Opinions and Legal Insights

Louisiana Department of Revenue Comments on Local Collectors’ Centralized Sales and Use Tax Proposal

As predicted in Kean Miller’s earlier blog post on an interesting developing movement toward centralized sales and use tax collection in Louisiana, the Louisiana Department of Revenue (the “Department”) has expressed its reservations regarding certain aspects of the proposal submitted by the Louisiana Association of Tax Administrators (the “LATA”).  The LATA had worked collaboratively with other local tax organizations to develop the proposal.  See Centralized Sales and Use Tax Proposal Submitted by Local Associations (Oct. 23, 2020).  As expected, the Department is wary of ceding its authority to a newly created Sales Tax Board comprised primarily of local representatives.  In a letter submitted to the chairman of the Centralized Sales and Use Tax Collection Study Group (the “Study Group”), the Department expressed its disinclination to “support any proposal that does not provide equal representation of board membership between state and local government.”

The Department expressed its concerns that, because state sales and use tax revenues account for one third of the revenue collected by the Department annually, and because the Department collects 70% of the revenue that funds state operations, the state tax collector should have equal representation when it comes to setting sales and use tax policies.  As discussed in more detail in our earlier blog post, the LATA proposal recommends that the Sales Tax Board be weighted more heavily in favor of representatives of local government.

Instead of forming a separate Sales Tax Board to oversee state and local sales and use tax collection, the Department suggests that an appropriate alternative would be to merge the new Sales Tax Board into the currently operating Louisiana Sales and Use Tax Commission for Remote Sellers (the “Remote Sellers Commission”).  The Remote Sellers Commission is constituted so as to provide for equal representation between the state and localities. The LATA proposal would place the Remote Sellers Commission underneath the control of the newly created Sales Tax Board.

The Department is also not in favor of having the proposed Sales Tax Board determine sales and use tax policy for both state and local sales and use taxes.  In the alternative, the Department suggests that the Sales Tax Board only be given responsibility for overseeing centralized registration, filing, and remittance of sales and use tax, with the Department and the local collectors each retaining their policy making and auditing functions.

In the end, the Department proposed an alternative to the LATA proposal, which would entirely remove the Department from the proposed Sales Tax Board.  Specifically, the Department proposes that a Local Sales Tax Collection Board be established that deals only with the centralized collection and remittance of local sales and use tax.  The proposed Local Sales Tax Collection Board would be subject to the guidance of the Uniform Local Sales Tax Board.  Under this proposal, the Remote Sellers Commission would remain apart from the proposed Local Sales Tax Collection Board and would continue to collect tax from remote sellers.

Centralized local sales and use tax collection has long been a contentious issue in Louisiana.  While taxpayers have sought centralized and more uniform administration and collection for many years, neither the Department nor the local collectors have been willing to cede the level of autonomy necessary to create a better and more uniform system for taxpayers. As the proposals put forth by the two sides so far contain positions that are not easily resolvable, the Study Group will face an uphill battle in making recommendations that both sides will support.  Certainly the Department’s recommendations, which are likely to weigh heavily with state legislators, do not advance the effort toward the level of uniformity that would make the Louisiana state tax system fairer and would provide welcome improvements designed to facilitate compliance for taxpayers and vendors.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441, or Michael McLoughlin at (504) 620-3351.