Louisiana may make marketplaces collect tax on third-party sales and take steps to prevent sales of counterfeit products
June 15, 2020. SB 138 was signed into law and takes effect July 1, 2020. Marketplace facilitators that meet or exceed the economic nexus threshold are considered the dealer for each remote sale for delivery into Louisiana. Facilitators must submit an application for approval to collect state and local sales and use tax on remote sales no later than 30 calendar days after establishing economic nexus, and commence collection duties once the application has been approved, no later than 60 days after meeting the economic nexus threshold.
If a marketplace facilitator fails to collect tax as required due to incorrect or insufficient information provided by the seller, the facilitator is relieved of liability and the marketplace seller shall be liable for any amount of uncollected or unremitted tax due. For additional details, see New Louisiana sales tax collection requirements for remote sellers and marketplace facilitators.
The Louisiana Legislature is back in session and considering two different marketplace bills. One would require marketplace facilitators to collect and remit sales tax on behalf of third-party sellers. The other would require marketplace facilitators to do more to prevent sales of counterfeit goods.
Collection requirement for marketplaces
Senate Bill 138 would include marketplace facilitators in the definition of “remote sellers” and require certain marketplaces to collect and remit state and local sales tax on sales of tangible personal property, products transferred electronically, or services in Louisiana, including those by third-party sellers. If enacted as written, it would take effect January 1, 2021.
This collection requirement applies to remote marketplace facilitators with 200 or more sales of tangible personal property, products transferred electronically, or services in Louisiana in the current or previous calendar year, or more than $100,000 of gross sales of the same. All remote sales (direct and third-party) should be considered when calculating the threshold.
A marketplace facilitator would have to register with the Sales and Use Tax Commission for Remote Sellers (an independent agency within the Louisiana Department of Revenue) within 30 days of meeting either threshold and begin collecting sales and use tax within 60 days of meeting either threshold. Individual vendors selling through a registered marketplace would not be liable for filing returns and remitting the tax on marketplace transactions.
Remote sellers and marketplaces that file returns and remit payments on time would be allowed to deduct 0.935% of the tax due, though this compensation could not exceed $1,500 per calendar month.
The Louisiana Senate Revenue & Fiscal Affairs Committee held a hearing on SB 138 on May 8.
Cracking down on counterfeit goods
Counterfeit products certainly aren’t new: Illegitimate vendors have been selling knockoff versions of branded goods for decades. Online marketplaces merely provide counterfeit sellers with the perfect platform.
According to a 2018 study by the U.S. Government Accountability Office (GAO), “the market for counterfeit goods in the United States has shifted in recent years from one in which consumers often knowingly purchased counterfeits to one in which counterfeiters try to deceive consumers into buying goods they believe are authentic.”
It continues, “Counterfeiters exploit third-party online marketplaces to gain an appearance of legitimacy and access to consumers, according to the Federal Bureau of Investigation.” Twenty of 47 items the GAO purchased from third-party sellers on popular consumer websites were counterfeit.
Legitimate businesses are often left to deal with the fallout themselves, seeking legal action if they have the resources to do so. Unfortunately, the counterfeiters often simply disappear when discovered. Since online marketplaces generally aren’t required to vet third-party sellers, accounts can be set up with false business names and bogus addresses.
Senate Bill 476 would attempt to put an end to that, at least for marketplaces doing business in Louisiana. If adopted as written, it would take effect August 1, 2020.
The measure would require an online marketplace to verify the authenticity of “high-volume third-party sellers” annually and, in certain situations, to remove them from the platform. It defines a “high-volume third-party seller” as a marketplace seller with:
- 200 or more discrete sales or transactions of new or used consumer products in any 12-month period during the previous 24 months; and
- $5,000 or more in aggregate total gross revenue.
SB 476 would also require high-volume third-party sellers to identify themselves to consumers by providing, in a conspicuous manner on the consumer product listing (or through a conspicuously placed link on the listing), the following information:
- The full name of the high-volume third-party seller
- The full business address, email, and telephone number of the high-volume third-party seller
- Whether the high-volume third-party seller engages in the manufacturing, importing, retail, or reselling of consumer products
If an online marketplace discovers a high-volume third-party seller has made false representations in order to justify partial disclosure of the above information, the online marketplace must require it to submit the identifying information within three days. If the information isn’t submitted within three business days, the online marketplace must remove the high-volume third-party seller from the platform and revoke its access and privileges.
Additional measures, including how to handle products that may be illegitimate, counterfeit, or improperly using a copyrighted image, are outlined in the text of the Senate Bill 476.
To learn more about different states' requirements for marketplace facilitators, check out our state-by-state guide to marketplace facilitator laws.
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