Filing sales tax is a necessity for businesses, but Louisiana’s antiquated system of sales tax collection places an undue burden on local companies.
Most states operate a centralized sales tax collection system, where a single entity is responsible for collecting sales tax from businesses for state and local governments.
Louisiana, on the other hand, utilizes a decentralized system, where both the state and local governments collect sales tax on their own. This means local government sales tax is collected on a parish-by-parish basis, representing 370 jurisdictions across Louisiana.
That’s a lot of sales tax codes for a business to keep up with, especially those operating in several parishes throughout the state.
Why is this important?
Last summer, the U.S. Supreme Court made a landmark ruling on South Dakota vs. Wayfair, allowing states to impose sales taxes on online purchases from out-of-state retailers. While state and local governments around the nation are salivating over the idea of collecting additional revenue from Internet retailers, national tax experts believe Louisiana has serious hurdles to overcome before any new collections can take place.
The Tax Foundation, the nation’s leading independent tax policy research organization, classifies Louisiana’s sales tax collection system as “duplicative, outdated, inconsistent and inefficient.”
Translation: Louisiana makes local businesses jump through a bevy of unnecessary hoops just to file simple sales tax returns.
Louisiana’s current solution is not going to please local retailers.
The Public Affairs Research Council of Louisiana’s policy brief on the issue details how Louisiana is developing two separate systems for sales tax collection by “providing a relatively easy and centralized path for remote ‘Internet’ sellers while keeping the old decentralized system for traditional brick and mortar in-state retailers and other businesses.”
“All but three states in the country have centralized collection, and especially in this day of technology, there is no reason we cannot do the same in Louisiana.”
While the state’s new collection policy is a partial step in the right direction, Dawn Starns, the Louisiana state director of the National Federation of Independent Business (NFIB), points out that Louisiana’s sales tax collection practices are hurting local businesses.
“I have small business owners call me regularly because of challenges they have with sales tax compliance,” says Starns.
Over the years, Starns has heard from numerous small family businesses bogged down by endless confusing paperwork and sales tax minutiae, only to be audited for incorrectly filing because of the complicated process.
Starns recalls one overwhelmed family involved in the energy business who considered closing shop altogether because the time and financial investment to deal with local and state governments was so tremendous.
Why would Gov. John Bel Edwards support the development of an alternative system that only benefits out-of-state retailers instead of working to simplify the state’s sales tax collection for all businesses, local and remote?
Starns believes the answer is politically motivated, as the governor does not want to upset his friends in local government.
“Local government has been resistant to moving the state to a centralized sales tax collection method like the rest of the country because they get paid by the state for what they collect and argue the state can’t do the job,” explains Starns. “All but three states in the country have centralized collection, and especially in this day of technology, there is no reason we cannot do the same in Louisiana.”
The case for implementing a streamlined centralized system for all companies that do business in Louisiana is simple: every other state is doing it, and it’s making life so much easier for business owners.
Local Companies, Real Frustrations
The Stine Lumber Company has been doing business in Louisiana for over 70 years. With 10 stores throughout the state and one in Mississippi, chief financial officer Tim Stine is well versed in how cumbersome sales tax filings can be for his company.
“Not only do you have to figure out what the state sales tax is, but you also have to figure out what the parish sales tax is, as well as the different sections inside that parish,” Stine explains.
Linda Fontenot, Stine’s corporate accounting specialist, says it takes a week each month to sort out and pay the sales taxes for all the parishes in which the company does business because of the convoluted collection system currently in place.
Conversely, it takes Fontenot about 15 minutes to complete the company’s monthly filing in Mississippi because of the singular sales tax code collected by the state.
“We only have one location in Mississippi, but it wouldn’t have mattered,” Stine explains. “We could have 20 locations in Mississippi, it would still take her 15 minutes.”
Wasted time dealing with sales tax is a monthly problem for Fontenot and Elizabeth Kelly, who serves as controller for Stine Lumber. Kelly says dealing with sales tax compliance and subsequent audits comprises 20 percent of her and Fontenot’s time, which they both agree is an unnecessary burden.
Stine’s solution would be to centralize the state sales tax system, where the state collects for everybody and the hundreds of jurisdictions are eliminated.
“Figure out a way to rebate it back to the different areas, much like Mississippi does,” Stine says.
The fact that Louisiana needs to look to Mississippi for solutions indicates how dire the need for a centralized system is in this state.
“The filing process is a nightmare. They’re so inconsistent, and they’re so unorganized.”
Jeff Giavotella’s biggest issue is the antiquated inefficient online filing system. As CFO of Northshore-based Ballard Brands, which is comprised of over 50 companies, Giavotella has encountered his fair share of frustrations when filling sales taxes.
“It’s horrible,” Giavotella says. “The filing process is a nightmare. They’re so inconsistent, and they’re so unorganized.”
Giavotella uses multiple websites to file Ballard Brand’s taxes, SalesTaxOnline.com and Louisiana Taxpayer Access Point (LaTAP) on the Department of Revenue’s website.
While SalesTaxOnline simplifies the process, not every parish or state utilizes it and other state taxes, such as the exhibition tax, are not included.
LaTAP does allow you to file everything in one place, but Giavotella says it’s an “absolute disaster to access.”
“It’s not user friendly,” Giavotella says. “Half the time the site is down, or it’s frozen, or slow, or it kicks you off. It’s an old site, it’s been around forever.”
However, much like Stine Lumber, Giavotella finds filing taxes in Mississippi not difficult at all. Giavotella’s solution for Louisiana’s outdated sales tax collection system is to put everything on a website that actually works.
“If you make things easy for people, they will follow, but if you start making them jump through hoops, they’re not going to follow,” Giavotella says.
While it’s no secret many facets of how Louisiana’s government operates are “duplicative, outdated, inconsistent and inefficient,” solving the sales tax collection problem seems to be an easy fix, especially in the minds of those regularly dealing with filings.
The governor’s administration could make filing easier for local businesses, as evidenced by the upcoming centralized system being developed to cater to out-of-state retailers. So why won’t they?