Above the law

Wouldn’t you, as a taxpayer, enjoy having the right to abide by only the tax laws that you agree with?

That is a fantasy that will never make the realm of reality for you, but many local governments in Louisiana are exercising that right when it comes to how they enforce sales and use tax laws.

First, some background. Until 1991, there were over 200 sales tax collectors in Louisiana. The paperwork nightmare of having to file a multiplicity of monthly sales tax returns—combined with the insanity of being subjected to 200 different audits—drove businesses up the wall. The law was changed in 1991 to limit each parish to only one sales tax collector. While reducing somewhat the number of filings and exposure to audits, businesses were still facing a heavy paperwork burden, a multiplicity of auditors, and sales tax rules and regulations that varied from parish to parish.

There are 34 states in which both state and local sales taxes are collected. In 33 of them, there are uniform rules regarding what is taxable, only one collector of the sales tax, and only one potential audit to determine if all appropriate taxes were paid. Louisiana is the state that goes entirely opposite this sensible system of sales tax collection. Why? Because local governments want it that way.
The Council on State Taxation does an annual report on how fairly the states administer their sales and use taxes. Each year Louisiana flunks, primarily due to the multiplicity of collectors, the potential endless nightmare of audits, and our failure to follow uniform regulations regarding what is taxable. Several years ago, legislation was passed that attempted to create a uniform code for sales and use tax collections in Louisiana. Unfortunately, the law had no teeth in it to force the local collectors to abide by the code. Many continue to tax what they choose to tax, regardless of what the law says.

Another law requires that any contract auditors hired by local sales tax collectors must be paid an hourly rate and not on a contingency fee (a percentage of the “take”) basis. That law was passed to correct abuses occurring in a system that allowed so many different collectors with varying regulations to hire auditors who were incentivized to stretch the boundaries of what was truly owed. Today, local sales tax collectors all over Louisiana are ignoring the prohibition on contract, contingency fee auditing. They act as if they are above the law.

Louisiana needs to join the rest of the nation and establish one sales tax collector, one auditor, and enforce one uniform set of rules. Additionally, our Legislature needs to let local governments know that they must follow the laws on the books, just like everyone else.