INSIGHT: Wal-Mart Is Not a ‘Dealer’ Required to Collect Louisiana Sales Tax

Wal-Mart.com USA LLC’s third-party sellers—not Wal-Mart—are responsible for remitting sales tax for merchandise they sell to Louisiana customers on Wal-Mart’s website.

After a trial court and intermediate appellate court sided with the Jefferson Parish tax collector, Wal-Mart appealed to the Louisiana Supreme Court, which determined that the third-party retailers were the “seller of record” under the Louisiana statute and, thus, “solely responsible for remittance” of sale tax. (Normand v. Wal-Mart.com, USA, LLC, No. 2019-C-00263 (La. 1/29/20)).

Wal-Mart.com USA LLC operates an online marketplace at which website visitors can procure products from either Wal-Mart or third-party retailers. In connection with online marketplace sales by third-party retailers, the Jefferson Parish, La., tax collector sought unpaid sales tax, interest, penalties, audit fees, and attorney fees.

Wal-Mart urged it was not the “dealer” in the retail sale transactions at issue. Wal-Mart argued that it was the third-party retailers—as the actual sellers—that were the dealers. Wal-Mart’s argument fell on deaf ears and it was ordered to pay unpaid sales tax, interest, and attorney fees to the tax collector by the trial court. On appeal to the Louisiana Court of Appeal, the trial court’s judgment was affirmed. The Louisiana Supreme Court granted review.

Marketplace Facilitator

At issue was whether a marketplace facilitator is a “dealer” under Louisiana Revised Statutes Section 47:301(4)(l) and was therefore obligated by law to collect and remit sales tax on the sales made by third-party retailers through its online marketplace. A sales and use tax is imposed on certain items of tangible personal property “sold or used in” the state. A “dealer” is responsible for collecting state and local sales tax. “The tax levied in this Chapter shall be collected by the dealer from the purchaser or consumer.” Any dealer who neglects, fails, or refuses to collect the tax will “be liable for and pay the tax himself.” See La. Rev. Stat. Sections 47:304(C); 47:337.17(C).

The term “dealer” encompasses a wider group of people than sellers. The type of transaction at issue in this case was a “sale at retail,” which is defined as “a sale to a consumer.” “Sale” is defined as any transfer of title or possession or both for a consideration. Relative to sales by third-party retailers on Wal-Mart’s online marketplace, the actual participants to the sale were the third-party retailers that actually sold the goods and the purchasers. Clearly, an online marketplace is not a party to the underlying sales transaction but rather (merely) a facilitator of the sale, the court said.

In the context of a sale at retail, La. Rev. Stat. Section 47:301(4)(b) defines dealer to be the seller. La. Rev. Stat. Section 47:304, in turn, requires “the dealer” making the sale to collect the tax from the purchaser. The references to “the dealer” (as opposed to “a dealer”) “indicate that the legislature contemplated that there can be only one dealer required to collect sales tax from the purchaser.” In a retail sale, “the dealer” is the seller—here, the third-party retailer that is transferring title and physical possession of its own property to its purchasers. The online marketplace is not a party to those sales transactions; the online marketplace acts only as a facilitator for which it receives a referral fee, the court said.

The enactment of La. Rev. Stat. Section 47:301(4)(l) in 1990, the court noted, “did nothing to change the meaning of the expression ‘the dealer’ in the context of a ‘sale at retail.’” There is no indication in Section 47:301(4)(l) that the legislature intended to expand this definition of “dealer” to include more than sellers that own the property being sold and are the parties to the underlying sales transactions. There is no indication the legislature intended to tax intermediaries “that are only tangentially involved in the sales transaction, such as a marketplace facilitator.”

Therefore, the lower courts erred in concluding that Wal-Mart was a dealer under Section 47:301(4)(l) in connection with property owned by third-party retailers that was sold through Wal-Mart’s online marketplace. It is the seller of merchandise, the performer of taxable services, and the lessor of property, as parties to the underlying transactions, that are solely liable for the collection of the tax. “The statutory and regulatory scheme does not contemplate the existence of more than one dealer that would be obligated to collect sales tax from a purchaser. An online marketplace, in its role as a facilitator for sales of third-party retailers, does not fall in these groups,” the court said.

Auctioneers

In connection with sales conducted and consummated by a third party, special legislation was enacted relative to auctioneers to impose the legal responsibility for collecting and remitting sales tax on third-party auctioneers. Relative to the sales for third-party retailers made through the Wal-Mart marketplace, Wal-Mart occupies a position similar to that of an auctioneer. The laws enacted to govern the obligations of an auctioneer, who the legislature obviously believed did not qualify as a dealer under La. Rev. Stat. Section 47:301(4), illustrate 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.

Furthermore, the court noted, “payments for retail sales transactions are frequently processed by service providers that, like the marketplace facilitator here, are not parties to the underlying sales transactions and are not responsible for collecting sales tax. The fact that an intermediary transmits the funds to sellers does not relieve the sellers of their tax-collection obligation or cause the intermediary to assume the sellers’ legal obligation to collect taxes” (emphasis added).

It is not, the court admonished, “the province of the judiciary to create an exception (in the context of a retail sale) to the seller’s obligation to collect sales tax for a marketplace facilitator, similar to that legislatively enacted for auctioneers.”

For these reasons, the lower courts legally erred in finding that Wal-Mart is a dealer under Section 47:301(4)(l) relative to sales by third-party retailers conducted through Wal-Mart’s online marketplace, the court ruled.

According to the “Marketplace Retailer Agreement” Wal-Mart has with third-party retailers, it is the third-party retailer that is the “seller of record.” According to the agreement, third-party retailers are then “solely responsible for remittance of all taxes required to be paid under all applicable Law” to the proper taxing authorities. Accordingly, the court concluded, Wal-Mart did not contractually assume the obligation of the third-party retailers, as dealers, to collect and remit sales tax. The trial court legally erred in finding to the contrary.

In contrast, in Amazon Services LLC v. S.C. Dep’t of Revenue, the South Carolina Administrative Law Court found that Amazon Services was, in fact, a “retail seller” that owed sales tax on certain retail sales involving merchants’ products on the Amazon Marketplace. Amazon Services, the court found was “engaged in the business of selling tangible personal property at retail.” The different outcomes, in the Amazon and Wal-Mart cases, can be traced to the differences in the respective states’ statutes regarding the party responsible, in a retail sale transaction, for the collection and remittance of the accompanying sales tax.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Robert Willens is president of the tax and consulting firm Robert Willens LLC in New York and an adjunct professor of finance at Columbia University Graduate School of Business.