E-Fairness

The UC is working with local businesses to ensure fair tax collection practices in Louisiana

UPDATE

Giant online retailer Amazon will be required to collect sales taxes from Louisiana customers (as brick and mortar businesses have always been required to do) starting on Jan. 1, 2017.  Read more. 

In March 2016, the Louisiana Senate passed E-fairness HB 30 unanimously (vote of 38 yeas and 0 nays) that requires remote dealers to collect sales tax on LA sales. See our advocacy here.


BACKGROUND

StayLocal is a part of the Louisiana Coalition for E-Fairness, a partnership between StayLocal, Greater New Orleans, Inc., and the Louisiana Retailers Association working with Louisiana businesses to resolve sales tax collection discrepancies between brick & mortar retailers and out of state online sellers that hinder local businesses’ ability to compete and grow their business.

The issue of e-fairness is of paramount importance to many businesses in the StayLocal network. Last year, the United States Senate passed the Marketplace Fairness Act, which would fix the issue once and for all. StayLocal and our partners worked on the state level to push for legislation that would allow our local businesses to compete effectively and grow their business, and in turn, contribute to statewide economic growth and job creation.

Read more about StayLocal’s recent efforts at staylocal.org/e-fairness

StayLocal has been actively advocating for efairness since the problem was brought to our attention by local independent retailers in 2008.  Here’s an editorial UC director Dana Eness wrote in 2009:

E-Fairness is Not a New Tax

September 2009

By Dana Eness, Urban Conservancy Executive Director

While Jefferson and Orleans parishes both reported dramatic shortfalls in projected sales tax revenue for 2009, little has been said about the role that the popularity of online retail plays.

Consumers are drawn to the convenience and savings that tax-free online shopping provides, but don’t realize that their community pays for these savings in three significant ways.

First, low-income families carry an unfair tax burden since credit card and internet access, and therefore tax-free online retail, are most available to higher income brackets. Thus, the most regressive form of taxation becomes even more regressive.

Second, the community loses needed tax revenue to fund public services including police protection, healthcare, and schools. Internet retailers with no physical presence or “nexus” in a state are not required to collect sales taxes on purchases. In theory, consumers are required to keep track of their online purchases and then pay the appropriate amount owed in sales tax as “use tax” on their state tax return. In practice, this “fair use tax law” is nearly unenforceable. A 2009 University of Tennessee study estimated that uncollected sales taxes on e-commerce cost Louisiana $344 million in 2010 and predicts those losses will rise to $440 million by 2012.

Finally, exempting online retailers from collecting sales taxes puts bricks-and-mortar businesses at a competitive disadvantage. In Orleans and Jefferson parishes, where sales taxes approach ten percent, companies like Amazon, the nation’s 20th largest retailer, are granted, in effect, a nearly 10 percent price advantage over local businesses.

Local businesses adversely affected by this are working with The Urban Conservancy to bring attention to this serious matter.


Update 2

Feb 2017

As of January 1, 2017, new e-fairness legislation in Louisiana prompted online mega-retailers like Amazon to collect and remit state and local sales taxes to the proper authorities, just as brick-and-mortar businesses have always been required to do.

Recently, WWL reported that Senator John Kennedy is unhappy about this new legislation citing that 1) the state should not charge consumers sales tax for online purchases, 2) the Louisiana Department of Revenue is not fairly enforcing the law, and 3) the law threatens to “kill the internet.” Kennedy’s comments not only contain several inaccuracies but also overlook how this policy supports Louisiana businesses by leveling the playing field and allowing them to compete fairly with online retailers.

Kennedy states, “You’ve got to ask where this money’s coming from, and I can tell you where it’s coming from. It’s not falling from heaven, it’s coming out of taxpayers’ pockets.” His implication is that this represents a new tax; it is not. In theory, consumers were required to keep track of their online purchases and then pay the appropriate amount owed in sales tax as “use tax” on their state tax return. In practice, this “fair use tax law” was nearly unenforceable. Few online shoppers knew about the requirement and even fewer actually reported their purchases.  Estimates place the 2015 collection rate at less than 1 percent.

Kennedy also claims that “[the Louisiana Department of Revenue] ought to enforce the law if they think the money’s due.” This is a specious argument. In effect, Kennedy’s suggestion is a call to expand government oversight exponentially, rather than simply shifting the responsibility from the consumer to the seller, online mega-retailers, in fairness to brick-and-mortars. E-fairness legislation also solves the tax collection issue in a simple, logical way that frees both consumers and the Department of Revenue from regulating individual purchases.

Finally, Kennedy remarks, “If you give government the right to get money as a result of people’s interaction with the internet, government will never stop, and they’ll kill the internet sooner or later.” Here, Kennedy erroneously conflates equitable tax collection policy with government overreach and stifling the free market. In Orleans Parish, where sales taxes are 10 percent, companies like Amazon were granted, in effect, a nearly 10 percent price advantage over brick-and-mortar businesses. Acts 87 and 1129 create a fair marketplace, where Louisiana businesses are no longer at a competitive disadvantage and can thrive and grow to their full potential.

Kennedy’s negative comments are premised on a common misperception about e-fairness, and this is that it places an onerous burden on online retailers. The fact is, Amazon already collects sales taxes in 29 states; there’s no reason it cannot do so in Louisiana, too. Further, until this legislation was enacted, Louisiana was leaving millions of dollars it was entitled to in Amazon’s hands. Collecting online sales tax will allow the state legislature to reduce Louisiana’s $600 million budget deficit, including the $304 million shortfall this fiscal year alone. Amazon and Empty Storefronts, a recent report by economic analysis firm Civic Economics, found that Amazon avoided $68.1 million in Louisiana sales tax in 2015. In the midst of a statewide budget crisis, equitably collecting sales tax from Amazon will significantly contribute to funding essential services such as infrastructure repair, economic development projects, and police and fire protection.

E-fairness legislation is not about demonizing online retailers as Kennedy states. It is a pro-business policy that ensures fair and equal taxation for both brick-and-mortar businesses and online mega-retailers. Louisiana based businesses can stay competitive on a national level and keep our state and local economies strong. After all, study upon study shows that local, independent businesses are the largest employers of our residents, they protect our local character, and they keep our hard earned dollars circulating among the individuals who work to support our communities’ well-being.

Kennedy describes collecting online sales tax as a “slippery slope.” I disagree. This legislation is a line in the sand signaling that we stand with our Louisiana businesses, statewide economic growth and job creation.

 

Abigail Sebton is the Policy and Research Coordinator for StayLocal, Greater New Orleans’ independent business alliance.  Learn more at staylocal.org.

States where Amazon collects sales tax

Update 1

Dec 2016

Until now, the onus of reporting online purchases to taxing authorities has been on the consumer.  Starting January 1, 2017 online retailers will be responsible for state and local sales tax collection in Louisiana at the point of sale just as brick and mortars have always had to do.  See our advocacy for the passage of HB 30 in February of 2016 here.

News

 

“Amazon.com to start collecting taxes for online sales in Louisiana”

The Advocate, 12/20/16

Giant online retailer Amazon will be required to collect sales taxes from Louisiana customers (as brick and mortar businesses have always been required to do) starting on Jan. 1, 2017.  

 

“Louisiana lawmakers consider Internet sales tax”

Channel 4-WWLTV, 2/29/16

In March 2016, the Louisiana Senate passed E-fairness HB 30 unanimously (vote of 38 yeas and 0 nays) that requires remote dealers to collect sales tax on LA sales. See our advocacy for HB30 in this coverage from WWL-TV’s Paul Murphy.

Read More

Read The Urban Conservancy’s May 2011 editorial in New Orleans CityBusiness.

(Archived copy here)

See our June 2011 Action Alert, including a sample letter to representatives, urging Louisianians to support e-fairness.

Read more about this issue within the national context.

Read a May, 2010 New York Times article and editorial about how a precedent-setting battle to enforce sales tax collection by Amazon.com is playing out in the state of New York.