After several delays, Louisiana is making progress toward mandatory collection of internet sales taxes, though technical hurdles and legal questions still must be resolved.

In last year’s South Dakota vs. Wayfair decision, the U.S. Supreme Court cleared the way for states to require sales tax collection by sellers that have only a virtual presence within their borders. Louisiana officials face a more difficult challenge than their counterparts in other states thanks to an existing sales tax structure that is highly complex and decentralized.

“No other state has this degree of local independence and control of its sales tax system,” the Public Affairs Research Council of Louisiana says. “Louisiana has an unusually large number of exemptions and exclusions, and state and local governments lack uniformity about what is taxable.”

The Louisiana Sales and Use Tax Commission for Remote Sellers, created last year, eventually will be the single collector of internet sales taxes. At that point, charging sales taxes on internet sales to Louisiana residents will be mandatory.

When that will happen is unclear. House Bill 547, approved during this year’s legislative session, sets a July 1, 2020 deadline, though officials don’t expect the process to take that long.

A commission subcommittee has been collecting data about each Louisiana jurisdiction’s sales tax rates and exemptions. Once the electronic system is live, the commission will begin collecting taxes from retailers and distributing the local portions to government entities throughout the state.

In the meantime, 923 sellers are collecting taxes voluntarily using the direct marketer form first established for catalog retailers and telemarketers. About $13 million has been collected from direct marketers over the past four fiscal years, according to the Department of Revenue.

Kimberly Robinson, who leads the department on behalf of Gov. John Bel Edwards’ administration, said collections from internet sellers might reach “tens of millions” of dollars annually, most likely on the low end of that range.

The department is collecting the 4.45 percent state sales tax and a standard 4 percent local rate. Once the electronic system is up and running, buyers will begin paying the same rate they pay at a local brick-and-mortar store, whatever that might be.

Rep. Neil Abramson, who sponsored House Bill 547, said during the session the bill represented what stakeholders could all agree to and lacked measures that didn’t garner consensus. Abramson did not respond to calls and emails from The Center Square seeking further comment.

Robinson said the biggest unanswered question is how to treat "marketplace facilitators" like Amazon and Etsy that help third parties sell products online. Wal-Mart.com currently is involved in a Louisiana Supreme Court case that could clarify the issue. A decision is expected late this year or early next year, and the result may nudge legislators to further tweak the state’s laws.

Though several business and public policy groups say Louisiana should establish a central collector for all sales taxes, local officials are very protective of their constitutional authority to collect local taxes.

“The locals want to make sure their constitutional taxing rights are protected,” said Jeanine Theriot, who represents the Louisiana Sheriffs’ Association on the commission. “They want to make things easy and simplistic for taxpayers.”

Perhaps the hardest question to answer is whether the state’s system will be judged constitutional in a post-Wayfair-decision world. Robinson said she believes the state will be in good shape once the new system is up and running.

But a recent article in The National Law Review points to what the authors argue is a major shortcoming of House Bill 547. They say the legislation, when read alongside other existing statutes, creates a definition of “remote seller” so narrow that few companies will qualify to use the central collector.

Online retailers that advertise in Louisiana could still be required to file returns with every local taxing jurisdiction, even if they don’t have a physical presence in the state, the authors say. While the U.S. Supreme Court did not set specific requirements in its Wayfair decision, it did warn states not to place undue burdens on interstate commerce.

Andre Burvant, a CPA and tax attorney with Jones Walker who co-authored the Law Review article, said the constitutionality of Louisiana’s system may well come down to how broadly or narrowly the commission interprets and enforces its rules.

“If our goal is to create a central filing system that passes constitutional muster, if hardly anybody’s able to use it, I don’t know that it does,” he said. “There are no bright-line rules here on what’s sufficient, but if very few [sellers] qualify to use the central mechanism, what’s the point?”