Louisiana Supreme Court Rules on Normand v. Wal-Mart.com USA, LLC
On January 29, 2020, the Louisiana Supreme Court determined whether an online marketplace facilitator had an obligation to collect and remit state and local sales and use tax as a “dealer” under Louisiana Revised Statute 47:301(4)(l). In Normand v. Wal-Mart.com USA, LLC, La., the court concluded Wal-Mart.com wasn’t obligated to collect sales tax as a dealer or by contract on property sold by third parties through Wal-Mart’s marketplace website.
Wal-Mart.com operated an online marketplace that allows customers to buy products directly from Wal-Mart or from third-party retailers. Wal-Mart.com collected and remitted sales tax to the various parishes only for its sales and not the third-party sales made through the website. After an audit, the Jefferson Parish tax collector commenced an action to recover the unpaid taxes from the portion of sales by third-party retailers on the marketplace.
At trial, Wal-Mart.com contended that it wasn’t a dealer but a service provider. Wal-Mart.com highlighted the website connects customers to the retailers, provides a centralized checkout system and processes payments. Wal-Mart.com asserted it never transferred title or took physical possession of an item in a transaction but rather served as an intermediary. Jefferson Parish argued the definition of a dealer isn’t limited to just the seller in the transaction but is broad enough to include a marketplace facilitator.
The trial court ruled in favor of Jefferson Parish, maintaining that the obligation to collect and remit sales and use taxes is imposed on the dealer and the definition of dealer isn’t limited to “a retail seller that transfers title or possession of the merchandise to the end customer.” To reach its conclusion, the court focused on Wal-Mart.com’s checkout process. Wal-Mart.com collects all the proceeds from the transaction, and third-party retailers were precluded from collecting sales tax on their sales directly from customers. The trial court ordered Wal-Mart.com to pay the unpaid sales tax plus interest to the Jefferson Parish tax collector. The appellate court affirmed the trial court’s decision.
On appeal, in a 4-3 decision, the Louisiana Supreme Court reversed the lower courts’ decisions and ruled Wal-Mart.com wasn’t a dealer under Louisiana Revised Statutes and didn’t contractually obligate itself to collect sales and use taxes on behalf of the third-party retailer.
Focusing on relevant statutes and legislative intent, the court found Wal-Mart.com wasn’t a party to the transactions between the third-party retailers and purchasers. The court emphasized the legislature didn’t intend to expand the definition of dealer to include an intermediary or marketplace facilitator. The plain reading of the statute indicates the legislature didn’t intend for more than one dealer to be required to collect and remit sales tax. The opinion highlighted that Wal-Mart.com didn’t act as a seller in third-party facilitated transactions. Wal-Mart.com never held title to third-party retailers’ property and didn’t transfer title or possession of the property to customers. Rather, the court likened Wal-Mart.com’s role to that of an auctioneer. Louisiana Revised Statute Section 47:303(C) specifically states that auctioneers must register as dealers and are responsible for remitting state and local sales tax. The opinion emphasized that if the legislature intended for intermediaries or marketplace facilitators to fall under the definition of a dealer, then the legislature wouldn’t need to enact the provision for auctioneers. Prior to the enactment of Louisiana Revised Statute §47:303(C), auctioneers weren’t obligated to collect and remit sales tax. The opinion acknowledged the dealer definition might be broad; however, if the legislature truly intended to obligate marketplace facilitators and other intermediaries to collect state and local sales tax in certain situations, then the legislature would’ve enacted a similar statute as the auctioneer statute.
The court also analyzed the Marketplace Retailer Agreement to determine if Wal-Mart.com had a contractual obligation to collect and remit state and local sales and use taxes to the state and the various parishes. Under the Marketplace Retailer Agreement Wal-Mart.com had with its third-party retailers, the third-party retailer was the seller of record. While it’s not prohibited for an intermediary to collect and remit sales tax on behalf of a retailer, Wal-Mart.com didn’t contractually assume that obligation.
The opinion called for the Louisiana Legislature to address collection obligations for online marketplace facilitators. For further information, please reach out to your BKD Trusted Advisor™ or use the Contact Us form below.