The Louisiana Supreme Court ruled Wednesday that Walmart.com doesn’t have to pay ecommerce sales tax to a local parish, but the decision doesn’t impact so-called marketplace facilitator laws created in the wake of the U.S. Supreme Court’s 2018 Wayfair decision, Bloomberg Law reported.
According to the Louisiana high court’s 4-3 ruling, the lower state courts were wrong to find Walmart.com met the definition of a “dealer” under Louisiana law. Jefferson Parish, in the greater New Orleans area, claimed Walmart.com had for years avoided paying ecommerce sales tax on transactions involving out-of-state sellers. It was the only one of 64 state jurisdictions to do so.
“Relative to the sales for third party retailers made through the Walmart.com’s online marketplace, Walmart.com occupies a position similar to that of an auctioneer, requiring like treatment under the tax laws,” wrote Justice John L. Weimer.
Weimer also wrote that the case illustrated “the need for legislation to address the obligation of an online marketplace facilitator to collect sales tax on sales of third-party retailers conducted through its online marketplace.”
According to Bloomberg, Louisiana law allows parishes to administer and collect their own sales tax. Two state courts agreed in 2018 that Walmart.com had been dodging its tax obligations to Jefferson Parish.
“We are pleased with the Louisiana Supreme Court’s decision,” Randy Hargrove, senior director of national media relations for Walmart, told Multichannel Merchant. “We agree that existing Louisiana state law does not support the actions taken by Jefferson Parish. As a long-time leader in the movement to level the sales tax playing field for all retailers, we remain committed to supporting Louisiana’s elected lawmakers toward the passage of a state law that requires marketplace facilitators to collect sales tax on behalf of third party sellers.”
Currently, 38 states plus Washington, D.C. have facilitator laws requiring marketplaces to collect and remit ecommerce sales tax on behalf of remote third-party sellers. That leaves just seven states that have not done so: Florida, Georgia, Kansas, Louisiana, Mississippi, Missouri and Tennessee.
These laws were created in the wake of the Wayfair decision in June 2018 that eliminated the need for physical presence in a state to establish nexus or tax liability. Shifting the obligation to the marketplace enables states to more efficiently collect sales tax from a single entity instead of from individual sellers.
Louisiana lawmakers have set a July 1, 2020, deadline to create a system for collecting the 4.45% state sales tax from remote sellers, according to Bloomberg, but it may not include a facilitator provision.
Scott Peterson, vice president of U.S. Tax Policy at tax software firm Avalara, said the Louisiana Supreme Court decision centered on the fact that its state law dictates there can be only two parties to a transaction, the seller and the buyer. Every state has some variation of that concept in their sales tax law, Peterson said.
“The Louisiana Supreme Court compared online marketplaces to auctioneers who, according to Louisiana law, are not parties to the sales, but simply facilitate sales,” he said. “Like Louisiana, many states look at auctioneers as facilitators of sales and not the actual seller, and because those states wanted the tax collected they enacted a law imposing a collection obligation on auctioneers.”
Peterson added the decision “reinforces the position that marketplaces have long made that they were not obligated under general Louisiana law to collect and remit sales tax. It also reinforces the decisions that 39 states have already made by enacting a specific law imposing a collection obligation on marketplaces on the sales they facilitate.”
Charles Maniace, vice president of regulatory analysis and design at tax software firm Sovos, said revenue departments in states with marketplace facilitator laws shouldn’t be concerned about legal challenges, as long as the amended law clearly articulates the collection-and-remittance requirement.
“As the remaining few states that don’t have a marketplace facilitator rule yet on their books move forward, they would do well to recognize the importance of evaluating the legislative fundamentals,” Maniace said.