Ten states began charging sales taxes on Internet purchases Monday, but Louisiana wasn't one of them because leaders are still working on efforts to modernize its collecting system.
The Sales Tax Streamlining and Modernization Commission met Monday to continue discussions about how Louisiana will move forward after a landmark U.S. Supreme Court ruling this summer paved the way for states to impose sales taxes on online purchases from out-of-state retailers.
"It's probably in Louisiana's best interest that we be streamlined – if not for (the Wayfair ruling) but also for the reason of just being an easier state to do business in," said state Rep. Julie Stokes, the Kenner Republican who chairs the commission.
If all goes according to plan, Louisiana taxpayers could be charged sales taxes on online purchases by Jan. 1, 2019. The new system is being created through the Louisiana Sales and Use Tax Commission for Remote Sellers, under the Department of Revenue, at the Legislature's direction.
The high court's June 23 South Dakota v. Wayfair ruling overturned a two-decade ban on taxing Internet purchases from sellers in other states.
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Louisiana had already been working to build up a foundation for Internet sales tax collections in anticipation of the ruling, but hurdles have remained.
Louisiana has a decentralized system where the state collects its sales taxes at 4.45 percent and local governments charge and collect their own at levels that vary by jurisdiction. Most states, including South Dakota where the Wayfair case began, have a single entity to collect both.
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"The court .. said 'Here are some features we really like about South Dakota's law,'" said Joseph Bishop-Henchman of the Tax Foundation, a D.C-based tax policy think tank.
Louisiana isn't part of a "streamline" compact to which South Dakota and several other states belong.
The Louisiana Sales and Use Tax Commission for Remote Sellers has been reviewing software programs that other states use to give vendors a way to calculate state and local sales taxes and weighing the idea of developing a program in-house, Assistant Revenue Secretary Luke Morris said.
"The Wayfair checklist is a concern, but use of the software seems to alleviate a lot of it," Morris said.
Louisiana already meets most of the other specifications.
Retailers with a physical presence in Louisiana, including Walmart and Home Depot, already charge sales taxes on internet purchases.
Some out-of-state retailers, including Wayfair and Amazon, recently have begun voluntarily charging local sales taxes.
Uncertainty over the Supreme Court ruling and whether Louisiana would begin to benefit from revenue collections on online purchases nearly upended a special legislative session that was called to address a looming "fiscal cliff" the state faced.
Some Republican lawmakers speculated that the state could immediately begin collections, which could have addressed the state's budget needs.
But the Tax Foundation's analysis determined that Louisiana and Colorado would have the most hurdles to overcome before they could begin collections due to the states' "duplicative, outdated, inconsistent and inefficient" sales tax collection mechanism.
Bishop-Henchman said Colorado is also working to conform to the court ruling's checklist and expects to have its online sales tax collecting system operational by July 2020.
The state streamlining commission is discussing ways to make the sales tax system, which is currently operated on a parish-by-parish collection representing some 370 jurisdictions, more uniform across-the-board, Stokes said.
After three special sessions, the Legislature agreed to set the sales tax rate at 4.45 percent. It had been 5 percent for the past two years and would have dropped to 4 percent on July 1 had the Legislature not approved the continued hike.
Stokes said that while legislators fought over what sales tax rate would help shore up the state's finances, many didn't notice that the state had effectively created some reform within the sales tax code by suspending many of the sales tax exemptions.
"It's nice to see that at least now we have all of the pennies behaving in the same way, generally speaking," she said.
But Stokes said she worries without more being done to address structural issues through evaluating exemptions and rates, that the state's reputation of having a complicated tax code is costing business opportunities.
"That's ultimately one of the biggest factors that can drive jobs here, and really change the trajectory of our state," she said.