Just in time for Cyber Monday, a new commentary reminds Louisiana shoppers that they’re supposed to pay sales taxes on their online purchases, even though online vendors aren’t required to collect the taxes.
Most large online retailers are collecting sales taxes, the Public Affairs Research Council of Louisiana says. But for many small- to medium-volume sellers, compliance is voluntary and will not be mandatory under state law until July 1.
Buyers are supposed to report any unpaid sales tax for this year on their 2019 state income tax form.
“In case you missed it, the 2018 Louisiana Income Tax Form (IT-540) required you to divulge your ‘consumer use tax’ on lines 24A, 24B and 25 and add it to your income tax liability,” PAR says. “We’re guessing many of you skipped this part.”
Retailers with very low volumes of sales shipped into Louisiana are not required to collect the tax, in keeping with U.S. Supreme Court’s guidance in its South Dakota vs. Wayfair ruling last year regarding “safe harbors” that avoid burdening interstate commerce, PAR says. If you buy from a vendor that facilitates purchases with a third party, that third party might be too small to handle taxation or might currently be on voluntary compliance status in Louisiana.
“This third-party taxation can get a little weird, because you might buy one product from Amazon that’s taxed and another that’s untaxed,” PAR notes. Though the online retail giant has agreed to collect and remit sales taxes, “we get a little skeptical of the current system when the third-party sends us a product without tax from someplace in China or from a famous brand retailer, which means some public revenue probably is going uncollected.”
“Presumably much of this will be ironed out by mid-year 2020, but we shall see,” PAR says.
In Louisiana, the state Department of Revenue collects state sales taxes, currently at 4.45 percent, and local authorities collect local sales taxes, which average 5 percent. Only Colorado and Alabama have similarly de-centralized sales tax collection and auditing systems, PAR says. Depending on the parish, the local collection authority could be the school board, parish government or the sheriff.
Louisiana has about 200 exemptions to the sales tax, 100 of which are suspended until 2025. Some exemptions apply to the state sales tax but not to the local sales tax. The narrow tax base is a major reason Louisiana’s average combined state and local sales tax rate is 9.45 percent, the third highest in the nation and only very slightly behind Tennessee and Arkansas at 9.47 percent, PAR says.
However, it’s possible to buy something that’s shipped to Louisiana and taxed at 8.45 percent because some online vendors use the state’s old catalogue sales method, which provides a single state collection point and distributes almost half the revenue to local governments based on population. This apparatus is expected to be modernized at a more consistent rate, PAR says.
Louisiana’s complex sales tax system is too difficult for businesses to navigate, PAR and other groups argue. But local collectors say local control helps ensure the money is spent the way local taxpayers want it spent.