Louisiana: Update on Wayfair Implementation for Remote Sellers and Marketplace Facilitators

Implementation of Wayfair in Louisiana involves several different pieces of legislation, the first of which predated the Wayfair decision. In 2018, during the Second Extraordinary Session, Act 5 was signed into law in Louisiana. Act 5 adopted an economic nexus threshold requiring a dealer to collect and remit state and local sales and use tax if it had $100,000 or more in gross revenue or two hundred or more separate transactions from the sale of tangible personal property delivered into Louisiana, products transferred electronically in Louisiana, or services used or consumed in Louisiana. The bill also established the Louisiana Sales and Use Tax Commission for Remote Sellers to be the sole entity authorized to collect local sales and use taxes from remote sellers. Subsequently, legislation passed in 2019  (Act 360) required the Commission to (1) set a date of not later than July 1, 2020 to begin enforcing the economic nexus law and (2) to publish a notice of enforcement at least 30 days prior to the enforcement date. Act 360 also amended the definition of “remote seller” to mean “a seller who sells for sale at retail, use, consumption, distribution, or for storage to be used for consumption or distribution any taxable tangible personal property, products transferred electronically, or services for delivery within Louisiana, but does not have physical presence in Louisiana, and is not considered a dealer.”

On May 7, 2020, the Commission announced that it will begin enforcing Louisiana’s economic nexus thresholds effective July 1, 2020.  The Commission’s bulletin provides that a remote seller will be required to register no later than 30 days after meeting the economic nexus thresholds. A remote seller must begin collecting and remitting state and local sales and use tax no later than 60 days after exceeding the threshold. The Commission’s bulletin also states that direct marketers (remote sellers that had voluntarily registered with the DoR and were collecting a statewide rate of 8.45 percent on all sales) that meet the economic nexus thresholds will be receiving correspondence from the Louisiana Department of Revenue and the Commission notifying them that their direct marketer sales tax accounts will be converted to remote seller accounts. As such, they will have to collect the actual local taxes (in lieu of the 8.45 percent) and remit such taxes through the Commission. The Commission has recently adopted regulations providing that for tax periods on or after July 1, 2020, remote sellers must file tax returns and make sales and use tax payments electronically.

Recently, the Louisiana legislature passed Senate Bill 138, which would make certain changes to sales tax law as applied to remote sellers and would require marketplace facilitators to collect state and local sales and use tax on facilitated sales effective July 1, 2020. Under the bill, which is pending signature by Gov. Edwards, a marketplace facilitator is defined such that the facilitator must collect payment from the purchaser and transmit payment to the seller before it is required to collect tax. Payment processors, advertising service providers, certain organizations registered with the Commodity Futures Trading Commission, and persons offering or facilitating the furnishing hotel rooms or rental cars would be excluded from the definition of a “marketplace facilitator.”  In determining nexus, the marketplace facilitator would account for its own sales and remote sales made on behalf of a seller. If a marketplace facilitator failed to collect tax due to incorrect or insufficient information provided by the marketplace seller, the facilitator would be relieved of liability of up to five percent of the total tax due and the liability would shift to the marketplace seller.

Louisiana has long been considered one of the more complex states for sales tax compliance because each parish collected and administered its own tax, established its own tax base within confines of state law, and set its own tax rate. The primary simplification adopted to accommodate remote sellers and marketplaces is to provide that a single return will be filed with the Commission. Sellers and facilitators are still required to collect tax based on the local rate and base in the location of delivery, and parishes will maintain a considerable degree of authority over the administration of tax for remote sellers. For more information on Louisiana’s remote seller and marketplace provisions, please contact Randy Serpas at (504) 569-8810.