Louisiana’s New E-commerce Tax Laws

In recent years, states have continued to collect tax from e-commerce transactions.  Louisiana has recently joined in on the trend and allowed the state to tax businesses without a physical presence there.  This is a trend that we have discussed in the past and we encourage our readers to catch up on previous posts about online taxes in California and the evolving trends.  However, Louisiana’s new regulations has shutdown Amazon’s affiliate program in the state.  So, what is the history of this bill?  Also, aside from retailers like Amazon, who would this legislation impact?

What is the bill’s history?

The bill fundamentally has its basis in something we’ve covered before where we discussed Quill Corporation v. North Dakota.  This case effectively ruled that without a sufficient connection, i.e., nexus, to the state, that state cannot tax it.  This has been interpreted that to tax the entity, the entity usually must have a physical presence in that state.  This would mean “brick-and-mortar” retailers would be taxable, while an entity like Amazon, which may not have any warehouses or physical presence in the state, would be “immune” to taxation.  In response, some states have taken action in legislating a “lowering” of the nexus standard.  For example, Act No. 22, also under HB-30, in the State of Louisiana was authored by Representatives Leger, Carpenter, and White, and enacted into law by the Governor on March 15, 2016.

Who would this legislation impact?

In this law, the state creates conditions that would effectively give a nexus of contact to the state.  The first hurdle to qualify for the lower nexus would be from vendors that regularly have some contact in the state.  This would include advertisement through catalogs, newspapers, television, and other channels.  It further includes the solicitation of independent contractors, or Louisiana businesses, where the person or entity would refer the state resident to the online business.  In essence, if a business in the store were to recommend using Amazon to find an item due to some agreement, then Amazon would be taxed.

However, the state does not want to tax all individuals and has taken measures to limit the taxable parties as well. The taxable parties are first limited due to the amount of sales.  To qualify, they must have sold more than $50,000 in products or services. Furthermore, the product or service would have to be the same or “substantially similar” to something provided by a retailer already in the state, and further covers any affiliates that the online entity uses to conduct business in Louisiana. This last part is likely referring to a program like Amazon’s Associates Program where individuals can earn commission by promoting items and encouraging their purchase.  This is likely why in response to this law, Amazon shut down this program within the State of Louisiana.  The law, as it is now, would likely include those individuals encouraging the sale of objects.

At our law firm, we assist clients with legal issues related to business, technology, and e-commerce transactions.  You may contact us to set up an initial consultation.