Amendment 1: Rationalization of sales tax | New

A vote for would be

Allow a single authority to oversee collection, electronic filing, and policy guidance for national and local sales taxes.

A vote against would be

Continue to constitutionally require the collection, filing and monitoring of separate sales tax policies by state and local governments.

Current situation

The Louisiana Department of Revenue levies a state sales and use tax at 4.45%, while local governments collect their own sales taxes at various rates of around 5% on average. Taxes for many Internet sales are administered by a special state commission. This highly decentralized system is unusual; almost all other states allow a central collector who pays the revenues to the appropriate state and local jurisdictions and acts as the central authority to determine how and when taxes should be applied.

Heavily dependent on sales tax revenues, local governments have firmly clung to their constitutionally protected right to collect them. According to the Constitution, each parish assigns a single collector to remit revenues to the various sales tax districts within its borders. Depending on the parish, this collector may be the school board, the parish government, the sheriff, or a large municipality, such as New Orleans. These entities may have different interpretations and policy perspectives on the proper application of sales and use taxes and exemptions. A statewide collaborative parish electronic filing system provides an online tool for businesses to help streamline the process. Companies doing business in more than one parish may be audited by more than one jurisdiction at the same time. Concerns have arisen as to whether Louisiana’s system conflicts with the U.S. Constitution or federal court rulings, particularly regarding how the state treats in-state sellers versus sellers. out of state.

Proposed change

This amendment would make five key changes to the current sales tax regime. 1. It would create a new commission with representatives of state and local agencies. 2. The commission would provide for electronic filing and develop a process for the combined collection of national, local and remote sales taxes for all state tax authorities. 3. The commission would turn over the revenue to the collector of each local tax authority and to the state revenue department. 4. The commission would provide strategic advice. 5. The commission would develop rules for the verification process.

If passed by voters on November 13, the amendment would still need implementing legislation to come into force and further define the new system. The amendment requires this implementing law to obtain a two-thirds majority vote in both houses of the legislature to become law. The new commission would replace the Louisiana Sales and Use Tax Commission for Distance Sellers and the Louisiana Uniform Local Sales Tax Council, and their responsibilities and powers would be transferred to the commission. Funding for the agency would be provided by part of the tax revenue from sales and use by the state and local communities.

What would not change

The amendment does not change the tax rates. Louisiana has the highest combined local and state sales tax rate in the country, and the average local sales tax is the third highest among the states. These ratings are not affected. The amendment does not require uniform tax rates and exemptions at national and local level. Rates and exemptions would continue to vary from jurisdiction to jurisdiction, although the new streamlining structure could facilitate greater consistency and political consensus. The amendment does not require a particular process for streamlined audits, although it does call for the development of new rules.

The new commission

The new authority would be the National and Local Commission for Simplified Sales and Use Taxes. Measured by gross revenue collected, the commission would be the state’s largest tax collection agency. This eight-member body would include four members appointed by organizations representing local communities, two by the state executive and two by the legislature. Appointments would require confirmation from the Senate. The specific appointing authorities would be:

Louisiana School Boards Association,

Louisiana Municipal Association,

Louisiana Police Jury Association,

Louisiana Sheriffs Association,

the secretary of the Ministry of Revenue,

the Speaker of the House of Representatives, and

the President of the Senate.

Argument for

Louisiana’s outdated, complex, and fragmented sales tax system is the worst in the country and an unnecessary burden on those trying to do business. This amendment would bring positive change by creating a central authority for collections, reducing bureaucracy and helping businesses comply with the law. This would dramatically improve Louisiana’s reputation as a place to do business while providing layers of guarantees to local governments to secure their revenue streams. The new process would be more likely to prevent lawsuits claiming Louisiana’s system does not meet Supreme Court or U.S. constitutional standards for fairness and open trade. State and local government stakeholders as well as business interests worked together to implement this plan, which was largely bipartisanly supported by the legislature. Those who defend the current system point to the same pseudo-nightmare scenarios that were used 30 years ago to oppose a proposal to consolidate sales tax collections at the parish level; this reform was adopted and the impact was extremely favorable.

Argument against

The move to a consolidated system takes control of local governments to collect their sales taxes. No one knows the behavior of local businesses better than local authorities. The current electronic parish file system provides a streamlining process that can be adapted and improved over time. While it is true that almost all other states that apply sales taxes let the state government collect them on a consolidated basis, most of these local governments are not as dependent on sales taxes as local government agencies. Louisiana, which enjoy relatively less tax support.

Additionally, if a local jurisdiction receives its late sales tax remittance under the new system, the government’s cash flow would be disrupted. The amendment does not address Louisiana’s inconsistency in sales tax rates and exemptions between state jurisdictions, and it’s an issue that influences the state’s poor national tax classification. Concerns about lawsuits that could challenge Louisiana’s system are overblown and could be addressed through improvements in collection methods rather than the creation of a central tax collection authority.

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