It’s official! Louisiana to enforce economic nexus starting July 1, 2020

June 15, 2020. Due to the enactment of SB 138, a sales and use tax collection requirement for marketplace facilitators takes effect in Louisiana on July 1, 2020.

Certain remote sellers must register with the Louisiana Sales and Use Tax Commission for Remote Sellers and collect and remit Louisiana state and local sales tax starting July 1, 2020, according to a recent Louisiana Department of Revenue announcement.

The collection requirement applies to remote retailers with economic nexus with Louisiana, i.e., out-of-state sellers with no physical presence in Louisiana whose sales into the state in the current or previous calendar year meet or exceed one or both of the following economic nexus thresholds:

• More than $100,000 in gross revenue from sales of tangible personal property, products transferred electronically, or services; or
• At least 200 separate transactions of tangible personal property, products transferred electronically, or services

This has been a long time coming. Louisiana enacted an economic nexus law on June 12, 2018 — approximately 10 days before the Supreme Court of the United States granted states the authority to tax remote sales with its decision on South Dakota v. Wayfair, Inc. (June 21, 2018). The state was to start enforcing the law January 1, 2019, but in December 2018, it changed the enforcement date to “a date to be determined in 2019.” Remote sellers were promised “at least thirty days’ notice prior to the commencement of mandatory collection and remittance requirements.”

Notice has now been given.

Come July 1, remote retailers must register with the commission within 30 days of meeting one of the economic nexus thresholds described above. They must start collecting state and local sales and use tax by the commission, which will be “no later than 60 days after surpassing either of the criteria.” Applications, tax returns, and remittances must be filed and paid electronically.

Certain remote sellers who chose to voluntarily collect and remit sales tax prior to the enforcement of economic nexus were permitted to file a single Direct Marketer Sales Tax Return and collect and remit a total combined rate of 8.45% on all sales into the state, rather than the actual rate in effect at each location. This greatly simplifies remote sales tax collection. Without it, retailers would have been required to file with the state Department of Revenue and potentially more than 60 parishes.

The Louisiana Department of Revenue and the Sales and Use Tax Commission for Remote Sellers will contact direct marketers later this month to explain the transition process. “No action is required until those direct marketers receive this correspondence.”

Direct marketers who don’t meet either of the economic nexus thresholds ($100,000 in sales or 200 transactions) may continue to collect and remit the single 8.45% rate. 

The Sales and Use Tax Commission for Remote Sellers will serve as the central, single collection agency for state and local taxes. A new software system to facilitate collection and remittance will be functional “no later than July 1, 2020.” Remote sellers can expect additional guidance on this in the months to come.

The Louisiana Legislature is currently considering a measure (Senate Bill 138) that would require marketplace facilitators to collect and remit sales tax on behalf of third-party sellers. If enacted as written, it would take effect January 1, 2021, but an amendment has been introduced that would change the effective date to July 1, 2020.

As of July 1, Louisiana will be one of 43 states (plus Washington, D.C. and parts of Alaska) to enforce economic nexus. If SB 138 is enacted, it will be one of 41 states (plus D.C. and parts of Alaska) with a marketplace facilitator law.

Think you may have economic nexus in Louisiana or another state? Find out where you’re most at risk with this free sales tax risk assessment.