( Act 569) that established notification and reporting requirements relative to retail sales made in Louisiana by remote retailers.

Compliance Mess Ahead?

Although the bottom-line contributions to Louisiana’s fiscus stemming from the new law remain unclear, the amount of chaos in its wake isn’t, Mantle said.

“Without a doubt, the short-term ramifications are going to be a mess,” he said. “Even the largest companies out there with complex third-party superstar systems get it wrong in Louisiana regularly.”

To contact the reporter on this story: Paul Stinson in Austin, Texas, at pstinson@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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