A Houma state representative has proposed legislation that could lead to the consolidation of all sales tax collections and, he says, bring Louisiana in line with a 2018 U.S. Supreme Court ruling that opened the door to broad taxation of the internet.
Republican Rep. Tanner Magee's HB 57 would call for a constitutional amendment that, if approved by voters, would lay down basic legal principles to transfer the sales tax collection job from an array of parish-level agencies to an unspecified central collection agency. The state Constitution currently enshrines that power with local governments.
The bill, which would need future statutory legislation to create the details of the new system, is in the vein of others through the years that have backing from business interests seeking to simplify the state's sales tax collection system.
The legislation also comes as a special state panel has been working for nearly a year on rules and specialized software to require consolidated collection of internet sales by the state. A November 2017 estimate from the U.S. Government Accountability Office says Louisiana lost $195 million to $228 million in revenue from untaxed internet sales in that year.
The bill, which was prefiled March 13 and has been sent to the House Ways and Means Committee, has a high bar to cross. Both chambers of the Legislature must back a proposed constitutional amendment with a two-thirds vote before it can be put before the voters.
Local governments and their statewide associations, like the Louisiana Municipal Association and Louisiana Police Jury Association, are opposed, and model resolutions to oppose Magee's bill and others like are already circulating. Some local governments, including the West Baton Rouge Parish Council and the Livingston Parish School Board, have adopted or are preparing to adopt those resolutions. Others, like the Ascension Parish School Board, are still evaluating the bill.
Magee said Monday his bill, which would apply to brick-and-mortar sales, too, would make the state more competitive economically, especially aiding small businesses, and bring Louisiana in line with all but one other state in the nation.
"Why wouldn't we want a streamlined process? Why would we want a Byzantine way of doing things instead of one thing," Magee asked.
Magee said he has backing from an array of business groups, including the National Federation of Independent Business, the Louisiana Mid-Continent Oil and Gas Association, and the Louisiana Association Business and Industry.
After an earlier consolidation effort years ago, the local tax collection authorities were consolidated by parish, primarily in school boards, sheriff's offices or local regional authorities.
Sales taxes are an important local government revenue source across the state, and officials worry the state won't be as vigorous in collection as local agencies that are closer to the ground have been.
Local government officials say their system allows a better understanding of idiosyncratic sales tax collection districts and the local market conditions that a bureaucracy centered in Baton Rouge never could do.
Mike Curtis, administrator for the Livingston Parish School Board's sales tax division, said his office handles sales tax collections for 17 entities in the parish, from small towns to the parish government. He said his office has a close relationship with those governments and area businesses, many of them often have his personal number.
"They can find me, or if they can't find me, they can call my mother because I'm accountable," he said.
Curtis pointed out that the state already handles vehicle sales taxes and has a roughly 10 percent error rate in his parish, but leaves it to his jurisdiction to figure out, even though the state takes a cut off the top for its administrative costs.
Dannie Garrett III, who represents the Louisiana School Boards Association, said Magee's rationale for the bill is a common misreading, in his view, of the key Supreme Court ruling last year, known as South Dakota v. Wayfair Inc.
The ruling struck down old precedent that required a physical presence for businesses to be required to collect and submit sales taxes to locales where their products are sold. Instead the court found South Dakota's rules sufficed to make the legal connection. Those rules said that businesses with $100,000 in sales or at least 200 transactions in a year can be required to collect sales taxes.
Magee argued that the court also took note of South Dakota's centralized sales tax collection system and said it wasn't "unduly burdensome," another key legal factor. Magee says if Louisiana doesn't centralize its system, the state could miss out on internet sales tax collections.
But Garrett said those latter comments in the ruling weren't part of the court's actual rationale for its decision and were never ruled on later when the case was sent back to the lower court. And, critics of Magee's bill added, the state has already created a special central entity to handle internet sales tax collections: the panel that has been working on the online sales tax software collection system.
Jim Patterson, LABI's taxation and finance director, said his group and independent tax groups have a different reading of the ruling than Garrett's that is more in line with what Magee is saying.
In any case, Patterson said, businesses complained about the state's sales collection system well before internet sales became an issue.
"Why on Earth does Louisiana need to do it differently when every other state has a single point of collection," Patterson said businesses have asked. "Why do we have to be different?"