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Walmart gets win in online sales tax case

Companies that maintain online marketplaces don’t have to collect state sales taxes on third-party purchases, the Louisiana Supreme Court ruled in a split decision.
In a case pitting Walmart against Jefferson Parish, the high court said the retail giant’s marketplace website, where consumers can buy products directly from Walmart or other parties, is not a “dealer” under state law. Therefore, the company does not assume the legal obligations of the other sellers that use the platform.
Jefferson Parish officials sued Walmart for almost $1.9 million in unpaid sales tax, interest, penalties, audit fees and attorney fees, alleging Walmart was required to remit taxes for third-party transactions. The trial court and appellate court both sided with the parish.
In a 4-3 vote, the state Supreme Cort disagreed.
“Clearly, an online marketplace is not a party to the underlying sales transaction between the third party retailers and their customers, but rather a facilitator of the sale,” the Supreme Court majority said in reversing those decisions.
In her dissent, Chief Justice Bernette Johnson wrote that a “dealer” is not the same thing as a “seller.” Lawmakers deliberately defined “dealer” broadly to account for changing business practices beyond traditional brick-and-mortar stores, such as online sales, she said.
Under Walmart’s rules, it is the only party with the ability to collect sales taxes on all transactions made through its website, Johnson said. She said the company “should not be allowed to refuse to perform the collection duties of a dealer under [state law] by nominally placing that duty on the third party retailer yet eliminating their ability to do so.”
“It is also troubling to me that the Marketplace Retailer Agreement – created by Wal-Mart.com – operates to promote and facilitate avoidance of tax payments by consumers, all to the detriment of Jefferson Parish,” she wrote.
This case is likely to have far-reaching implications in Louisiana and beyond, according to an analysis by Matt Mantle and Cami Fergus of the Jones Walker law firm.
“Other sales tax administrators in Louisiana would have undoubtedly attempted to rely on the decision to pursue sales tax collections from marketplaces, and perhaps on a retroactive basis,” they wrote. “Such action from other local collectors is now unlikely, given today’s decision from the Court.”
And though the court’s decision is not binding outside of Louisiana, other states with similar statutes may be persuaded to follow suit when addressing the scope of collection requirements on marketplaces under their own laws, they said.

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