The Louisiana House Ways and Means Committee advanced a bill Tuesday that would create a centralized state agency to streamline sales tax collections in the state and replace the currently fragmented system of collections by individual cities, parishes and other agencies.
House Bill 199, sponsored by House Speaker Clay Schexnayder, R-Gonzales, would create the State and Local Streamlined Sales and Use Tax Commission to handle all sales tax administration and collections. Cities, parishes and other tax authorities would retain their powers to set and levy taxes but no longer collect them. The legislation is one of a number of different tax reform bills that lawmakers are considering this session.
“Our constituents pay taxes now that we simply are not collecting,” Schexnayder said. “House Bill 199 is that tool that we need to start with.”
The bill would create a proposed constitutional amendment, which means it requires passage by two-thirds of the legislature. A proposed constitutional amendment would need the approval of a simple majority of Louisiana voters. Schexnayder’s bill cleared its first hurdle on Tuesday by making it through committee with a 14-1 bipartisan vote.
Louisiana’s current sales tax system relies on 54 different collecting agencies including individual parishes, cities, sheriffs, police juries, school boards and other government entities. The state also has the Tax Commission for Remote Sellers, which collects remittances from out-of-state businesses with customers in Louisiana.
This fragmented system has made it difficult for certain in-state business, particularly web-based companies that sell to customers all over the state. Such a company must remit sales taxes to every jurisdiction in which it makes a sale. However, an out-of-state competitor with the same business model can remit all its sales taxes to a single entity — the Tax Commission for Remote Sellers.
Swamp Dragon hot sauce, is one such Louisiana company that sells bottles of liquor-based artisan hot sauce online. During one month of business, owner Matt Beeson said, he sold bottles to customers in about 30 different parishes and had to file 30 separate tax remittances. He said his wife spent hundreds of hours on administrative work filing those remittances.
“If businesses are busy turning in 30-something tax returns every month, they’re not transacting business, so there (will be) no sales tax to remit,” Beeson said.
House Bill 199 is the result of the work of a special committee of people from state and local taxing entities who studied the issue of streamlining sales tax collections. Although the bill establishes the statutory authority, membership and funding for the new centralized tax commission, it does not establish the actual means or framework of collecting the sales tax remittances.
Rep. Tammy Phelps told her colleagues on the committee that she expected to see a companion bill that would actually build the agency.
Schexnayder said the members of the special committee didn’t want to spend time and effort on a companion piece that might prove worthless if the constitutional amendment fails to pass.
“Right now it’s on hold to build it, but you have my pledge to bring everybody to the table to be able to work on this as we move forward to have that companion piece put together,” Schexnayder said.
The new sales tax commission would have eight members. The Louisiana School Boards Association, Louisiana Municipal Association, Police Jury Association of Louisiana, Louisiana Sheriff’s Association, Department of Revenue, the governor, House speaker and Senate president would each appoint one member.
The commission would also serve as the central auditing authority for all out-of-state taxpayers, while local governments would retain their auditing authority for in-state taxpayers.
The bill will likely return to the committee for a second review of its technical language before heading to the House floor.