Sunday, June 23, 2024

Starns: Modernizing sales tax collection important to Legislature

by BIZ. Staff

One of the most important – and controversial – issues facing the Legislature this spring will be sales tax collection.

I’m not talking about the sales tax rate or even how we pay it. When we shop, paying the sales tax is dirt simple. The cashier tells us what we owe, and then we pay it. That’s not going to change.

What needs to change is how stores remit that tax revenue. Behind the scenes, Louisiana’s tax system is a mess.

Louisiana is one of only two states without a centralized sales tax collection system.

In most states, stores send sales tax revenue to a single agency. Louisiana, though, has 64 parishes; one without a local sales tax, leaving 63 parishes with local sales tax collectors and over 100 different sales tax jurisdictions.

Our sales tax collection system isn’t a big deal if you’re a small business with a single store, but if you have two or more stores in different jurisdictions, then it’s a lot harder – and more expensive – to understand and follow the rules.

That’s why NFIB, the state’s leading small business advocacy organization, supports House Bill 57, a proposed state constitutional amendment that would bring Louisiana’s sales tax collection system into the 21st century.

If the proposed amendment clears the Legislature and is approved by voters, it would do two things.

It would make it a lot easier to run a business in Louisiana by simplifying sales tax collection. Employers wouldn’t have to keep up with different rules in different parishes. They could collect the sales tax, send the revenue to the centralized collection entity, and state and local officials would handle the rest.

It would also let Louisiana collect sales tax on all online purchases in response to last summer’s U.S. Supreme Court decision.

Right now, the state can’t do that because of our broken structure. Some out-of-state merchants voluntarily collect an 8.45 percent sales tax on online purchases made in Louisiana, but others don’t.

That’s a 4.45 percent state tax and a 4 percent generic parish tax which is less than what is actually due the parishes. On top of that, the state divides this generic sales tax among the parishes based on population, regardless of the parish’s actual sales tax rate.

The constitutional amendment outlined in House Bill 57 would change that; online sales tax rates would depend on where the customer lives.

Predictably, most of the opposition to H.B. 57 is coming from local government, but centralizing Louisiana’s sales tax collection process wouldn’t cost parishes a penny. It wouldn’t siphon money from local budgets; tax revenues would be collected through single-point collection software, divided up between the state and local governments, and sent to those accounts accordingly. It wouldn’t reduce the size of local government, and it wouldn’t rob local governments of the power to audit sales tax collection.

What it would do is make it easier to own, operate, and grow a small business in Louisiana. That’s why NFIB is urging the Louisiana Legislature to pass H.B. 57 and hoping that voters approve it when it appears on the October ballot.

Dawn Starns is Louisiana state director of NFIB, the nation’s leading small business advocacy organization.

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