In an interesting (but not earth shattering) development, on January 29, 2020 the Louisiana Supreme Court held that Jefferson Parrish could not hold Walmart.com liable to collect and remit sales tax on transactions made by third party sellers through their online platform. In short, Walmart.com is not a “dealer” as that term is defined under Louisiana law. While important with respect to evaluating the ability of states to pursue marketplaces retroactively (particularly in Louisiana), this case has very little impact on the current and future landscape of tax compliance in the post-Wayfair era.
Since the groundbreaking Supreme Court decision in South Dakota v. Wayfair, virtually every state in the country has enacted rules or requirements compelling remote sellers to collect and remit tax based on an economic nexus standard. While some states enacted bills to enable remote collection, many did so via rules or regulations. While Kansas faced some backlash from their own Secretary of State regarding their rule, most others have imposed these new requirements without controversy. The key is that many states had existing statutes in place allowing the Department of Revenue to enforce their sales tax requirements to the “maximum extent” allowed under the law. When the Court in Wayfair changed the “maximum extent,” states were able to tweak their rules quickly.
Faced with the daunting reality of administering compliance for thousands of remote sellers, 38+ states enacted “Marketplace Facilitator” requirements. Marketplace Facilitator rules are a very different beast from economic nexus. In the case of economic nexus, states are casting a wider net, bringing more sellers under their jurisdiction than had been allowed before. Most of these sellers were required to charge sales tax in at least one state prior to Wayfair, and now are required to do so in more.
By contrast, until very recently, Marketplace Facilitators had no sales tax compliance responsibilities as it related to their marketplace clients. Granted, some marketplaces also sell directly and for those sales, tax collection was always fair game. But, it’s an entirely novel idea to make facilitators collect tax on a sale where they are merely bringing the buyer and seller together. This idea was likely not considered when states initially drafted their sales tax statutes and it seems reasonable for the Louisiana Supreme Court to require the legislature revisit their laws and clearly articulate such a requirement to eliminate any ambiguity or confusion.
While Wamart.com scored a victory here, its’ impact should not be overstated. This case involved transactions from a time well before the game-changing Wayfair decision and well before states began amending their laws to compel Marketplace Facilitator collection. The ruling does not suggest that Marketplace Facilitator laws are unconstitutional or overly burdensome. All it says is that you can’t enforce such a requirement in Louisiana until the necessary legislation is in place. Unlike economic nexus, the states (other than Louisiana) that have enacted Marketplace Facilitator rules have taken the preliminary step of enacting enabling legislation, a step Louisiana could take as well in their upcoming session.
So, if your strategy to manage Marketplace Facilitator requirements depended on state course cases like the one in Louisiana putting these requirements on ice, you should reconsider. While the Louisiana Supreme Court may have put a temporary speedbump down, you can be sure most others are accelerating down a path towards enforcement.
