Louisiana Enacts Marketplace Facilitator Legislation – Effective July 1, 2020

Summary

On June 11, 2020, Louisiana’s governor signed S.B. 138 into law, finally adding Louisiana to the long list of states enacting marketplace facilitator rules. Effective July 1, 2020, this bill adds sales and use tax collection, remittance, and reporting requirements to marketplace facilitators that enable sales into the state, if the marketplace facilitator has nexus. Like many states that enacted economic nexus rules after Wayfair, Louisiana will assert economic nexus on out-of-state sellers with over $100,000 in sales, or more than 200 separate transactions.

 

Details

Marketplace Facilitators and Their Responsibilities

Senate Bill 138 amends Louisiana’s economic nexus provisions that apply to both remote sellers (originally effective as of January 1, 2019) and marketplace facilitators. Louisiana’s economic nexus threshold is gross revenue for sales delivered into Louisiana exceeding $100,000 from sales of tangible personal property (TPP), products transferred electronically, or services, or 200 or more separate transactions in the previous or the current calendar year. When calculating whether it exceeds Louisiana’s economic nexus thresholds, the marketplace facilitator must include its own sales, as well as all marketplace-facilitated sales.

Effective for sales occurring on or after July 1, 2020, S.B. 138 requires “marketplace facilitators” to register with the state within thirty days of meeting the economic nexus threshold, and to begin to collect and remit sales tax on all “remote sales.” A remote sale is the sale of an item or service by a remote seller or facilitated by a marketplace facilitator.

Similar to many states with marketplace schemes, Louisiana defines a marketplace facilitator as a person that facilitates a sale for a marketplace seller through a marketplace, by either of the following:

1. Offering for sale through any means, by a marketplace seller, TPP or sales of services for delivery into Louisiana; or
2. Collecting payment from the purchaser and transmitting it to the marketplace seller.

A benefit of being one of the last states to enact marketplace facilitator laws is that Louisiana can improve and expand upon the marketplace schemes implemented by other states. For example, SB 138 also defines who is not considered a facilitator. Specifically, an entity that only processes the payment between the facilitator and purchaser or facilitates the furnishing of lodgings or car rentals is enumerated as not a facilitator. Likewise, a platform that merely provides advertising services is not considered a facilitator, so long as the advertising service platform does not also engage, directly or indirectly, through an affiliate.

A marketplace facilitator is considered a “dealer.” As such, it is required to comply with the same registration requirements, along with collection and remittance requirements, as any other dealer in Louisiana. Marketplace facilitators also follow the same provisions for the refund of any sales tax that a dealer would follow.

 

Responsibilities and Obligations Between the Marketplace Facilitator and Marketplace Seller

Similar to other states, Louisiana provides protection to marketplace sellers from the audit of sales that are reported by a marketplace facilitator and from remitting the tax due on such sales. This shield can only be pierced if the marketplace seller provides incorrect or incomplete information to the marketplace facilitator that causes a failure to remit the correct amount of tax. However, the marketplace facilitator is responsible for the taxability determinations of the items sold. If the underreported sales are more the 5% of the marketplace facilitator’s total sales into Louisiana, the marketplace facilitator is not relieved of liability for the tax. The liability relief provision also does not apply if the marketplace facilitator and marketplace seller are affiliates.

 

Ability to Shift Sales Tax Responsibilities

Throughout the country recently, one of the topics discussed has been the ability of marketplace facilitators and marketplace sellers to agree to shift collection responsibilities to marketplace sellers. For example, Georgia and Tennessee have recently enacted marketplace facilitator schemes that include provisions to shift collection and remittance responsibilities if the marketplace facilitator and marketplace seller meet certain statutory requirements. Louisiana allows for such contracts but imposes several additional requirements for the shifting of tax collection responsibilities to be enforceable, such as:

1. The marketplace seller must have more than a billion dollars in gross sales in the United States.
2. The marketplace seller must be a service supplier of mobile phone services or prepaid access to 911.
3. The marketplace seller must be registered as a dealer in Louisiana prior to entering the agreement and notify the state that the seller is responsible for the collection of tax on all its sales.

Effectively, this Louisiana provision allowing the facilitator and seller to shift responsibilities only applies in the context of the telecommunication industry.