Louisiana Supreme Court Backs Walmart in Sales Tax Dispute (2)

Jan. 29, 2020, 8:25 PMUpdated: Jan. 29, 2020, 10:32 PM

Walmart.com doesn’t have an obligation to pay local sales taxes to a Louisiana parish on sales made through the company’s online marketplace, the Louisiana Supreme Court ruled.

The ruling was issued Wednesday. Bloomberg Tax obtained the document from attorneys representing the Council on State Taxation.

Lower courts erred in finding that Walmart.com met the definition of a “dealer” under Louisiana law, Justice John L. Weimer said in the opinion representing the court’s 4-3 majority.

“Relative to the sales for third party retailers made through the Walmart.com’s online marketplace, Walmart.com occupies a position similar to that of an auctioneer, requiring like treatment under the tax laws,” Weimer wrote.

He added that the case illustrated “the need for legislation to address the obligation of an online marketplace facilitator to collect sales tax on sales of third party retailers conducted through its online marketplace.”

The attorney for Jefferson Parish, Ken Fonte, said he and his client would have to discuss the opinion before he could comment.

“We agree that existing Louisiana state law does not support the actions taken by Jefferson Parish,” Walmart.com spokesman Randy Hargrove said in an emailed statement. “As a long-time leader in the movement to level the sales tax playing field for all retailers, we remain committed to supporting Louisiana’s elected lawmakers toward the passage of a state law that requires marketplace facilitators to collect sales tax on behalf of third party sellers.

The court rejected the parish’s argument that under Walmart.com’s marketplace retailer agreement, third-party sellers can’t collect or separately invoice for sales taxes.

“Based on the terms of its agreement with third-party retailers, Walmart.com did not contractually assume the tax obligation of third-party retailers for their sales made through Walmart.com’s online marketplace,” Weimer wrote.

Justice Bernette Johnson dissented, saying Walmart.com was “the only party with the ability and opportunity to collect sales taxes from purchasers for all Marketplace sales transactions because all orders are processed through the Walmart.com checkout system and Walmart.com collects all proceeds from the sales transactions.”

Two other justices also dissented, citing a procedural issue with Walmart.com’s appeal.

The unusual sales tax dispute between the retail giant and Jefferson Parish began before the U.S. Supreme Court’s 2018 Wayfair ruling that changed the remote-sales taxation landscape nationwide.

Louisiana law allows individual parishes to administer and collect their own sales taxes. Jefferson Parish claimed Walmart.com dodged its tax obligations for years, and two state courts agreed in separate 2018 orders.

The South Dakota v. Wayfair decision overturned the physical presence standard the U.S. high court affirmed in its 1992 Quill Corp. v. North Dakota, which limited the ability of states to tax remote sales. Since Wayfair, most states have passed versions of a South Dakota law requiring collection of sales tax from remote sellers with more than $100,000 of in-state sales or 200 in-state transactions. Many states also want to make marketplace facilitators collect and remit sales tax for transactions on their online platforms.

Jefferson Parish was alone among Louisiana’s 64 parishes in assessing Walmart.com for sales taxes on third-party sales.

But local governments statewide suffer from persistent “abuse and deceptive business practices” that undermine their legal tax obligations, the city of New Orleans said in an amicus brief supporting Jefferson Parish.

The Louisiana Department of Revenue, however, concluded Walmart.com wasn’t liable for taxes on sales made by third-party sellers, after a state audit of the company’s state sales tax returns from January 2013 through December 2014.

The opinion clarifies who is responsible for remitting sales taxes when third parties are involved, said Jones Walker attorney Matt Mantle. Jones Walker filed an amicus brief supporting Walmart.com in the case on behalf of the Council on State Taxation.

“As a result of the case now, most assuredly, localities will continue as they probably had in the past to agree that marketplaces are not part of the definition of dealer under current Louisiana law and will likely not attempt to pursue that any further,” Mantle said.

Nationwide, many states still have old statutes that would define Walmart.com as a dealer. But as the Louisiana Supreme Court concluded, those provisions address only “whether or not the actual seller was a dealer, and had nothing to do with trying to use that provision to impute a dealer status onto other folks who are not either the seller or the buyer in the transaction,” Mantle said.

Louisiana lawmakers set a July 1, 2020, deadline to streamline a system for collecting the 4.45% state sales tax, along with local sales taxes, from remote sellers. They have not yet passed any tax laws governing marketplace facilitators.

Walmart.com is represented by Jeffrey Friedman and Charles Kearns of Eversheds Sutherland and Martin Landrieu of Gordon Arata Montgomery Barnett McCollam Duplantis & Eagan LLC.

The case is Normand v. Wal-Mart.com USA, LLC, La., No. 2019-C-263, 1/29/20.

(Adds additional comment, details from opinion. )

To contact the reporter on this story: Jennifer Kay in Miami at jkay@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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