Louisiana enacts online sales tax

Update 12.21.2018: Louisiana initially planned to enforce economic nexus starting January 1, 2019. However, the Louisiana Department of Revenue now says it will enforce economic nexus at "a date to be determined in 2019."

Update 7.19.2018: The U.S. Supreme Court has ruled in favor of South Dakota in South Dakota v. Wayfair, Inc. On the day the decision was issued, the Louisiana Department of Revenue said, "It is far too soon for a definitive estimate of what the state will receive from online sales as a result of today’s decision, but when appropriate, we will provide updates." Additional details have yet to be released.

Louisiana is the latest state to enact economic nexus. Governor John Bel Edwards signed the measure into law on June 12, 2018.

House Bill 17 considers an out-of-state retailer who makes taxable sales for delivery into Louisiana to be a dealer in the state responsible for collecting and remitting sales tax if, in the current or previous calendar year, that retailer:

• Has gross revenue for sales delivered into Louisiana in excess of $100,000; or
• Made 200 or more separate transactions of taxable goods or services delivered into Louisiana.

Non-collecting sellers “without a physical presence in Louisiana” are invited to “voluntarily register for and collect state and local sales and use taxes as a dealer,” even if they don’t meet the above thresholds.

The significance of South Dakota v. Wayfair, Inc.

South Dakota v. Wayfair, Inc. could change the way states are permitted to tax remote sales. According to precedent upheld by the Supreme Court in Quill Corp. v. North Dakota (1992), a state can only tax a business with a physical presence in the state. Since ecommerce sellers are often based remotely, this means states are barred from taxing many online sales.

South Dakota’s economic nexus law challenges the physical presence standard by maintaining economic activity alone is sufficient to trigger a tax collection obligation. The state petitioned the Supreme Court to reconsider Quill, and the court took the case. The Supreme Court heard oral arguments on April 17, 2018, and is expected to issue a decision before leaving for recess at the end of June.

If the court rules in favor of South Dakota, states with economic nexus laws like South Dakota’s could be better positioned to tax some remote sellers. Louisiana clearly has this in mind. Its economic nexus policy is set to apply “to all taxable periods beginning on or after the date of the final ruling by the United States Supreme Court in South Dakota v. Wayfair Inc., Overstock.com, Inc., and Newegg Inc.”

Yet, although Louisiana doesn’t currently tax remote sales, it does impose notification and reporting requirements on certain non-collecting vendors. Learn more.

New entity will collect remote sales tax

HB 17 also establishes a new entity, the Louisiana Sales and Use Tax Commission for Remote Sellers, to “serve as the single entity in Louisiana” able to collect state and local sales and use taxes from remote sellers.

The measure makes clear that the new commission will only collect taxes if authorized to do so by “any federal law” or final ruling by the United States Supreme Court authorizing such collection. 

To learn more about economic nexus and South Dakota v. Wayfair, Inc., see Avalara Sales Tax 360.