Gail Cole Nov 22, 2021
Louisiana’s sales tax registration and reporting requirements are Byzantine, and that’s complicating sales tax compliance for remote sellers.
The Pelican State started taxing remote sales on July 1, 2020, two years after the Supreme Court of the United States overturned the physical presence requirement in South Dakota v. Wayfair, Inc. The Wayfair decision allows states to tax businesses with no physical presence in the state — though physical presence in a state still establishes a sales tax collection obligation. As a result, states can base a sales tax obligation solely on a remote company’s economic activity in the state, or economic nexus.
Under Louisiana’s economic nexus law, a remote seller establishes an obligation to collect Louisiana sales and use tax if it meets or exceeds one of the following economic nexus thresholds in the current or previous calendar year:
The $100,000 sales/200 transactions threshold is on par with thresholds in many other states, so that’s not the tricky bit. Where Louisiana rises above other states in terms of complexity is the fact that it requires remote retailers with economic nexus to register and file with every parish (aka, county) where they make sales. Louisiana has 64 parishes.
Sales and use tax in most states is administered by the state tax department, like the Florida Department of Revenue or the Texas Comptroller of Public Accounts. But since Louisiana is a home-rule state where local governments administer their own local sales and use taxes, remote retailers must register with the Louisiana Department of Revenue plus the tax authorities in parishes where they do business.
That there’s no statewide sales and use tax collection system in Louisiana is one big challenge. Another is that each parish can have unique sales and use tax exclusions and exemptions. Cities, towns, villages, and fire or school districts within a parish can set their own tax rates, so local tax rates within a parish often vary.
Furthermore, as there are 64 parishes, and delivery addresses don’t necessarily indicate which local taxing bodies have jurisdiction, businesses with customers throughout the state could need to contact up to 64 different entities to determine the proper rate to apply to each transaction. Tangipahoa Parish has nine different jurisdictions, while Washington Parish requires remote sellers to distinguish addresses within the 4th Ward but outside Bogalusa limits.
In a recent legal complaint challenging the complexity of these requirements, the National Taxpayers Union Foundation (NTUF) said a remote seller could end up with hundreds of different state and parish filing requirements each year. Collecting, remitting, and reporting sales tax across multiple parishes in Louisiana reportedly takes one company hundreds of hours annually, at a cost of approximately $2.28 for every $1 of sales tax collected.
As NTUF notes, “Louisiana could ease the burden on small businesses by streamlining collection to one central collection point.”
Indeed, numerous states have taken steps to simplify compliance for remote sellers. The 24 states participating in the Streamlined Sales and Use Tax Agreement have adopted a centralized electronic registration system, uniform state and local tax bases, and more. Texas allows remote sellers to collect and remit a single local use tax rate rather than the various rates in effect in each location.
Even other home-rule states are working to streamline compliance for remote retailers. For example, the Colorado Department of Revenue encourages self-collecting, home-rule jurisdictions to participate in the department’s Sales & Use Tax System (SUTS), although it doesn’t require them to do so; retailers still need to file and remit directly with local tax authorities in nonparticipating jurisdictions. Alaska jurisdictions created the Alaska Remote Seller Sales Tax Commission to coordinate sales tax collection for remote sellers.
That there’s a need to simplify compliance in Louisiana is generally understood but doing so would entail overhauling the whole sales and use tax system. A recent attempt to amend the constitution to streamline the collection and remittance process failed.
See how close you are to meeting the economic nexus threshold in Louisiana or other states with the Avalara free sales tax nexus assessment.
