Louisiana’s online shoppers are required to pay sales taxes

23rd April 2018   ·   0 Comments

By Susan Buchanan
Contributing Writer

To get a jump on summer, you may have gone online and bought a sundress or sports gear from an out- of-state retailer. Louisiana levies a consumer use tax on those purchases. Some large retailers collect it at the time of sale. Smaller, out-of-state vendors with no physical presence in the Pelican State seldom do. But buyers are required to pay these taxes to the state.

Under Louisiana law, if an online seller doesn’t have a presence or “nexus” in the state and doesn’t collect sales taxes, the buyer has to pay a consumer use tax, according to Byron Henderson, spokesman for Louisiana’s Department of Revenue. This tax applies to transactions that escaped sales taxes at the time of purchase. For items bought since April 1, 2016, the tax is nine percent — five percent for the state and four percent for local jurisdictions.

“If you bought from out-of-state companies and weren’t charged Louisiana’s state sales tax, you’re required to pay the consumer use tax directly to the Department of Revenue,” Henderson said. Purchases include those made on the internet, from catalogs and television, and from outside the United States. In addition to raising revenue, the tax keeps Louisiana’s retailers from operating at a disadvantage to outside vendors.

In a 1992 case, Quill Corp. v. North Dakota, the Supreme Court ruled that retailers weren’t required to collect sales taxes unless the vendor had a physical presence in the state where the buyer was. But last Tuesday, the court heard a case, South Dakota v. Wayfair Inc., that might end up requiring big and small online sellers to collect state taxes. South Dakota wants the court to overturn the 1992 ruling because it and other states have missed out on needed revenue.

State and local governments could have brought in another $8 billion to $13 billion in 2017 if sales taxes had been collected from all remote sellers, according to the U.S. Government Accountability Office. And Louis-iana could raise between $200 million and $400 million annually if sales taxes were fully collected by online vendors, the state’s Depar-tment of Revenue has estimated. That would reduce Louisiana’s budget deficit, seen at $648 million in the year starting in July.

The Supreme Court is likely to announce its decision in June. If Quill Corp. v. North Dakota is overturned and e-commerce companies have to start collecting sales taxes on all purchases, many shoppers will pay more when they buy online. Meanwhile, however, Congress is also interested in online sales taxes, and with related proposals being considered there, it’s possible that the court will leave the matter up to legislators.

A number of online retailers collect state sales taxes now. Amazon.com, Walmart.com and other big cyber vendors operate warehouses, stores and data centers in many states and charge sales taxes. Amazon.com collects sales taxes on purchases in the District of Columbia and 45 states that have these taxes, the company said last week. In late 2016, Amazon announced that it would start collecting and remitting sales taxes on purchases shipped to Louisiana on January 1, 2017, Byron Henderson said.

Amazon doesn’t have to collect sales taxes when shoppers buy from its third-party, marketplace sellers — except when those customers are in Washington state or Pennsylvania, where laws require collection. Pennsylvania’s Marketplace Facilitator Law went into effect in March, and under it Amazon.com is considered a marketplace. With a similar law in Washington, Amazon began collecting Washington sales taxes for third-party sellers in January.

Last year, more than half of the units sold on Amazon worldwide were from third-party, marketplace sellers, including small- and medium-sized businesses, Amazon founder and CEO Jeff Bezos said last week. Amazon in Seattle and Alibaba in China are the globe’s largest online retailers.

For many years, Walmart.com has collected sales taxes on goods it sells, and it charges taxes on sales by third-party, marketplace vendors when requested by the seller to do so, Walmart spokesman Ravi Jariwala in California, said last week. “Taxes are collected at the time the order is placed,” he said.

California-based eBay, an online auction and shopping site, doesn’t collect sales taxes on transactions between buyers and sellers. But the company’s sellers are required to comply with sales tax laws in any state where they operate or have a presence. “Sellers from Louisiana could be required to collect and remit sales taxes when they sell to a buyer in Louisiana,” an eBay spokeswoman, who asked not to be named, said last week. “To any seller notifying us of that kind of obligation, eBay provides the ability to have the sales tax charged to Louisiana buyers when a sale is made.” Like other small businesses, eBay’s sellers handle their own tax responsibilities.

Macys.com collects sales taxes in locations where it’s legally required to do so. Taxes charged are calculated based on the state and local taxes of the place where the order’s being shipped. “The taxes that appear in your order during checkout are estimated and may differ from taxes you are ultimately charged,” Macys.com advises. “Taxes are charged only when your order ships.”

Small online vendors are less likely to collect sales taxes from out-of-state customers than big retailers. At the Mississippi Gift Company in Greenwood, Miss., “if a customer from Louisiana buys a gift going anywhere outside of Mississippi, no sales tax is charged,” Cindy Tyler, the company’s owner and president, said last week. “If they ship their order to a Mississippi address, then they’re subject to Mississippi sales tax charged at the time of purchase.” She sells to customers from all states and mostly in the South.

Small businesses have been wary of complying with complex state and local sales tax laws. But in the decades since the 1992 Quill decision, software companies have developed programs that can calculate and help collect state sales taxes more easily.

Meanwhile, if you’re charged sales tax on an online purchase, make sure it’s the right amount. Last year, a class action lawsuit in Pennsylvania alleged that LuLaRoe, a women’s clothing retailer in California, collected taxes from online customers in states that don’t charge sales taxes. In late 2017, the company told affected customers that they’d be reimbursed for overpaying sales taxes on purchases made before June 2017.

President Donald Trump, weighing in online sales taxes, has criticized Amazon.com for its practices, tweeting last August that the company “is doing great damage to tax paying retailers.” But Trump is also upset because Amazon CEO Jeff Bezos owns The Washington Post, where White House coverage hasn’t been to the president’s liking.

Nationally, malls and stores are closing as customers shop online. Millennials, born between 1981 and 1996, grew up with computers and are active cyber shoppers. In a trend that worries store owners, customers come in, inspect merchandise and try on clothes, only to buy the items they saw at lower online prices, often with no sales tax collected.

In Louisiana, consumer use taxes can be reported on resident or nonresident state individual income tax returns or on the state’s Consumer Use Tax return, Henderson said. Penalties and interest are charged for noncompliance.

This article originally published in the April 23, 2018 print edition of The Louisiana Weekly newspaper.