Normand v. Wal-Mart.com's Implications for the Online Marketplace
Walmart’s recent win in the Louisiana Supreme Court further highlights how important it is for state and local jurisdictions to set up clear guidance for market facilitator laws instead of looking back and trying to collect pre-Wayfair taxes.
The court, in its 4–3 decision in Normand v. Wal-Mart.com, overturned two lower court rulings and found that Walmart wasn’t liable for collecting taxes from third-party sellers in Jefferson Parish using the company’s online marketplace.
The case originated with the parish’s audit of Walmart.com for 2009 through 2015, well before the Wayfair ruling. That makes this another example of a government administration focusing on the past instead of the future to close the revenue gap. We’re seeing this in California and South Carolina as well.
Retroactive Tax Liabilities: A Fundamental Violation of Fairness
The Wayfair ruling was supposed to be a prospective, future-looking tax, and the recent attempts by states to collect back taxes from a time when the law didn’t even exist is a fundamental violation of fairness. Retailers would have to absorb the cost of recalculating taxes, and notifying customers would be a nightmare. In fact, in an amicus brief filed during the Wayfair case, 40 states promised not to impose retroactive tax liabilities on companies.
What should states, counties and other local jurisdictions be doing instead of trying to boost revenue through retroactivity? Make it easier for companies to comply moving forward as we navigate the post-Wayfair tax landscape.
By taking the long view and setting up clear, simple-to-understand regulations governing remote seller and marketplace facilitators, tax jurisdictions will be able to collect the revenue they desire without resorting to litigation.
What the Future Holds
In fact, many states have already started doing this. More than 30 have already set up marketplace facilitator framework. There’s still a lot of work to be done during the 2020 state legislative sessions to make these laws clear and compliance easy, but for jurisdictions waffling between looking to the future and looking back, the choice is clear.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.