Legislature 'running out of time' to prevent devastating budget cuts; sales tax key issue _lowres (copy)

Rep. Julie Stokes, R-Kenner, has served as chairwoman of the Sales Tax Streamlining and Modernization Commission since 2015. The commission has been trying to come up with ways to make Louisiana's sales tax less convoluted.

Louisiana is only one week into its new regime for charging sales taxes for goods purchased over the internet and already some experts are saying they are bewildered by the new rules.

Much of the puzzle is rooted in a long simmering dispute over whether Louisiana should adopt a centralized system — as was put in place Jan. 1 for the collection of internet sales taxes — for all the sales in the state. Louisiana is one of three states where local jurisdictions have the authority to levy and collect their own sales taxes from brick and mortar establishments in their parish.

But much of the uncertainty comes from efforts to fit Louisiana’s complex sales tax structure into a simple, centralized system described by U.S. Supreme Court last June in the Wayfair case that opened the door on collecting sales taxes on internet purchases from merchants with no other presence in Louisiana.

“I’m confused,” said Dannie Garrett, a Baton Rouge lawyer representing the Louisiana School Boards Association during Tuesday’s meeting of a legislatively formed committee considering the modernization of state sales taxes.

The law unambiguously requires “remote sellers” with more than $100,000 in sales or more than 200 transactions to register and then start collecting state and local taxes on their sales under the oversight of the Remote Sellers Commission. About 70 out-of-state retailers selling through websites have registered.

But in order to begin the internet sales tax collection process before enforcement mechanisms were in place, the newly formed Sales and Use Tax Commission for Remote Sellers instituted a system to voluntarily register out-of-state vendors operating in Louisiana via the internet and to turn over sales taxes collected to the Louisiana Department of Revenue. LDR is collecting at a flat 8.45 percent over every dollar spent — 4.45 percent for the state and 4 percent for local jurisdictions.

That procedure was put in place in order to meet the Wayfair standards of not causing an “undue burden” on retailers while the Remote Sellers commission finishes buying and installing software that will levy the tax at local rates based on where the purchased item was sent. At that point, the Remote Sellers commission will take over from the Revenue Department. The commission will then mandate the collection of internet sales taxes from out-of-state retailers, punish those who don’t, and deliver the proceeds to the appropriate local authority, Revenue Assistant Secretary Luke Morris said. But until the software is in place, the commission is not established and therefore the Revenue Department has to collect and distribute the taxes.

Garrett argued that the commission members have been appointed, have met repeatedly and have adopted regulations. “That seems pretty established to me,” he said.

Local jurisdictions — about 370 of them — operate pretty much on their own. The state constitution gives the parishes in which the local taxing jurisdictions authority to collect the local taxes. School boards, municipal governments, law enforcement, parish police juries and other local taxing authorities rely on those revenues and set their own rates with voter approval. That’s why different parishes have different tax rates. East Baton Rouge Parish charges 9.45 percent sales tax.

Garret said local jurisdictions likely would oppose any effort to peel back their constitutional authority to collect sales taxes on their own. Local governments fear that the money that goes to pay for local services will be held up in Baton Rouge if the state collects and distributes the funds. Also, whether to audit a local business for compliance is a decision better made by authorities familiar with the local situation rather than by state officials.

“It seems like that the Remote Seller commission has created a new bureaucracy, more complexity and duplication of what we already had in place which is what we call the Department of Revenue,” said Jay Campbell, the retired head of Associated Grocers and member of the legislative Sales Tax Streamlining and Modernization Committee.

If the law was changed to allow for the central collection of taxes on all sales, “would there even be a need for the Remote Seller Commission?” Campbell added.

“Fiddlin’ around the edges, trying to see how cute we can get with Wayfair is only going to continue to bring more pain to Louisiana,” said Jason Decuir, a former top official in the Revenue Department who now provides private counsel on tax matters. “We need to be discussing what the appropriate constitutional amendment would be."

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