New Louisiana sales tax collection requirements for remote sellers and marketplace facilitators
Starting July 1, 2020, out-of-state sellers and marketplace facilitators doing a certain amount of business in Louisiana will be required to register with the Louisiana Sales and Use Tax Commission for Remote Sellers and comply with sales and use tax laws. These new obligations are due to the enactment of a new marketplace facilitator law and the enforcement of a two-year-old economic nexus law.
Next Sunday marks the two-year anniversary of South Dakota v. Wayfair, Inc. (June 21, 2018), the historic United States Supreme Court decision that overruled a long-standing physical presence rule. While physical presence continues to establish nexus, the decision allows states to base a sales tax collection obligation on sales activity alone (economic nexus). Consequently, states can now require out-of-state businesses with no physical presence in the state to collect and remit sales tax.
Louisiana enacted an economic nexus law on June 12, 2018, shortly before the Wayfair decision. The bill (HB 547) stipulated that economic nexus couldn’t be enforced until “a federal law authorizing states to require remote sellers and their agents to collect state and local sales and use taxes on their sales in each state has been enacted and becomes effective, or a decision by the United States Supreme Court overrules the physical presence requirement for a remote seller to collect and remit state and local sales and use tax on remote sales for delivery into the state.”
Wayfair fulfilled the requirements of HB 547, yet Louisiana held off on enforcing economic nexus until it could determine the best way to do so. The state has an incredibly complex sales and use tax system, with the Louisiana Department of Revenue administering state sales tax, but local governments levying and administering local sales and use taxes. Thus, in addition to creating an economic nexus policy, HB 547 established the Louisiana Sales and Use Tax Commission for Remote Sellers within the Department of Revenue; it serves as the single entity within Louisiana responsible for all state and local sales and use tax administration, return processing, and audits for remote sales delivered into Louisiana.
On May 7, 2020, the commission announced that, effective July 1, 2020, remote sellers are required to register with the commission no later than 30 calendar days after meeting or exceeding one or both of the following economic nexus thresholds in the current or previous calendar year:
- More than $100,000 in gross revenue from sales of tangible personal property, products transferred electronically, or services; or
- At least 200 separate transactions of tangible personal property, products transferred electronically, or services
The commission has yet to clarify whether a remote seller should include sales made through a registered marketplace when calculating the threshold.
Marketplace facilitator requirement
Although one of the first states to embrace economic nexus (if not enforce it), Louisiana is among the last to require marketplace facilitators to collect and remit sales tax on behalf of third-party sellers. Only four states with a general sales tax are still holding out: Florida, Kansas, Mississippi, and Missouri.
Under Louisiana Senate Bill 138, a marketplace facilitator that meets or exceeds one of the economic nexus thresholds listed above is considered the dealer responsible for sales and use tax. As such, it must:
Submit an application for approval to collect state and local sales tax (no later than 30 days after meeting the economic nexus threshold)
Commence sales and use collection duties once the application has been approved (no later than 60 days after meeting the economic nexus threshold)
In determining whether the $100,000 sales/200 transactions threshold has been met, a marketplace must include all remote sales (direct sales and third-party sales).
Liability. If a marketplace facilitator fails to collect tax as required due to incorrect or insufficient information provided by the marketplace seller, the facilitator is relieved of liability for failure to collect or remit tax provided the relief does not exceed 5% of the total sales tax due from sales made or facilitated in Louisiana by the marketplace facilitator. If the facilitator is relieved of liability, the marketplace seller is liable for any amount of uncollected or unremitted tax.
In other words, marketplace sellers are advised to ensure the information they provide to marketplace facilitators is accurate, and that facilitators have all the information they need to correctly collect and remit sales tax or validate exempt transactions.
Marketplace sellers won’t be audited for remote sales facilitated by a marketplace facilitator except to the extent a facilitator seeks relief due to incorrect or insufficient information, as described above.
SB 138 provides no relief for marketplace sellers that are affiliates of marketplace facilitators.
Returns. Marketplace facilitators must file and report tax monthly. To ascertain the amount of tax payable, marketplace facilitators must provide information about their monthly gross sales in a manner prescribed by the commission, on or by the 20th day of the month following the month the tax was collected.
A marketplace facilitator may deduct a vendor’s compensation fee if a return is filed on time or early. The commission will apply each tax jurisdiction’s specific rate of vendor’s compensation as a deduction against the tax due.
A marketplace facilitator may report the sales and use tax collected on remote marketplace sales separately from its own direct sales into Louisiana, or it may report direct and third-party sales on a combined basis.
Options for large marketplace sellers. A marketplace facilitator and marketplace seller can contractually agree to have the marketplace seller and its affiliates collect and remit all applicable taxes and fees in Louisiana, provided all the following requirements are met:
The marketplace seller has annual U.S. gross sales over $1 billion dollars, including gross sales of any affiliates (and franchisees of a single franchisor, in the case of franchised entities)
The marketplace seller (or affiliates) is a service supplier as defined by R.S. 33:9109(B)(7), or is a seller as defined by R.S. 33:9109.1(B)(8)
The marketplace seller provides evidence to the marketplace facilitator that it is registered as a dealer defined by R.S. 47:301(4) with the state and local collectors as defined by R.S. 47:301(2)
The marketplace seller notifies the commission (in a manner prescribed by the commission) that the marketplace seller and its affiliates will collect and remit all applicable taxes and fees on its sales through the marketplace and is liable for failure to collect or remit applicable taxes and fees on its sales
Additional information is available in the text of SB 138 and will be forthcoming from the Louisiana Sales and Use Tax Commission for Remote Sellers.
To learn more about economic nexus and marketplace facilitator laws in other states, check out Sales tax nexus laws by state, a seller’s guide to nexus laws and sales tax collection requirements.
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