Presentation to Louisiana Centralized Sales and Use Tax Administration Work Group Patrick J. Reynolds, COST September 18, 2020 Council On State Taxation Council On State Taxation
Agenda • Introduction to COST • Wayfair Decision – What the Court Held and What It Did Not Hold • Specific Questions Council On State Taxation Council On State Taxation
Introduction to COST
COST Background • Who we are • What we do Council On State Taxation Council On State Taxation
Wayfair Decision – What the Court Held and What It Did Not Hold
South Dakota v. Wayfair – What the Court Held • U.S. Supreme Court on June 21, 2018 issued its decision in Wayfair that overturned a physical presence requirement for sales/use tax collection ( Bellas Hess (1967) and Quill (1992)) and in its place used an undefined “economic and virtual presence” test • The Court only addressed the first prong of Compete Auto’s (1977) four prong test – the prong that requires a taxpayer have “substantial nexus with the taxing state” before the taxpayer can be subject to a state’s tax • South Dakota’s $100,000 in sales or 200 transactions held by the Court to be sufficient because “the seller availed itself of the substantial privilege of carrying on a business in South Dakota” Council On State Taxation Council On State Taxation
South Dakota v. Wayfair – What the Court Did Not Hold • The Court did not rule on the constitutionality of other states’ remote seller collection laws • The Court did not rule on the constitutionality of South Dakota’s law • The Court remanded the case back to South Dakota to address “whether some other principle in the Court’s Commerce Clause doctrine might invalidate [South Dakota’s law]” • The Court noted these issues were not litigated or briefed; the Court did not resolve them Council On State Taxation Council On State Taxation
South Dakota v. Wayfair – Guidance “That said, South Dakota’s tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce. First, the Act applies a safe harbor to those who transact only limited business in South Dakota. Second, the Act ensures that no obligation to remit the sales tax may be applied retroactively. S. B. 106 § 5. Third, South Dakota is one of more than 20 States that have adopted the Streamlined Sales and Use Tax Agreement.” Council On State Taxation Council On State Taxation
Risk Will Louisiana’s decentralized sales and use tax collection system withstand Dormant Commerce Clause scrutiny? Council On State Taxation Council On State Taxation
Specific Questions
Contingent Fee / Private Auditing Allows Contingent Fee Auditing Does Not Allow Contingent Fee and Private Contract Auditing Does Not Allow Contingent Fee, Some Locals Use Private Allows Private Contract Auditing Contract Auditing WA ME MT ND MN OR VT NH ID WI SD MA NY MI CT WY RI IA PA NJ NV NE OH IN DE IL UT CA MD CO WV VA KS DC MO KY NC TN OK AZ NM AR SC GA: HB 811 allows GA AL MS contingent-fee AK auditing. No current TX LA private-contract HI FL auditing MS: Recent legislation (SB 2973, 2017) allows contingent fee auditing.
States With Local Sales Tax Jurisdictions States With Local Administration of Sales Tax States With Centralized Administration of Local Sales Taxes States With No Local Sales Taxes States With No Sales Tax WA ME MT ND MN OR VTNH ID WI MI SD MA NY CT WY RI IA PA NV NE NJ OH MD IL IN DE UT CA WV CO VA KS MO KY NC TN OK AZ NM AR SC GA AL MS AK TX LA HI FL
Common Local Taxes in States Without a Local Sales Tax • Real Estate Tax • Personal Property Tax • Local Income Tax • Motor Vehicle Tax • Transient Room (hotel) Tax • Business Taxes • Transfer Tax • Food and Beverage Tax Council On State Taxation Council On State Taxation
Exclusions and Exemptions applied to Local Sales Tax Local sales tax is applied to the same tax base as the state-level sales tax, with limited exceptions in AZ, CO, GA, KS, LA, NY, PA, SC, and WV. Council On State Taxation Council On State Taxation
Questions ???
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