U.S. Supreme Court clears way to tax out-of-state vendors

Internet sales taxes would boost local tax collections

Online shoppers in Avoyelles Parish, get ready for a change.

Louisiana is beefing up its efforts to collect taxes on purchases made from out-of-state internet retailers. If all internet- based companies are required to pay parish sales tax, it could mean hundreds of thousands of dollars to local governments in sales tax collections.

Avoyelles consumers should have one more Christmas shopping season before most internet merchants begin charging Bayou State buyers their local sales taxes.

After New Year’s, the state hopes to begin charging consumers an online sales tax for their internet purchases from vendors in other states.

This comes in the wake of the June 23 U.S. Supreme Court decision in a South Dakota case that overturned the 26-year ban on allowing local and state entities to tax internet sales across state lines.

Avoyelles School District Chief Accountant Jaimie T. Lacombe, who handles the sales tax collections in the parish, said local entities will receive a “substantial” amount from the new sales tax source.

“This has been a much-anticipated ruling for many states and local tax collectors,” Lacombe said. “ It’s no secret that the way we as a society shops has changed. Therefore, laws that affect tax collection must change also.”

Lacombe said the Supreme Court ruling “ is simply the first step in how e-commerce sales tax laws will affect local collections. Most importantly, this helps level the playing field for local businesses who are required by law to collect and remit sales tax.”

BILLIONS UNCOLLECTED

It has been estimated that states have lost billions of dollars in uncollected taxes from online sales. There has been a lot of time and effort spent on trying to find ways to capture that lost revenue, but those efforts were limited prior to the June 23 ban-breaking decision.

“Internet giant Amazon.com fought for years against collecting sales tax, but now does so nationwide,” Lacombe said, adding that third-party sellers on its site have been making their own decision as to whether to collect and remit state and local sales taxes.

“Just for our parish, our collections from this decision of Amazon is estimated to bring in over $100,000 in sales tax collections parishwide,” she said.

When other internet vendors follow suit, that number could top $300,000 a year, Lacombe added.

Of course, those are sales tax payments added to items purchased by Avoyelles Parish consumers.

Local businesses hope that if local customers have to pay the same sales taxes online, they will decide to keep their money closer to home and buy those items in the local brick-and-mortar store.

State officials had been preparing a plan just in case the Supreme Court ruled in favor of collecting sales taxes.

The Department of Revenue’s recently created Louisiana Sales and Use Tax Commission for Remote Sellers is researching software packages that internet vendors in other states can use to calculate state and local sales taxes. The computer programs will be free and can tell registered vendors what to charge based on the buyer’s location.

Several large out-of-state merchants selling in Louisiana voluntarily collect taxes and turn them over to the state to distribute. Those include Amazon and Wayfair. Other big retailers with stores, warehouses or other operations in Louisiana also collect sales taxes on sales made over their websites. Those include Apple and Walmart.

One element of the new program still needing attention is firming up how to collect and distribute the proper amount of local sales -- the one or two cents going to school boards, police juries, municipalities and other taxing bodies.

At this time, the plan is for the state to collect the local tax based on the ZIP code where the item is delivered and then
distribute the appropriate amount to each jurisdiction.

DECENTRALIZED SYSTEM

In most states, one entity collects state and local sales taxes. Louisiana has a “decentralized” system. That means the state collects its 4.45 percent sales tax and local governments charge and collect their own.

Local sales taxes vary widely, even in Avoyelles Parish. There are sales taxes collected by the School Board, Police Jury and Law Enforcement District. All municipalities except Evergreen collect at least 1 cent of sales tax, and most collect 2 cents.

Even with the legislative action at the end of last month, which essentially lowered the state rate by more than a half-cent, Louisiana still has the nation’s highest sales tax rate when local and state taxes are combined, according to The Tax Foundation, a Washington, D.C., think tank.

While the Supreme Court majority gave some idea of how they would like to see internet tax collections structured, they also sent the case back to South Dakota to sort out other issues, such as how to  force out-of-state vendors to collect sales taxes.

Louisiana officials are watching how South Dakota handles the case because those decisions could impact what happens in Louisiana.

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