Louisiana Remote Seller Commission Issues First Information Bulletin Addressing Impact of Wayfair

The Louisiana Sales and Use Tax Commission for Remote Sellers (the “Commission”) has now issued its first information bulletin – Remote Sellers Information Bulletin (“RSIB”) 18-001 – regarding the impact of the U.S. Supreme Court’s South Dakota v. Wayfair, Inc. decision on remote sellers selling to Louisiana purchasers.

A copy of RSIB 18-001 can be found here: http://revenue.louisiana.gov/LawsPolicies/RSIB%2018-001%20-%20Remote%20Sellers%20Impact%20of%20Wayfair.pdf

A few items to note regarding RSIB 18-001 are:

  • The RSIB opines that due to the Wayfair decision, the Commission is now authorized to act as the single entity for the administration and collection of sales and use taxes with respect to remote sellers. However, it should be noted that it remains unclear if this jurisdictional expansion of the Commission under Act 5 of the 2018 Second Extraordinary Session was actually triggered by Wayfair.  As we mentioned in our previous blog post, Not So Fast: Louisiana State and Local Sales Taxes in a Post-Wayfair World:

“Act 5 does not become applicable unless/until the U.S. Supreme Court rules in the Wayfair case that the South Dakota statute/regime is “constitutional.”  Although the Court in Wayfair ruled that there is no longer a “physical presence” nexus test for Commerce Clause purposes, the Court did not rule that South Dakota’s scheme was constitutional.  Rather, the Court remanded the case to address whether South Dakota’s regime was constitutional taking into account other issues (such as any other undue burdens upon, or discrimination against, interstate commerce).  Thus, as of right now, Act 5 in Louisiana is not yet applicable (and may never be).”

  • The RSIB also opines that a flat adoption of the Streamlined Sales and Use Tax Agreement was not a requirement found by the Court in Wayfair in order to meet Commerce Clause standards. Some, however, have disagreed with this notion, and the ultimate answer on this issue is currently unclear.
  • The RSIB provides that the Louisiana Department of Revenue will not be seeking any retroactive application of the Wayfair decision, and instead will begin enforcing collection from remote sellers for any taxable period beginning on or after January 1, 2019.
  • The RSIB also notes that the Louisiana Uniform Local Sales Tax Board will issue guidance to local collectors recommending that they also do not seek any retroactive application of the Wayfair decision.
  • The RSIB reminds remote sellers that those who have voluntarily registered with the Department of Revenue and are currently collecting and remitting sales and use tax using a Form R-1301, Direct Marketer Sales Tax Return, should remain collecting and remitting in such manner until further guidance is issued by the Commission.
  • The RSIB also reminds taxpayers that the current information reporting requirements in Louisiana are still in effect; thus, remote sellers who are not currently collecting and remitting sales and use taxes must file applicable information reports as required under current law.

The Jones Walker SALT Team will continue to closely follow – and report on – these developments as they occur.

 

Not So Fast: Louisiana State and Local Sales Taxes in a Post-Wayfair World

As word spread about the Supreme Court’s opinion in South Dakota v. Wayfair, Inc., Dkt. No. 17-494, 485 U.S.        (June 21, 2018), tax administrators around the country popped open bottles of champagne and began toasting the end of the “physical presence” substantial nexus standard.  The sounds of celebration were, at least initially, particularly deafening in Louisiana, with its sixty-three (63) autonomous parish taxing jurisdictions that levy, administer and collect local sales and use tax on behalf of numerous cities, towns, districts and other local jurisdictions.  Remote sellers might have considered downing a drink or two to drown their sorrows at the thought of potentially having to navigate the complex systems of state and local sales taxes in Louisiana.

As tax administrators continued to read the Wayfair opinion, however, a sobering reality began to set in that, at least in the short term, Louisiana’s various taxing jurisdictions are in no better position to force remote sellers to collect and remit state and local sales taxes than they were before the Wayfair decision (and perhaps even a worse one). Continue Reading

The Taxman Cometh: Mississippi Sales and Use Taxes in a Post-Wayfair World

In December 2017, the Mississippi Department of Revenue finalized a new sales and use tax regulation addressing remote sellers and establishing a $250,000 bright-line nexus standard. The department began that process in January 2017 by issuing a proposed regulation and refined it following a public hearing held in February. The regulation positioned the state to take advantage of any repeal of Quill’s physical presence test, but the department stated it would not enforce the new rule until the Supreme Court took that step. Now that Quill’s physical presence rule has been invalidated in Wayfair, taxpayers should expect the department to move forward with these remote-use tax collection efforts. The following information should help summarize Mississippi’s current rules and identify several important details and questions that have yet to be answered.

Statutory Background

Mississippi law [Section 27-67-4(2)(e)] has long required remote sellers to collect use tax if they have nexus with the state by “purposefully or systematically exploiting the consumer market provided by this state.” This could be accomplished “by any media-assisted, media-facilitated or media-solicited means, including, but not limited to, direct mail advertising, unsolicited distribution of catalogues, computer-assisted shopping, television, radio or other electronic media, or magazine or newspaper advertisements or other media.” This collection obligation is contained within the use tax code, not the sales tax code as may be the case in some other states.

Regulatory Bright-Line Rule

The final regulation specifies that sellers have a “substantial economic presence” if their sales into the state exceed $250,000 for the prior 12 months. The original proposed regulation would have based the sales threshold on the prior calendar year, so this change means sellers should track Mississippi transactions on a rolling, monthly basis if they are not otherwise registered. Unlike other states, Mississippi does not specify any minimum number of transactions to create nexus, and Department of Revenue officials have stated informally that a single transaction may meet the requirement when coupled with the other “market exploitation” criteria discussed below. Continue Reading

When Things Get Hot, Put the Bugs in the Pot!

 

It is July in South Louisiana and it is hot and muggy. But that did not stop last weekend’s crawfish boil.  Lately, I have become weary of reading about Wayfair, Kraft, repatriation, BEAT, FDII, GILTI, retroactivity, the slow erosion of the Chevron doctrine, and all of the other hot topics boiling in our SALT world.

To escape the relentless reading, my family hosted a few of our son’s friends for a traditional crawfish boil. Many would question this decision because we are late in the crawfish season and the heat and humidity are oppressive. Forging ahead, however, we enjoyed the successful crawfish boil and highly competitive games of beer pong and water basketball. All in all, a great Saturday afternoon in New Orleans!

Space (and probably protected intellectual property rights) does not allow me to publish the entire recipe for the pots of mudbugs and other fixings we enjoyed. But I will share my favorite part of the recipe we used to conjure up the crawfish concoction. The recipe was broken into detailed steps. At the beginning of each step, the creator of the recipe reminded the user of the recipe the importance of cold beer to the process. No, everyone knows you don’t put beer in the crawfish boil. Instead, an ice cold beer at the beginning of each step is a great refresher, but also chills any anxiety for messing up the preceding step in the recipe. I think you get the picture.

It is now the middle of the week and the Jones Walker SALT Team has returned their sights to the pressing SALT topics of the day. Writing this story, however, makes me smile thinking about the mudbugs (and cold beverages) that were consumed on a hot and sultry South Louisiana Saturday evening. Come on down, ya’ll, and we will boil some mudbugs!

Remember, everything is better with a little SALT. Enjoy your week!

Louisiana Department of Revenue Issues New “Taxable Rate” Chart to Explain State Sales Tax Changes Following Enactment of Recent Tax Revenue Bill

The Louisiana Department of Revenue has now issued a revised “Taxable Rate” chart (Form R-1002) to provide the Department’s understanding of the new Louisiana state-level sales/use/lease tax rates following the Louisiana legislature’s enactment of the sales tax revenue measure Act 1 (HB 10) in the recently-concluded third special session of the legislature, effective July 1, 2018.

A copy of the Department’s new 21-page “Taxable Rate” chart can be found here:

http://revenue.louisiana.gov/Publications/R-1002(07-18).pdf

CAUTION:  Taxpayers should  be mindful that the rates noted in the new “Taxable Rate” chart represent the Department’s interpretation of the applicable rate looking at each specific exemption or exclusion separately and in a vacuum, without taking into account the potential availability of various overlapping exemptions and exclusions that may be applicable to the same type of product, service, or transaction.  Also, as this chart is very new, the chart has not yet been exhaustively reviewed by practitioners and business and industry groups to determine/confirm accuracy.

These state-tax rate changes are the direct result of the highly contentious sales tax revenue measure (Act 1) that was finally agreed upon among the Louisiana legislators late last week following three special legislative sessions in 2018 alone.  Act 1 was enacted to address and offset the looming “fiscal cliff” revenue shortfall that was going to take effect in Louisiana on July 1, 2018.  Act 1 generates the revenue by continuing the imposition of 0.45% of the expiring 1% “clean penny” state sales tax and also imposing a temporary suspension/repeal of the availability of certain exemptions and exclusions to all 4.45% of the state sales tax as of July 1, 2018.  It should also be noted that business utilities will be taxed at a lower state sales tax rate of 2% during this time period.  These new changes are to be effective for 7 years and will sunset on June 30, 2025.

The state-level sales tax revenues approximated to be generated from Act 1 (per the enrolled bill’s fiscal note) are:  $466 mil for the 2018-2019 fiscal year, and $502 mil for each of the 2019-2020, 2020-2021, 2021-2022, and 2022-2023 fiscal years (total of $2.474 billion over the first five years).

 

 

JW SALT Partners Head to Vancouver for the IPT Annual Conference

JW SALT partners Jay Adams and John Fletcher are attending the IPT Annual Conference in Vancouver. Jay is presenting “What the ‘L’ Local Taxes?” about the differences between state and local taxing jurisdictions and uniformity issues. This is highly relevant in the wake of the recent Wayfair decision. Please contact Jay for more information on this presentation.

Louisiana Governor Issues Call for Second Special Session of 2018 to Address Fiscal Cliff

Louisiana Governor John Bel Edwards (D) has now issued his anticipated call for a second special legislative session in 2018 (from May 22nd to June 4th).  This 14-day special session is meant to address a stated $648 million budget shortfall, commonly known as the “fiscal cliff.”  This will be the sixth special session called since January of 2016.

A copy of the Governor’s call can be found in its entirety here.

The Governor’s press release regarding the call can be found here.

According to the House Fiscal Office, $1.4 billion in state revenue is set to expire on June 30, 2018.  This “fiscal cliff” in the budget results from the scheduled roll-off of incoming revenue from the additional 1% “clean penny” state-level sales tax, as well as the sunset of several temporary haircuts to various exemptions and credits.  These measures, which were put in place during the 2015 and 2016 legislative sessions, were considered “temporary” while the legislature worked toward longer-term taxing and spending reform.  The Governor has proposed maintaining a portion of that revenue, resulting in a $400 million “net tax cut” for the people of Louisiana.

The first 2018 special session called by the Governor in February (the fifth in three years) was also an attempt to address this upcoming revenue roll-off; however, no significant tax measures were passed by the legislature at that time.

If no new revenue is generated by the legislature in the upcoming special session, then the legislature will be required to balance the fiscal year budget and related “fiscal cliff” solely with budget cuts – largely to the areas of higher education and health care.

The Governor’s new call allows the legislature to consider, among other things, the following items:

  • Adjustments to brackets for state income tax
  • Adjustments to state sales tax rates, exclusions, and exemptions
  • Sales taxation of sales of services
  • Amendment to the definition of “dealer” for sales tax purposes
  • Adjustments to various tax incentives (credits, rebates, deductions)
  • Adjustments to individual income tax deductions
  • Potential adjustments regarding depreciation and expensing of property for purposes of state income tax (likely as a result of recent federal tax reform measures)

As previously noted, 2019 is a gubernatorial election year in Louisiana. Therefore, budget issues, tax reform, and the raising of taxes will surely continue to be infused with a heavy dose of politics from all sides.

The Jones Walker SALT Team will continue to closely follow – and report on – these legislative developments as they occur.  The Louisiana and multistate business community should follow the upcoming second special session carefully and be prepared to act with regard to any new legislation proposed  by the legislature.

 

SAVE THE DATE for Jones Walker’s 10th Annual State and Local Tax Seminar

WHEN: WEDNESDAY, OCTOBER 10, 2018

WHERE: HILTON AMERICAS-HOUSTON

Please Save the Date for Jones Walker’s 10th 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

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