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| Jaye Calhoun |
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| William Kolarik |
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| Michael McLoughlin |
Given the substantial budgetary issues created by the lockdown in Louisiana, it is expected that 2021 will be even more eventful regarding state tax issues. The following are what we think were a few of the most prominent tax developments to come out of Louisiana in 2020.
1. Casino hotel rolls snake eyes on hotel room tax appeal.
A Louisiana Court of Appeals held in Jazz Casino Co. LLC v. Bridges[1] that the term "room taxes," as included in a provision of the Louisiana Gaming Corporation Act imposing tax on complimentary rooms at the land-based casino-hotel in New Orleans, includes state sales and use taxes on hotel occupancy, in addition to local hotel occupancy taxes.
Thus, the casino-hotel was required to pay both state and local hotel occupancy taxes at the full room rate even if the room was discounted or provided at no charge. The taxpayer argued that it was only local hotel occupancy taxes that were covered by the gaming law, but the court held that it was the Legislature's intention to include the state sales tax when it amended the state's gaming laws to impose room taxes on complimentary rooms at the casino hotel.
The taxpayer has appealed the decision to the Louisiana Supreme Court.
While the decision is narrowly applicable to the one land-based casino-hotel in New Orleans, the Louisiana Department of Revenue is taking the position in its opposition to a writ application filed by Jazz Casino, as well as in ongoing audits, that discounted and complimentary hotel rooms have always been subject to state hotel occupancy taxes at the full retail rate.
A clear reading of the applicable sales tax law demonstrates that there is no basis for the department's position.
2. Marketplace facilitator takes parish sales tax offline.
In Normand v. Walmart.com USA LLC,[2] the Louisiana Supreme Court held that Walmart Inc.'s online sales entity, Walmart.com, was not a dealer under Louisiana Revised Statutes Section 47:301(4)(l) and thus was not liable for the collection of Jefferson Parish sales tax on sales made by third-parties into the parish that it facilitated through its platform.
The court held that the definition of dealer does not apply to "intermediaries that are only tangentially involved in sales transaction, such as a marketplace facilitator relative to sales by third-party retailers." Jefferson Parish audited Walmart.com for the years 2009 through 2015 and issued an assessment for roughly $2 million in unpaid sales taxes on third-party marketplace sales from the company's website.
According to the court, under Section 47:301(4), remote sellers will have nexus and a sales tax collection obligation, if they engage in "regular or systematical solicitation of sales from in-state customers through a mail-order catalog."
The court determined that there was no indication that the Legislature intended to impose a tax collection obligation on anyone other than persons that owned the property being sold, i.e., the law was not intended to cover companies that simply facilitated transactions between buyer and seller.
The court also shot down the parish's procedural argument that the taxpayer had not followed the proper rules for a summary proceeding in Louisiana.
The court found that there had been numerous acts of divergence from the summary proceeding procedures by both the taxpayer and the parish but the parish had never objected to it at the time and in some cases agreed to the taxpayer's request to deviate from the summary proceeding requirements
3. Louisiana Legislature fights back, bringing marketplace facilitators tax back online.
In response to the Louisiana Supreme Court's decision in Walmart, the Louisiana Legislature enacted S.B. 138, under which marketplace facilitators are treated as "the dealer for each remote sale for delivery into Louisiana and transacted on a marketplace on behalf of a marketplace seller."
As such, marketplace facilitators are required to register with the Louisiana Sales and Use Tax Commission for Remote Sellers and to collect sales and use taxes on third-party sales. However, the legislation only applies if the facilitator's annual gross revenue from sales into Louisiana on their platform of tangible personal property, digital goods, or services is $100,000 or more, or there are 200 or more separate in-state sales transactions.
The bill was signed by Gov. John Bel Edwards on June 11 and became effective on July 1. This brings Louisiana into line with other states that impose sales tax and have acted to require marketplace facilitators such as Amazon.com Inc. and eBay Inc. to begin collecting state taxes after the U.S. Supreme Court's decision in South Dakota v. Wayfair Inc.,[3] which overturned the long-standing physical presence requirement for nexus upheld by the Supreme Court in Quill Corp. v. North Dakota.[4]
4. Economic nexus? Not so fast.
In Robinson v. Jeopardy Productions Inc.,[5] the Louisiana Court of Appeal for the First Circuit dismissed the Department of Revenue's attempt to impose corporation income and franchise taxes on a California company, Jeopardy Productions, whose only contact with the state was that it indirectly derived revenue from intangible property used in Louisiana.
Jeopardy Productions owned the intangible property related to the "Jeopardy!" television game show — for example, the "Jeopardy!" logo that it licensed to third parties, who subsequently licensed them to Louisiana companies.
In determining that Jeopardy Productions did not meet the minimum contacts requirement of the due process clause, the court noted that Jeopardy had no intentional or direct contact with Louisiana. Its only contact with Louisiana was indirectly through the activities of unrelated third parties that contracted with the entities that Jeopardy licensed the intellectual property to.
At present, the department is regularly issuing assessments premised on the assertion of jurisdiction over a number of out-of-state businesses that simply own an interest in an affiliate doing business in Louisiana. If the Jeopardy Productions decision stands, it should give the department pause regarding whether to continue issuing such assessments.
5. Mardi Gras has been canceled for 2021, but not completely.
While this doesn't sound like a tax development, the state and the New Orleans metropolitan area will, in fact, miss out on the annual influx of visitors and the related tax revenue from their spending on hotels, restaurants, daiquiris in to-go cups, feathered masks and stuffed alligators. The impact on tax collections will likely mean bad news for taxpayers in Louisiana.
Tough economic times have, in the past, led to more aggressive state and local tax audits and litigating positions. A bit of good news though, in light of the cancellation of Mardi Gras parades, New Orleanians are still planning to decorate their houses like Mardi Gras floats and will throw beads and trinkets at any passersby. The effort is organized — there will be a map showing all the locations where people will throw Mardi Gras goodies at you if you show up — and is being called the "Krewe of House Floats"!
So, if you're Louisiana resident, come on down and celebrate Mardi Gras in a safe, socially distanced way. Tell your supervisor that it should be a covered business expense and may save your business tax money in the long run!
Jaye Calhoun is a partner, William Kolarik is special counsel and Michael McLoughlin is of counsel at Kean Miller LLP.
Disclosure: Kean Miller filed an amicus brief on behalf of the Louisiana Hotel and Lodging Association and the Greater New Orleans Hotel and Lodging Association in support of the plaintiff-appellant in Jazz Casino Co. LLC v. Bridges.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Jazz Casino Co. LLC v. Bridges
, 2019 CA 1530 (July 29, 2020).[2] Normand v. Walmart.com USA LLC
, No. 2019-C-00263 (La. 2020).[3] South Dakota v. Wayfair Inc.
, 585 U.S. ___, 138 S. Ct. 2080 (2018).[4] Quill Corp. v. North Dakota
, 504 U.S. 298 (1992).[5] Robinson v. Jeopardy Productions Inc.
, 2019-1095 (La. App. 1st Cir. Oct. 21, 2020) ___ So. 3d ___ (slip op.).For a reprint of this article, please contact reprints@law360.com.