SAVE THE DATE for Jones Walker’s 11th Annual State and Local Tax Seminar

WHEN: WEDNESDAY, OCTOBER 09, 2019

WHERE: HILTON AMERICAS-HOUSTON

Please Save the Date for Jones Walker’s 11th Annual State & Local Tax Seminar!

Be sure to check back for upcoming program details! This program is intended for industry tax professionals and will be recommended for Texas CPE. Full brochure coming soon!

Questions? Contact Courtney Farley at cfarley@joneswalker.com

Wal-Mart.com Oral Argument at Louisiana Supreme Court Now Set for September 4th

The date and time are now set for the much-anticipated oral argument of the Wal-Mart.com “marketplace” litigation matter in Louisiana’s highest court!

On September 4th, at 2:00 PM CT, the Louisiana Supreme Court will hear oral arguments of the taxpayer, Wal-Mart.com, and the local tax collector, the Jefferson Parish Sheriff’s Office (JPSO).

A link the Louisiana Supreme Court’s Official Docket for that date can be found here:  http://www.lasc.org/docket/dockets/Sept2019.pdf.

Live streaming video of the oral argument on the big day can be viewed here:  https://livestream.lasc.org/.

City of New Orleans Offering Amnesty Late Fee Forgiveness Program

In an effort to spur the payment of unpaid back taxes and fees, the City of New Orleans is currently offering an Amnesty Late Fee Forgiveness Program, which began June 3rd and runs through September 3rd, 2019. Certain tax deficiencies, as well as parking and certain camera tickets, code enforcement violations, and even library fines may be paid with reduced or waived fees, penalties, and interest.

The amnesty program offers business owners and operators with delinquent tax accounts an opportunity to settle those accounts without having to pay penalties and all of the accrued interest.

Qualifying taxes include:

  • Sales/use
  • hotel/motel
  • parking
  • alcoholic beverage gallonage
  • occupational license taxes
  • various permits

Delinquent property taxes are not eligible for the amnesty program.

Qualifying taxpayers include:

  • Those who failed to file a tax return and pay the tax due
  • Those who failed to register and/or file sales or any other type of tax, license or permit
  • Taxpayers who are currently under an installment agreement or have defaulted on an installment agreement
  • Taxpayers who underpaid tax or have any outstanding sales tax balance
  • Taxpayers who have failed to pay for or renew an Occupational License or permit
  • Taxpayers currently under audit or in litigation for sales tax matters
  • Taxpayers who misrepresented or omitted tax due
  • Taxpayers who have sales tax liens on personal or business property
  • Taxpayers who claimed incorrect credits or deductions on tax returns

The benefits of the program for taxpayers include a waiver of all penalties and 50% of accrued interest. Taxpayers participating in the program must pay their liability in full by November 15, 2019, with a 50% down payment required at the time of application, and the option of two equal remaining payments.

Taxpayers should note that this is not a voluntary disclosure program, and it will require identification of the taxpayer at the time of application. A taxpayer applying for amnesty might be required to register with the city if the taxpayer does not already have an existing account.

For a full explanation of qualifications and benefits, please click here.

Jay Adams Named IPT Instructor of the Year for Sales Tax

Our own Jay Adams was named by the Institute for Professionals in Taxation (IPT) as its Instructor of the Year for Sales Tax at the IPT Annual Conference! Jay earned this award in recognition of his significant contributions to the IPT’s Sales Tax School I, many years of instruction at IPT events, and the highly positive evaluations he received from his engaging and interactive presentation style.

Congrats, Jay!

June 2019 Louisiana Remote Sellers Commission Meeting Brings Good News and… No News

Monday’s meeting in Baton Rouge of the Louisiana Sales and Use Tax Commission for Remote Sellers (the “Commission”) included two pieces of good news for just about everyone involved in or affected by the state’s effort to centralize the collection and remittance of sales taxes for remote sales. Unfortunately, there still remains a lack of clarity as to exactly who will be subject to the remote seller provisions of Act No. 5 of the 2018 2nd Extraordinary Session (“Act 5”) and HB 547, (signed into law by Governor Edwards on June 17, 2019 and designated as Act No. 360)… but let’s get to that in a moment.

First, the Technology Sub-Committee reported that it is close to completing the local tax matrix. When finished, the matrix will include all of the sales tax rates for all of the state’s local sales tax jurisdictions, as well as relevant exemptions and exclusions.

Second, the Committee also reported that the draft central sales tax return is nearing completion. This return will be used by qualifying remote sellers to report and remit sales taxes collected on remote sales of items delivered into Louisiana.

Following the completion of these essential steps, Louisiana will be able to provide this information to software service providers, who will, in their turn, be able to develop software to be utilized by remote sellers to prepare and file the Commission’s central tax return.

In the meantime, the clock is ticking for the Commission and businesses alike: Act 5 and Act 360 take effect for tax periods beginning July 1, 2019, with the Commission acting as the single collector of state and local sales taxes for remote sellers and as the party responsible for distributing local sales taxes to parishes and sub-jurisdictions. Until the Commission has established its central collection system, remote sellers will be able to use the state direct marketer’s return, which provides for a flat 8.45% rate to cover state and local sales taxes.

All of this is the good news that came out of this week’s meeting of the Commission. The “no news” of the title relates to the issue we reported on last week: to whom will Act 5 and Act 360 actually apply? More than 900 businesses have voluntarily registered to collect and remit sales tax using the direct marketer’s return. Looking ahead, however, it is quite possible that at least some of these might not qualify as “remote sellers” given the narrow definition of “remote sellers” in Act 360. The Commission’s meeting also lacked any discussion whatsoever about marketplace sales. While we applaud the Commission’s progress toward the development of a central return for remote sales, it remains to be seen when and how the Commission will take up other core issues.

There is one more piece of important news that came out of this week’s meeting: the election of the coming year’s Commission officers. Jeanine Theriot, the Sales Tax Administrator of the Jefferson Parish Sheriff’s Office and a member of the Commission representing the Louisiana Sheriff’s Association, was elected chairman, replacing Kimberly Robinson, Secretary of the Louisiana Department of Revenue. Darlene Allen, of the LDR, was elected vice-chairman, replacing Tiffani Delapasse, a member of the ULSTB.

SAVE THE DATE for Jones Walker’s 11th Annual State and Local Tax Seminar

WHEN: WEDNESDAY, OCTOBER 09, 2019

WHERE: HILTON AMERICAS-HOUSTON

Please Save the Date for Jones Walker’s 11th Annual State & Local Tax Seminar!

Be sure to check back for upcoming program details! This program is intended for industry tax professionals and will be recommended for Texas CPE. Full brochure coming soon!

Questions? Contact Courtney Farley at cfarley@joneswalker.com

Louisiana’s New Remote Sellers Law: What Does H.B. 547 Have in Common with a Box of Donuts?

As members of the Jones Walker SALT Team sat around the table in our office kitchen staring into a box of donuts provided by our firm on National Donut Day (the day after the close of the 2019 Regular Session of the Louisiana Legislature), we pondered this question: what does that box of tasty treats have in common with H.B. 547, which is Louisiana’s latest legislative expression on the subject of sales tax collection and remittance obligations for remote sellers? Two similarities quickly came to mind as we licked the glaze off our fingers.

First, the box of donuts definitely was full of some tasty treats (a dozen to be exact), and, well, H.B. 547 has some tasty ingredients, but certainly not a dozen. Second, H.B. 547, like that box of donuts, is full of holes.

H.B. 547, which is awaiting action by Governor Edwards, is Louisiana’s second legislative effort to bring Louisiana’s exceedingly complex state and local sales tax system into the post-Wayfair world envisioned by the United States Supreme Court in South Dakota v. Wayfair, Inc., 138 S.Ct. 2080, 201 L.Ed.2d 403 (2018), a world that many states have already entered in full force. Louisiana’s first effort, Act No. 5 of the 2018 2nd Extraordinary Session (“Act 5”), made some strides by establishing minimum economic nexus thresholds for state-level sales tax collection purposes (Act 5 is silent as to any local-level economic nexus standards) and attempting to establish the Louisiana Sales and Use Tax Commission for Remote Sellers (the “Commission”) as the single entity in Louisiana for the collection of state and local sales taxes on remote sales.

Unfortunately, as enacted, the provisions of Act 5 never became effective due to a drafting hole. Act 5’s provisions were not to become effective until a final ruling by the United States Supreme Court in Wayfair finding South Dakota’s remote seller law to be constitutional. In Wayfair, the Supreme Court overruled the physical presence requirement, but it did not reach a ruling on the constitutionality of South Dakota’s remote seller law. Thus, the provisions of Act 5 never got rolling like the donut that rolled across the table.

H.B. 547 essentially began its legislative path as a bill to fix the effective date provision of Act 5 and to address some of the issues the Commission had discussed and developed over the past few months. As is the case with many bills, H.B. 547 changed as it worked its way through the legislature. For example, at one point, provisions were added to specifically address a form of “centralized reporting” for online marketplace sales. There also were discussions among various stakeholders regarding issues, such as how to fund the work of the Commission, how to make sure local tax collectors received the proper amounts of sales taxes on remote sales, and how to make sure the local tax collectors retained their constitutional power and authority to operate independently from the state sales tax system.

Most importantly, stakeholders discussed a strategy for broadly defining “remote sales” and “remote sellers” to allow more businesses to take advantage of some form of centralized collection and remittance for remote sales. Most stakeholders agreed that this strategy would bring Louisiana more in line with the Wayfair standards, would avoid protracted and costly litigation over the constitutionality of Louisiana’s dizzyingly complex state and local sales tax systems, and would bring in much-needed state and local sales tax revenues on an efficient basis that is user-friendly for the tax collectors and their “deputy tax collectors” (i.e., remoted sellers).

Now that H.B. 547 is baked (half-baked?), what tasty treats does it contain? First, H.B. 547 fixes the effective date snafu in Act 5 by providing that H.B. 547 and Act 5 are effective for tax periods beginning July 1, 2019. This essentially means that the legislature has finally breathed life into the Commission, which will soon be fully effective and able to carry out its mission. Second, the Commission now has authority to be the single collector of state and local sales taxes for “remote sellers,” as narrowly defined in H.B. 547. Third, until the Commission fully establishes the central collection system for “remote sellers,” H.B. 547 allows “remote sellers” to temporarily use the state direct marketers return (the “DMR”) as provided in La. R.S. 47:302(K), which provides for a flat 8.45% rate to cover both state and local sales taxes.

Now, to the holes.

Much like the boxes of donuts pictured, H.B. 547 is full of holes. For example, H.B. 547 fails to address online marketplace sales. Marketplace facilitators provide an online marketplace for the sale of items by third parties. Louisiana sales tax laws presently are unclear, at best, regarding sales tax collection and remittance responsibilities for online marketplace sales, making Louisiana’s already mind-numbingly complex state and local sales tax systems even more complex. A Louisiana court of appeals recently “addressed” marketplace facilitators in Normand v. Wal-Mart.com USA, LLC, 18-211 (La. App. 5 Cir. 12/27/18); 263 So. 3d 974. This case is on appeal to the Louisiana Supreme Court and likely will be decided later in 2019. A complete discussion of the Wal-Mart.com case is beyond the scope of this article. Suffice it to say that the Louisiana Legislature missed a timely opportunity to thoughtfully and deliberatively address online marketplace sales though the legislative process on a prospective basis via H.B. 547. Language found its way into the bill but was unceremoniously stripped out in the legislative process.

Perhaps the largest hole in H.B. 547 is another opportunity missed by the legislature. H.B. 547 provides more specific definitions of “remote sales” and “remote sellers.” But the new definitions are so narrow that very few “online businesses” will qualify for the new remote sellers’ central collection process administered by the Commission. The problem arises because of the reference in the definition of “remote seller” to the definition of “dealer” in La. R.S. 47:301(4)(a) through (l). Reading these provisions together, the scope of “remote seller” that can benefit from the central collection system is very small. Indeed, sellers that engage in the regular solicitation of a consumer market in Louisiana through any type of advertising or media can potentially be required to collect state and local sales taxes in Louisiana, but will not qualify as “remote sellers” that are allowed to use the Commission’s central filing system. Consequently, even sellers lacking any physical presence in Louisiana could be required to file sales tax returns with the state and every independent, local taxing jurisdiction in Louisiana. This begs the question: Has Louisiana made any meaningful headway in the post-Wayfair world?

The picture provides a great illustration of one of the shortcomings of H.B. 547. In order to bring Louisiana’s complex state and local sales tax systems more in line with the Wayfair criteria, avoid unnecessary litigation and related costs over the constitutionality of Louisiana’s system, ease the undue burden on the “deputy tax collectors” of the state and local tax administrators, and more quickly start the flow of much-needed revenues to the state and local tax recipient bodies at little or no additional costs, the Louisiana Legislature missed the opportunity to draft legislation that would have a scope as broad as the outer diameter of the donut in the picture above. Instead, the Louisiana Legislature focused on the diameter of the hole in the middle of the donut (or even smaller) when defining “remote sale” and “remote seller.”

Unless things change over the next year through the work of the Commission and further efforts by the Louisiana Legislature to broaden the scope of central collection of state and local sales taxes, and to address online marketplace transactions, all on a specific, non-speculative, and prospective basis, few “remote sellers” will be able to use the Commission’s central collection system. Confusion and undue burden will continue for both businesses and tax administrators. Needed revenues will not flow to the local tax recipient bodies. And litigation over the constitutionality of the discriminatory, complex state and local sales tax systems will undoubtedly follow, with the related time and costs. In other words, if Louisiana aims low and seeks to perpetuate the undeniable complexity and undue burden on interstate commerce caused by the current systems in Louisiana and force the systems into the hole of the donuts, the state, local governmental tax recipient bodies, and businesses will suffer. Louisiana will continue to be at the bottom.

With meaningful collaboration among all stakeholders, however, the Commission and the Louisiana Legislature can aim high, make Louisiana’s system as close as possible to a non-discriminatory, constitutional sales tax system envisioned by the U.S. Supreme Court in Wayfair, and move Louisiana out of the cellar when it comes to complex state and local sales tax systems. Aim for the outer diameter of the donut hole, not the inside. Everyone will enjoy the tasty treats of such a system.

ADDENDUM:  H.B. 547 was signed into law by Gov. Edwards on June 17, 2019.  It is now designated as Act No. 360 of the 2019 Regular Session.  It is fitting that the bill was assigned 360, just like a donut.

Bill Backstrom presents on Intercompany Transactions at COST Spring Audit and Income Tax Conference

SALT Team member, Bill Backstrom, recently co-presented “Intercompany Transactions – State Challenges” at the COST Spring Audit and Income Tax Conference in Denver, Colorado.

The presentation focused on transactions between related parties and how they attract the attention of state taxing authorities. Tax authorities believe that such transactions provide opportunities for the “redistribution” of income. But supply chains and service companies are a common part of a corporate family.

The speakers discussed several weapons that states use to challenge intercompany transactions such as addbacks, throwbacks and throwouts, as well as transfer pricing studies. The speakers also discussed if the state has the authority to use these weapons and what the taxpayer’s best arguments are against their application.

Louisiana’s Uniform Local Sales Tax Board Issues Adopted Regulation Regarding Uniform Voluntary Disclosure Program and Related Voluntary Disclosure Agreements (VDAs)

Louisiana’s Uniform Local Sales Tax Board (“ULSTB”) has now issued its adopted regulation at Louisiana Administrative Code (“LAC”) 72:I.105 (“Voluntary Disclosure Agreements”) regarding a uniform voluntary disclosure program and corresponding uniform voluntary disclosure agreement (VDA) for Louisiana local sales and use tax purposes.  The final, adopted regulation contains the same language as the prior proposed regulation that was issued by the ULSTB on November 29, 2018.

A copy of the adopted regulation can be found here (March 2019 Louisiana Register – see p. 440):

https://www.doa.la.gov/osr/REG/1903/1903.pdf

As required by statute (see La. R.S. 47:337.102(F)), the ULSTB has promulgated this regulation to establish a uniform voluntary disclosure program and corresponding VDA for taxpayers seeking relief from penalties in cases where a liability to more than one local sales and use tax collector is owed.

Taxpayers may apply for a VDA with the ULSTB anonymously, if they wish.

Pursuant to the adopted regulation, an undisclosed liability will qualify for a VDA if it results from the underpayment or non-payment of sales tax due to an error in the:

  1. mathematical computation of the tax due on the return;
  2. interpretation of the law; or
  3. process of reporting the tax due on the return.
  4. An undisclosed liability also qualifies if it resulted from the merger or acquisition of a company that previously failed to properly report sales and use taxes to a collector.

An “error in the mathematical computation of the tax due on the return” is an error on the part of the taxpayer in mathematical computation on the face of the return or on any of the supporting documents or the unintentional failure to include all amounts necessary for calculating the correct amount of taxes due on the return.

An “error in the interpretation of the law” is a construction of the law on the part of the taxpayer contrary to the collector’s construction of the law that caused the applicant to incorrectly determine that no tax or a smaller amount of tax was due.

An “error in the process of reporting the tax due on the return” is an error, omission, or a mistake of fact of consequence to the determination of the tax liability on the part of the taxpayer.

However, pursuant to the regulation, an applicant shall be considered to fail to comply with the requirements for a VDA under any the following conditions:

  1. The applicant is registered as a dealer that is required to report retail sales or sales at retail, as defined in R.S. 47:301(10), to the collector on the application date and the undisclosed liability results from the applicant’s failure to file returns for a local sales tax.
  2. The undisclosed liability results from the filing of false, fraudulent, or grossly incorrect returns and the circumstances indicate that the taxpayer had intent to defraud the local taxing authority of the tax due under a local ordinance or the Uniform Local Sales Use Tax Code (the “ULSTC”) (La. R.S. 47:337.1, et seq.).
  3. The applicant has been contacted by the collector to inquire about a tax matter, including but not limited to nexus, a potential tax liability or an audit of the taxpayer’s records provided such contact occurred in writing and prior to the application date of the agreement.
  4. The applicant is affiliated, as defined by law, with an entity that has been contacted by the collector for the purpose of performing an audit. However, an applicant shall be considered in compliance with the requirements of the voluntary disclosure program after the audit of the affiliated entity has been completed, provided the undisclosed liability otherwise qualifies for the VDA (as described above) and the applicant does not otherwise fail to qualify for the VDA (as described in the bullets immediately above).

The adopted regulation also provides additional detailed information regarding:

  • the VDA Application and the ULSTB’s evaluation of offer to enter into a VDA.
  • the determination of the applicable “look-back period” and treatment of periods prior to the look-back period.
  • post-approval procedures and conditions.
  • the procedure for payment of the tax, interest, and penalty due (however, under the adopted regulation, once full payment of tax and interest has been received, the collector shall waive any delinquent penalty due).

As part of this VDA program, the ULSTB has also set up a separate online “Agreement for Voluntary Disclosure of Local Sales and Use Taxes,” which can be found here:

https://lulstb.com/agreement-for-voluntary-disclosure-of-local-sales-and-use-taxes/

This online form Agreement can be completed by the taxpayer and submitted online to the ULSTB for review and distribution to the relevant local sales/use tax collectors.

 

 

 

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