Louisiana Working to Come Up With Wayfair Decision Compliant System for January 1, 2019 Rollout

A state with a relatively complicated sales tax system, Louisiana, has announced that it plans to come up with a mechanism that it feels meets the “suggestions” laid out in the majority opinion in South Dakota v. WayfairThe Advocate and various other sources reported that Louisiana Department of Revenue Secretary Kimberly Robinson has set a January 1, 2019 date to have the program in place and begin requiring out of state sellers to collect taxes.[1]

The story on The Advocate website noted that although Louisiana already has a simplified flat rate program in place for catalog sellers (using a flat 9% rate), the state plans to require internet vendors to collect a variable amount based on the many and varied local tax rates charged in the state, using the delivery zip code to determine the tax to be imposed.

The article notes the relative complexity of Louisiana’s taxes compared to other states:

Unlike most states where the one entity collects sales taxes for both local and state jurisdictions, Louisiana has a decentralized system where the state collects its sales taxes — 4.45 percent on the dollar as of July 1 — and local governments charge and collect their own.

Local sales taxes vary widely. Some parishes charge no sales taxes, like Tangipahoa, but its municipalities, like Hammond, will charge 5 percent on purchases. Other parishes charge only “special rates” on certain items. And other jurisdictions charge across the board.

The article describes a new state commission formed to handle this program, as well as issues they are considering at this point.

The Louisiana Sales and Use Tax Commission for Remote Sellers, newly formed within the Department of Revenue, is researching various software packages that internet vendors in other states can use to calculate state and local sales taxes. The computer programs will be free and can tell registered vendors whether to charge at a rate of 0.092 cents per dollar for Metairie residents or at the 0.0945 rate for those living 500 feet away in New Orleans.

The commission also is gathering data on how the 45 states that charge sales taxes are handling the internet following the high court decision.

Only time will tell if the state will be able to come up with a system that will be deemed acceptable by the courts.  Certainly, the Louisiana taxing regime is far more complex than the much-simplified program that the Supreme Court ruled on in South Dakota.

However, most clients don’t want to become the “test case” that we discuss in forums like this.  Certainly, any clients not currently collecting sales or use tax for Louisiana sales that have significant sales in Louisiana will need to carefully follow developments as the state attempts to start requiring collection on January 1, 2019.

[1] “Sales tax on internet purchases in Louisiana coming soon: Details on timing, more”, The Advocate website, https://www.theadvocate.com/baton_rouge/news/politics/legislature/article_5c4e157e-7fad-11e8-9ec9-0bdcb091f339.html, July 6, 2018