A Louisiana appellate court recently upheld a trial court decision holding that an online retailer was liable for Jefferson Parish sales tax on transactions in which third-party retailers sold goods using the retailer’s online marketplace. In its role as a marketplace, the taxpayer facilitated payment processing for the third-party retailers and received a commission from each sale. Per a contract with the third-party retailers, the third-party retailers remained the “seller” of record; they were responsible for fulfilling all orders and all customer service aspects of a transaction, such as order cancellations, returns, and refunds. The taxpayer collected Jefferson Parish sales and use taxes on sales of its own products via the marketplace, but argued that it was not a “dealer” required to collect and remit tax with respect to the third-party transactions that arose from its marketplace. Under Louisiana law, parish-level sales tax must be collected by a “dealer” from a purchaser. The statutory definition of “dealer,” among other things, includes any person “who engages in regular or systematic solicitation of a consumer market in the taxing jurisdiction,” including by various computer and electronic means.
On appeal, the taxpayer argued that it was not a “dealer” because it was not the seller in the transactions as it transferred neither title nor possession of the property. The appellate court, however, noted that the tax collection requirement applied to “dealers” and that the definition of the term “dealer” encompassed a wider group of people than a “seller.” Had the legislature intended the collection duty to apply only to sellers, in the court’s view it presumably would have used that term. Applying the manifest error standard of review, the court next concluded that the trial court’s determination that the taxpayer was a dealer was not manifestly erroneous. Finally, the court declined to rule on whether or not imposing a collection duty on the taxpayer would violate federal law because this issue was not before the trial court. Please contact Randy Serpas at 504-569-8810 with questions on the Wal-Mart.com decision.