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Louisiana: It's Important to Stay on Top of Tax Changes

  • Feb 5, 2013 | Gail Cole

 A Louisiana School Board Must Decide Whether or Not to Pursue Collection of Unpaid Taxes.

A recent case in Louisiana illustrates one reason why it's important to keep abreast of tax changes. In the case in question, a temporary sales and use tax exemption on the sales of certain services expired, after which a number of businesses failed to collect and remit it. What to do, what to do?

The situation is described in an opinion issued by the Office of the Attorney General regarding "…whether the East Feliciana School Board (the "School Board") would violate La. Const. art. VII, §14 if it fails or declines to pursue certain claims for unpaid sales and use taxes that are otherwise due and owing."

Pursuant to relevant Louisiana law:

  • "[S]ales of services in Louisiana are taxed at the rate of two percent…" (La. R.S. 47:302(C)(1)).
  • "[C]harges for the furnishing of repairs to tangible personal property may be excluded from sales of services …" in East Feliciana Parish. (La. R.S. 47:301(14)(g)(i)(bb)).

The School Board "did pass an ordinance exempting, for a three year period, sales and use taxes for sales of services as described in La. R.S. 47:301(14)(g)(i)(bb)." The tax was reinstated after the expiration of the exemption, but "several businesses thereafter failed to collect and remit taxes (the "Disputed Taxes") to the School Board for sales of services that met the requirements [of the law]".

The attorney general determined that "if the School Board fails to pursue the claims in question, such failure would amount to a gratuitous alienation of property or a thing of value, and would therefore be an unconstitutional donation pursuant to La. Const. art. VII, §14" because the "Disputed Taxes are legally and validly owed to the School Board… ." Such a donation is not constitutionally valid in Louisiana.

However, the School Board may determine that "the benefit or value of recovery would be equal or exceed the costs that will be expended in pursuing collection of the disputed tax… ." If it does not make such a determination, it is required to pursue collection of the unpaid tax.

To summarize the opinion:

"Article VII, Section 14 of the Louisiana Constitution of 1974 requires the East Feliciana Parish School Board to pursue collection of unpaid and disputed taxes unless the School Board determines that the benefit or value of recovery would be less than the costs that would be expended pursuing collection of the taxes."

The opinion does not specify what kind of proof the School Board would have to present in order to validate such a claim.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.