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Legislative efforts resume to centralize sales tax collections

March 5, 2020
Originally posted on Greater Baton Rouge Business Report

House Speaker Pro Tem Tanner Magee, R-Houma, is renewing his efforts to centralize sales tax collections in the state, this time taking a sort of backdoor approach. 

Magee prefilled House Bill 429 as a constitutional amendment that would allow—but not require—all retailers to remit local sales and use taxes directly to the state for distribution. 

The bill is prefaced on a new software program that will be rolling out in July for remote sales tax collections. That software, as it’s being designed now, however, is targeted only for out of state, online sales, due to the current jurisdictional power of the commission, says Luke Morris, assistant secretary in the state Department of Revenue. 

Morris confirmed the software is being developed under previous legislative mandates and is directed by the Louisiana Sales and Use Tax Commission for Remote Sellers. The commission is working with a company called Avenue to develop the program, which will require remote sellers to register and file tax returns to remit the exact amount of sales taxes due back to the commission. The commission will, in turn, divide the revenue between the state general fund, at the 4.45% rate, and local collectors based on each parish’s varying rates. The current system collects only a flat 8.45% tax rate. The state’s average combined state and local sales tax rate is 9.45%, according to the Tax Foundation. 

Magee’s bill would open up the new software to all retailers in the state, including brick and mortar. 

“If they’re doing the website, online software for out of state, why wouldn’t we make it available to all the people who sell stuff in the state, not just online?” he says. “Why have two systems? … Why not give you the option to participate in what other people are participating in?” 

As the law stands now, the commission’s jurisdiction is limited only to remote sellers, so that’s what the software is being built for. If the Legislature, and voters, approve expanding the use of the software, it would have to be redeveloped to accommodate the added levels of local tax exemptions, Morris says. 

Magee sponsored a bill last year that took a direct approach to creating a centralized system, but it never made it out of the House Ways and Means Committee. That bill was more explicit in removing the full authority of local governments to collect their sales and use taxes. 

Magee is hoping that this optional version will make it less objectionable to local collectors and legislators. 

“This is getting the same thing through different methods,” he says, essentially “backdooring centralized sales tax collections.” 

If passed this go-round, the measure would be put on the Nov. 3 ballot for voters to decide. 

The idea of a centralized system has been vehemently opposed by local sales tax collectors and municipal groups like the Louisiana Municipal Association, the Louisiana School Board Association and the Louisiana Police Jury Association, but has been supported by business groups like the Louisiana chapter of the National Federation for Independent Businesses, LABI, Council For A Better Louisiana, the Public Affairs Research Council and the Baton Rouge Area Chamber.

Louisiana and Oregon are the only states that do not have a centralized system for collecting sales taxes. 

In the Senate, Sen. Bret Allain, R-Franklin, has filed a related bill that would narrow definitions of what constitutes as a marketplace, marketplace facilitator and seller, remote sale, and remote seller—and sets up the framework for when each entity would register with the commission and remit sales taxes.