By Jaye A. Calhoun, Jason R. Brown and William J. Kolarik, II

On Friday, August 10, 2018, the Louisiana Department of Revenue (the “Department”) released Remote Sellers Information Bulletin No. 18-001 (the “RSIB”).  The RSIB states that the Louisiana Sales and Use Tax Commission for Remote Sellers (the “Commission”) “will not seek to enforce any sales or use tax collection obligation on remote sellers based on United States Supreme Court’s decision in South Dakota v. Wayfair or the provisions of Act 5 [2018 La. Sess. Law Serv. 2nd Ex. Sess. Act 5 (H.B. 17)] as it relates to the expanded definition of “dealer” for any taxable period beginning prior to January 1, 2019.  In addition, the RSIB notes that Uniform Local Sales Tax Board will issue guidance to local sales and use tax collectors advising them not to seek retroactive application of the Wayfair decision.

In Wayfair, the United States Supreme Court held that physical presence in a state is no longer required before a state (or local, by implication) taxing jurisdiction may impose a use tax collection obligation on an out-of-state vendor.  But the Court also noted that a use tax collection obligation could constitute an undue burden on interstate commerce.  In so holding, the Court listed the characteristics of the South Dakota law at issue in Wayfair that may indicate that South Dakota’s law does not impose an undue burden on interstate commerce.  Those factors included: (1) a safe harbor to protect small sellers; (2) the lack of retroactive enforcement; and (3) South Dakota’s adoption of the Streamlined Sales and Use Tax Agreement (which, among other things, requires centralized collection, uniform definitions, simplified rate structures, access to sales tax software paid for by the state, and audit immunity for a seller using the state’s tax software).  The Court remanded the case to the South Dakota Supreme Court for a determination of whether South Dakota’s law created an undue burden on interstate commerce.

Act 274 (H.B. 601) of the 2017 Regular Session of the Louisiana Legislature created a Commission within the Department of Revenue for the administration and collection of the sales and use tax imposed by the state and political subdivisions with respect to remote sales.  The Commission was created to: (1) promote uniformity and simplicity in sales and use tax compliance in Louisiana, (2) serve as the single entity in Louisiana to require remote sellers to collect from customers and remit to the Commission sales and use tax on remote sales sourced to Louisiana, and (3) provide the minimum tax administration, collection, and payment requirements required by federal law with respect to the collection and remittance of sales and use tax imposed on remote sales.[1]  But the Commission was prohibited from acting unless the U.S. Congress enacted a federal law authorizing states to require a remote seller to collect and remit state and local sales and use tax on sales made into the state, which has not occurred.

Act 5 was passed, in part, to fix the Congressional action requirement in Act 274 by amending the definition of “federal law” to include a “final ruling by the United States Supreme Court” (which did not occur in Wayfair).  Act 5 also amended the definition of “dealer” to create a South Dakota-style economic nexus law.  But Act 5’s effective date was contingent on a final ruling by the United States Supreme Court in Wayfair that South Dakota’s law was constitutional, which, as mentioned, did not occur.

Despite the uncertainty of its authority to act, the Commission held its first meeting on June 29, 2018 and has continued to meet monthly.  The RSIB represents the first substantive official guidance issued by the Commission since Wayfair.

As noted above, the RSIB adopts a January 1, 2019, prospective enforcement date and encourages Louisiana localities to refrain from applying Wayfair retroactively.  The Department also notes that any remote seller who is not currently registered with the Department or a local sales and use tax collector can voluntarily register with the Department to begin collecting and remitting sales and use tax in accordance with the direct marketer return provisions in La. R.S. Sec. 47:302(K).  Finally, the RSIB notes that Louisiana’s notice and reporting requirements remain in effect for any remote seller to which those rules apply.

Implications

Louisiana’s decentralized sales and use tax regime does not conform in any measurable way with the factors outlined in the Wayfair opinion as significant in evaluating whether South Dakota’s law imposes an undue burden on interstate commerce.  And numerous Louisiana officials have indicated that Louisiana will not adopt the Streamlined Sales and Use Tax Agreement.  As a result, if Louisiana’s sales and use tax regime were applied to remote sellers as it currently stands it going to be very hard for tax collectors to argue that it does not create an undue burden on interstate commerce.

During its meetings, the Commission has indicated that it views the factors listed in the Wayfair decision as a roadmap and the Commission appears to be attempting to adhere to that roadmap.  For example, the Commission is currently researching software vendors certified by the Streamlined Sales Tax Project (the SSTP”) and the SSPT registration process.  But, as mentioned above, because the Wayfair decision was not a final decision by the Supreme Court, the Commission’s authority to act is simply not clear.  However, it is clear that that the Commission has no direct authority to binds Louisiana local tax collectors.

Nevertheless, it appears the Commission will continue to work towards finding a path that conforms Louisiana’s sales and use tax regime as closely as possible to the factors listed by the Court in Wayfair.  But as the January 1, 2019 date approaches, it is possible that rifts between the localities and the state may be revealed and those rifts may jeopardize the Commission’s mission.

A remote seller that sells goods into Louisiana should be mindful that Louisiana’s notice and reporting requirements remain in effect.  As a result, a remote seller that sells into Louisiana should carefully balance the business concerns related to complying with those requirements with the costs and business concerns of complying with the direct marketer return provisions.

Kean Miller is also aware that some parishes may be sending out post-Wayfair voluntary compliance notices.  Those notices request that the vendor register with the Parish under the Parish’s registration system and begin collecting and remitting tax.  While some vendors may be voluntarily registering with Louisiana localities, it should be noted that there may be a downside to voluntarily registering at this point, before the Commission’s work is complete.  For example, the Commission contemplates a single point of registration and return but if a remote vendor registers voluntarily, it may be stuck with filing individual returns for the foreseeable future in every parish where it has sales (as opposed to filing through the contemplated forthcoming uniform system) and the vendor may not be able to take advantage of any uniform guidance issued by the Commission.  Any taxpayer that receives a voluntary registration notice, or that is considering voluntary registration, should speak with their tax advisor before doing so.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Jason Brown at (225) 389-3733, or Willie Kolarik at (225) 382-3441.

************************************

[1] La. R.S. Sec. 47:339.