Presentation to Louisiana Centralized Sales and Use Tax - - PowerPoint PPT Presentation

Council On State Taxation

Patrick J. Reynolds, COST September 18, 2020

Council On State Taxation

Presentation to Louisiana Centralized Sales and Use Tax Administration Work Group

Council On State Taxation

• Introduction to COST
• Wayfair Decision – What the Court Held

and What It Did Not Hold

• Specific Questions

Council On State Taxation

Agenda

Introduction to COST

Council On State Taxation

• Who we are
• What we do

Council On State Taxation

COST Background

Wayfair Decision – What the Court Held and What It Did Not Hold

Council On State Taxation

• 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

South Dakota v. Wayfair – What the Court Held

Council On State Taxation

• 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

South Dakota v. Wayfair – What the Court Did Not Hold

Council On State Taxation “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

South Dakota v. Wayfair – Guidance

Council On State Taxation

Will Louisiana’s decentralized sales and use tax collection system withstand Dormant Commerce Clause scrutiny?

Council On State Taxation

Risk

Specific Questions

AK HI ME RI VT NH MA NY CT PA NJ MD DE VA WV NC SC GA FL IL OH IN MI WI KY TN AL MS AR LA TX OK MO KS IA MN ND SD NE NM AZ CO UT WY MT WA OR ID NV CA DC

Contingent Fee / Private Auditing

Allows Contingent Fee Auditing Allows Private Contract Auditing Does Not Allow Contingent Fee and Private Contract Auditing Does Not Allow Contingent Fee, Some Locals Use Private Contract Auditing

GA: HB 811 allows contingent-fee

• auditing. No current

private-contract auditing MS: Recent legislation (SB 2973, 2017) allows contingent fee auditing.

AK HI ME RI VTNH MA NY CT PA NJ MD DE VA WV NC SC GA FL IL OH IN MI WI KY TN AL MS AR LA TX OK MO KS IA MN ND SD NE NM AZ CO UT WY MT WA OR ID NV CA

States With Local Sales Tax Jurisdictions

States With Centralized Administration of Local Sales Taxes States With No Local Sales Taxes States With Local Administration of Sales Tax States With No Sales Tax

Council On State Taxation

• 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

Common Local Taxes in States Without a Local Sales Tax

Council On State Taxation

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.

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Exclusions and Exemptions applied to Local Sales Tax

Questions ???