Walmart.com USA LLC is obligated to collect local sales and use tax on third-party sales made through its online marketplace, a Louisiana locality argued before a state appellate court.
The Louisiana Fifth Circuit Court of Appeal heard oral arguments in Normand v. Wal-Mart.com USA LLC October 11, with Kenneth Fonte of Golden & Fonte APLC representing Jefferson Parish and Jeffrey Friedman of Eversheds Sutherland (US) LLP representing Walmart.com.
According to Jaye Calhoun of Kean Miller LLP, who attended the hearing, the three-judge panel was openly skeptical of Walmart.com’s arguments. She told Tax Notes October 11 that the arguments focused more on which party was better able to collect the tax rather than whether Walmart.com would be considered a “dealer” under La.R.S. 47:301 (4)(1).
Calhoun continued that in her view, a ruling in favor of Jefferson Parish would be a “wide expansion” of the statute.
Walmart.com is appealing a March 2 Louisiana district court ruling that the company is the dealer on sales by third-party retailers in its marketplace program and is therefore required to collect and remit Jefferson Parish’s sales tax on items delivered into the locality. The parish sued Walmart.com for $137,944 in uncollected taxes for the sales made through the marketplace.
The company collected and remitted local sales and use taxes on its own sales but argued that it was not the dealer on the third-party transactions because it was not the retail seller. Only the person transferring title or possession of the merchandise could be obligated to collect and remit the sales and use tax, the company claimed.
Fonte argued on behalf of the parish that Walmart.com is assisting in the third-party sales and therefore has an obligation to collect the tax, according to Calhoun. She added that Fonte claimed that the tax system won’t work if vendors don’t collect the tax because it’s not cost-effective for localities to collect the use tax.
But, Calhoun said, Friedman argued that Walmart.com did not have the information to determine whether a third-party sale was taxable or not. He also said that although Walmart.com receives a service fee for third-party sales, it has no authority regarding the prices or return policies of the marketplace vendors, Calhoun added.
Friedman also argued that Walmart.com, through its marketplace, assists in the distribution of the products in a similar manner to FedEx, which isn’t responsible for collecting the sales tax on behalf of its third-party sales. But one of the judges pointed out that FedEx does not collect money for the third-party sale, according to Calhoun.
Fonte argued that Walmart.com shouldn’t be able to argue that it is not a dealer for sales by third-parties through its marketplace when the company has already conceded that it is a dealer for its own sales, Calhoun said.
In the March 2 decision, Louisiana District Court Judge Stephen Enright Jr. ruled in favor of Jefferson Parish, holding that statutory definition of the term “dealer” was not limited to the retail seller.
Enright said testimony from the company’s director of specialty taxes conceded that Walmart.com’s agreement with its marketplace retailers “does not allow a third-party Marketplace retailer to separately invoice a customer for sales taxes, and that only Walmart.com can collect such taxes."
The case has been watched with interest in Louisiana as the state tries to navigate issues with remote sales taxation. At an August 9 meeting, the Louisiana Sales and Use Tax Commission for Remote Sellers decided to defer guidance on the treatment of marketplace sellers pending a decision in the case. The commission, which was created to serve as a single, state-level tax administrator for remote sales, has met regularly on issues such as local tax administration and retroactivity.