If you live in Louisiana and have you purchased anything online since 2016, get ready to pay taxes on the items you purchased.
The state of Louisiana is beefing up efforts to recover unpaid taxes on purchases made from online out-of-state retailers. This comes after the state passed new legislation that requires shoppers in Louisiana to pay sales taxes on online purchases. However, many online stores with physical addresses outside Louisiana have not been charging Louisiana residents these sales taxes.
Residents of the state who purchased products from 2015 have been issued notices from retailers in the mail. These notices were sent out to shoppers to let them know that they owed the state taxes on their purchases. According to the Louisiana Department of Revenue, these notices will become an annual thing.
State’s effort to close gap
Taxpayers in Louisiana are required by law to report any online purchases for which they did not pay state tax in their income tax returns. They are supposed to pay the required tax on them. However, very few shoppers actually make these payments.
The state’s Department of Revenue estimated that billions of dollars in uncollected taxes for online sales have been lost over the years. They have spent years trying to find ways to recover this lost revenue and have found that their options were limited, especially when the retailers were not based in the state.
The Louisiana law, passed in 2016, was modelled on a similar law in Colorado that was upheld in federal court. The Louisiana law requires online retailers that are based outside the state to notify shoppers that the items they purchase online are subject to state tax if the taxes are not included in the sale price.
Notifications to shoppers should include the total amount for the purchases made and a breakdown of the taxes due. Shoppers should expect the notifications in envelopes marked ‘important Tax Document Enclosed.’ Shoppers who prefer electronic communication can have the same notification sent electronically. However, they will have to agree to this in writing.
The Louisiana Department of Revenue isn’t letting out-of-state retailers off the hook even after sending the notifications. In a bid to ensure accountability, the state requires the retailers to submit annual reports detailing the purchases made by Louisiana customers and the taxes owed.
This move is not meant to deter small online retailers. It is meant to affect large retailers with gross profits of more than $50,000 annually.