In what a business lobbyist calls “the holy grail of the session,” House Speaker Clay Schexnayder is pressing a bill he hopes will overcome generations of reluctance by local governmental taxing agencies to turn over their sales tax collection and distribution authority to a new “centralized” system that would align Louisiana’s taxing system with those in rest of the country.
While municipal governments haven’t rallied around House Bill 199, at least they’re not throwing up roadblocks.
“We appreciate the speaker including us and local government in providing input on the bill,” John Gallagher, head of the Louisiana Municipal Association, said Thursday. “At this time, we remain neutral and asking our members for input while we remain actively engaged in the process.”
The school boards are still working Thursday with Schexnayder on the bill, said Janet Pope, head of the Louisiana School Board Association.
Small though it is, those are steps forward for local and parish governments as well as school boards that over the years have jealously guarded their authority to collect their own sales taxes. It’s in the state Constitution.
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Sales taxes are one of the few sources of revenues local jurisdictions are allowed by the state.
Gallagher says local government officials historically have been fearful that the state would take control of sales taxes and then, as is often the case, decide that some or all of the money is needed in Baton Rouge more, despite the fact that local voters had approved the amounts for specific local projects.
Think the settlement dollars from the multi-state lawsuit against the tobacco companies, Gallagher said. Part of that money was supposed channel to local programs. But the state of Louisiana needed the bucks and hasn’t appropriated the local earmarks since 2003.
“That’s part of the problem we’ve had for past 75, 100 years. We have an amazing ability at the state level to give away local revenues,” said Julie Stokes, head of Ellevate Louisiana, a Metairie-based policy analysis group of women. “We do it a lot. I don’t blame them, the locals. They’re really not the bad guys.”
As a former Republican state representative from Kenner, Stokes led unsuccessful fights to change Louisiana’s tax system, including centralizing the collection of sales taxes. Only Colorado, Hawaii and Louisiana don’t use a single agency to gather up taxes on the sales of goods and services. That means retailers and wholesalers with stores in different parishes have to collect different taxes on sales, follow different rules and different interpretations of the same state law, Stokes said. It's a burden on business, she added.
“This is the holy grail of this session,” said Stephen Waguespack, president of the Louisiana Association of Business & Industry, told members of One Acadiana in Lafayette on March 5. “If there’s one thing you could choose, this would be it.”
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HB199 differs from past centralization efforts in that the legislation by Schexnayder, a Gonzales Republican, would create the State and Local Streamlined Sales and Use Tax Commission, which would have four local government representatives and four state government representatives.
“The money goes to the independent commission, rather than the Department of Revenue,” said Jay Adams, a tax law specialist with the New Orleans-based law firm of Jones Walker LLP. “The state is on equal footing with the parishes, municipals and school boards. That’s the difference.”
Adams said the technology is available to give businesses the ability to file a single return, submit the cash to one place and have it distributed to each parish – all 64 have different sales tax rates – as well as the state, which charges 4.45 cents on every dollar of a particular purchase.
“As long as the commission doesn’t morph into the state, as long as the local authority and control remain local,” the structure in HB199 is workable, said Dannie Garrett III, a Baton Rouge tax attorney who has represented local taxing authorities. “It doesn’t amend the authority the Constitution gives the locals.”
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Stokes is concerned that the structure might cause stalemates. “That’s the part I worry the most about in the bill: The four-to-four structure and they have to pass everything by two-thirds votes.”
Karen White, the Municipal Association’s general counsel, said one of her concerns in the wording that requires the two existing boards established to collect sales taxes being immediately subsumed and folded into the Schexnayder commission at its very first meeting. Both boards have programs and technologies that will require a fair amount of work to transfer into a new entity. “This process is not going to be done overnight. We would be interested in seeing some language that accommodates some transitional period,” she said.
But the wording of the legislation likely will change during the legislative session that begins Monday and adjourns June 10.
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