Will there ever be a level playing field ? Just how much money are state and local governments losing to untaxed sales? Depending on your age...you may, or may not, know that to be the $64,000 question. But then age is something that few of us take very gracefully, so lets just say that this is a very "big and important" question, with no one knowing the answer.

With the assistance of our friend up in Caddo Parish, our last issue addressed some numbers relative to our state in loss revenue. By using some of Ed’s calculations, and a little imagination of your own, you may get a good idea about your local parish. Good numbers or bad, there is little doubt that the loss will be in the hundreds of millions of dollars across this great land.

The National Governors Association is trying to do something about this great injustice. Officials from more than half of the states, including ours, are discussing how to reconcile various sales tax law, so the collection process may become easier. This process is certain to be a huge cross word puzzle, with square pieces to put in round holes. One such piece is certain to be Louisiana. Without state central and standardized rates someone is going to get the short end of the stick.

Four states, Michigan, North Carolina, Kansas and Wisconsin have actually solicited bids from major retailers to experiment with tax collection software online.

The NGA emphasizes that it is trying to streamline sales tax accounting and collections. The object is to insure that citizens who order over the Internet, will pay the same tax that those who go to a physical or fixed location to purchase the same, or similar items.

Is this a legal question relative to tax obligations on Internet purchases? Maybe, but we believe it to be bigger than that...we believe that retailers, with a physical presence, are obligated to collect our tax. However, there is a constitutional issue with businesses outside our boundaries. Therefore, we must depend on our citizens to report their out-of-state purchases. When you run out of something else to do, check your miscellaneous receipt files and see how many private citizens paid you a use tax!

It would appear as if, on a national level, this exercise is not being received with open arms. With those states with huge surpluses, based on "Bro Bill’s" booming national economy, there seems to be no evidence that consumers’ noncompliance is eroding their economic base. However, with states such as ours that depend heavily on sales taxes to pay for government services, this issue takes on a different meaning. There is a disparity, between what some may believe to be an "exempt" Internet sale and Main Street USA.

Whatever the amount of lost tax collections are, you can believe that it is huge and growing each and every day.....as is our need to collect!

If only the Internet could fend off viruses as effectively as it sidesteps taxes. The House voted last week to extend a moratorium set to expire next year on any new Internet taxes, such as state or local surcharges on access fees. The extension also cancels existing Internet levies currently imposed in a handful of states. If the Senate and White House go along, the grace period will last until October 2006.

The moratorium doesn’t bar sales tax on online purchases. But that tariff is uncollectible in many cases because states often can’t force out of state merchants to impose it. What’s more, debate still rages over whether it should be collected at all.

.........US News & World Report, May 22, 2000

Surveying the future of cyberspace, a scientific advisory panel recently suggested that Congress consider a voucher program for the Internet. The group has also proposed a flat tax for states to collect revenue from sales.

The National Research Council, has urged our law makers not to force the Internet to change the way it operates in an effort to address concerns such as pornography and gambling.

The group thinks that Web access should be as widespread as telephones. Indicating that there is a "digital divide" that keeps many low income, rural and minority Americans from using the Internet.

Laying out several possible options, the group seems to think that there should be a program akin to food stamps. Suggestions such as a tax on phone service to help schools, libraries and hospitals pay for Internet access.

The group also has ideas on possible solutions in the battle between states and localities that want to collect taxes on e-commerce purchases, and those who fear such taxes would jeopardize growth of the Internet.

One very interesting solution offered would be to create a flat tax on Web purchases, no matter where the buyer or seller resides, which would be administered by the vendor.

Beginning July 1, there will be a new penny increase in the State Sales Tax on groceries, utilities and other such items.

The sales tax hike from 3 percent to 4 percent will effect food purchased for home consumption and utilities such as electricity.

The purchase of most products already is subject to the State’s 4 percent general sales tax. All or part of the taxes on groceries and utilities have been levied since 1986. In an effort to help balance the budget, the legislature agreed to the tax increase which has been levied at 3% since July 1997.

The Department of Revenue has repealed its rules providing for the administration of tax credits allowed to municipalities that operated manufacturing establishments or electric generating plants fueled by natural gas.

The Administrative Code provided for the administration of a severance tax exemption for newly discovered wells. This was repealed by the Legislature in 1994.

(LA Register, Volume 25, No 10)

Louisiana has a new tax collector. Cynthia Bridges, succeeds Brett Crawford as revenue secretary. Ms. Bridges a twenty year veteran of the Department, served as the deputy secretary prior to her appointment.

Citing a need for a new direction, Governor Foster noted his desire for a more aggressive and timely process. Although, he indicated that he wanted every penny owed the state, he stressed that he wanted the collection process to be fair.

Mr. Crawford is leaving to accept an offer of a teaching fellowship at Georgetown University. He plans to enter a dual degree in law and a doctorate in government.

Other appointments being made at the Department are:

Gary Matherne, Training Director, will replace Bridges as Deputy Secretary...

Ken Comeaux, Deputy Undersecretary, will become Assistant Secretary for collections...

Joy Mullins, Director of Personal Income Tax, will become Assistant Secretary for customer services...and

Clarence Lymon, director of the Houston office, will become Asst Secretary for audits.

Bob Rainer of Rainer, Anding & McLindon in Baton Rouge is proud to announce Fred Mulhearn has joined his law firm.

Fred was formerly an attorney with the Louisiana Department of Revenue and will be working with Bob in the tax litigation area. Fred earned his Juris Doctor degree from LSU and practiced law with an Alexandria insurance defense firm prior to joining the Department of Revenue.

Fred gave a very interesting and informative presentation at the Quarterly Meeting recently held in Alexandria.

Congratulations Fred, we look forward to you joining us...at other conferences.

The Commissioner of Financial Institutions has set the interest rate applicable to refunds and credits for Louisiana tax overpayments at 7.285% per annum for calendar year 2000. The interest rate for 1999 was 6.73%.

This interest rate is revised annually. The Commissioner sets the rate by determining the coupon issue yield equivalent, as set by the Secretary of the US Treasury bills settled immediately before October 1 each year.

The effective interest rate is statutorily required to be set at 2% above the coupon issue yield equivalent amount.

(LA Register, Volume 25, No 12)

Congratulations and thanks to Pat Segura and staff for a wonderful 2^nd Quarter Meeting. If you missed this one you missed a good one...thanks Pat, you did good!

 

LATA Newsletter Summer 2000

The Department of Revenue has issued a rule for the dissemination of tax assessment tables to property owners, and local assessors no later than the valuation date of January 1.

The Admin Code was revised to implement the requirement that improvements be added to the rolls on the January 1, after the year the improvements are made, except in Orleans Parish.

New improvements completed in Orleans Parish before August 1, of a given year are added to the next year’s tax roll.

(LA Register, Volume 25, No 25)

If I had a lower I.Q. I could enjoy the company of a politician...

Taxpayer was not responsible for use taxes on advertising brochures mailed to individuals in the state because the items were not found to be "transferred" under statutory meaning.

The parties stipulated that the brochures were not sent, nor was possession transferred to, the taxpayer. The direct mailing by the advertising firm of free brochures to consumers did not constitute a transfer of the brochures to the taxpayer.

Since the amount to be refunded to the taxpayer was in excess of $1,000, the trail court incorrectly ordered an immediate refund by the state because refunds in excess of $1,000 required legislative authorization.

(Blue Cross v Dept of Rev, LA 1^st Circuit, Dkt 98 CA 1971)

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Louisiana Association of Tax Administrators
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Vidalia, Louisiana 71373

 

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