Retailers, practitioners, and taxpayers are all aware of the landmark sales tax case South Dakota vs. Wayfair, et al. in which the United States Supreme Court overturned the physical presence nexus standard for state sales tax purposes. As a result, remote retailers must collect sales tax in 43 of 46 state sales tax jurisdictions regardless of whether they have physical presence in the state. On July 1, 2020, Louisiana will become the 44th state to enforce collection on remote retailers after Wayfair.
To augment the collections that states are receiving after Wayfair, many states are also passing legislation to force those who run online marketplaces, known as marketplace facilitators, to collect sales tax on sales made by third parties utilizing their online marketplaces. Amazon, Wal-Mart and Best Buy are a few examples of large marketplace facilitators. When a customer purchases items from any of those online sites, they may not be purchasing directly from the named retailer, but from a third-party retailer utilizing the Amazon, Wal-Mart, or Best Buy platform.
It is anticipated that Louisiana will follow the lead of the many states that have passed legislation requiring marketplace facilitators to collect on behalf of these third-party sellers...
However, Louisiana has not yet enacted legislation that requires marketplace facilitators to collect sales tax on third-party sales. Despite the fact that there is no sales tax legislation in Louisiana with respect to the collection obligations of marketplace facilitators, at least one parish has asserted that marketplace facilitators do, in fact, have a collection obligation in Louisiana. The Louisiana Supreme Court heard the case Newell Normand, Sheriff & Ex-Official Tax Collector for the Parish of Jefferson v. Wal-Mart.com USA, LLC, which investigated whether, under current Louisiana law, marketplace facilitators have a sales tax collection obligation in Louisiana.
In this case, Jefferson Parish sued Wal-Mart in order to collect nearly $2 million in estimated sales tax, penalties and interest from 2009 through 2015 for sales made by third parties through the Wal-Mart online platform. On January 29, 2020, the Louisiana Supreme Court found that, with respect to sales through their online marketplace, Wal-Mart, under current law, did not meet the definition of a dealer required to collect sales tax for third parties. Rather, they likened Wal-Mart to an auctioneer, who sells on behalf of its customers. In that case, it is the auctioneer’s customers, rather than the auctioneer, who are the dealers responsible for collecting sales tax on such sales.
Thus, in Louisiana, marketplace facilitators are not currently required to collect sales tax on sales made by third parties through their marketplace. It is anticipated that Louisiana will follow the lead of the many states that have passed legislation requiring marketplace facilitators to collect on behalf of these third-party sellers who are not otherwise collecting sales tax. P&N’s state and local tax team continues to follow the development of these cutting-edge sales and use tax issues. If you have questions about how court decisions and legislation may impact your business, please contact us.