Louisiana Supreme Court Rules on Walmart.com Online Marketplace Facilitator Case

In a 4-3 decision on January 29, 2020, the Louisiana Supreme Court held that under Louisiana law, Walmart.com was not obligated to collect and remit sales tax on transactions facilitated through its online marketplace. The case, which was between Walmart.com and a local parish, rather than the state of Louisiana, turned on the Louisiana Supreme Court’s interpretation of the term ”dealer,” as under Louisiana law, only dealers are obligated to collect and remit sales tax.

Louisiana defines ”dealers” relatively broadly, such that under a liberal interpretation of the statute, multiple participants in a transaction could theoretically be held liable for sales and use tax purposes. Instead, looking to the full context of Louisiana’s regulatory scheme, the Court explained that there was “no indication that the legislature intended to tax intermediaries that are only tangentially involved in the sales transaction” and that “double taxation” could result if the statute were interpreted such that online marketplaces could also be held liable to collect sales tax.

While the Court acknowledged that the statutory definition of dealer generally encompassed a “wider group of people than sellers,” the Louisiana Supreme Court held that in the context of a “sale at retail,” Walmart.com could not be considered a dealer as it is not a party to the underlying transaction conducted through its online marketplace; rather it is a mere facilitator of the sale. Moreover, in analyzing Walmart.com’s role in facilitating sales transactions, the Court analogized online marketplaces to auctioneers, stating that like auctioneers, online marketplaces occupy a unique position as third parties to the underlying sales transactions. The Court noted that auctioneers were historically not considered to be dealers under Louisiana law and are instead specifically obligated to collect sales and use tax by statute. Due to the nature of their similar status as third party facilitators, the Court held that online marketplace facilitators such as Walmart.com could also not be treated as dealers absent legislation specifically imposing a duty to collect and remit sales tax on marketplace facilitators.

Writing for the majority, Justice John L. Weimer noted that, as it was not in the province of the judiciary to create exceptions to a seller’s sales and use tax obligation in the context of retail sales conducted through the use of an online marketplace facilitator, the case demonstrated the need for legislation to address the sales tax obligations imposed on online marketplace facilitators. While the Louisiana Supreme Court’s ruling does not establish precedent, and as such, is not binding outside the state of Louisiana, as one of the nation’s first cases addressing the online marketplace facilitator issue, the Court’s decision may prove important as other jurisdictions begin to address the issue in their own courts and legislatures.

For more information regarding Louisiana’s sales and use tax law and how marketplace facilitator issues may affect you or your business, please contact your Marcum state and local tax professional.