On June 19, Louisiana Gov. Bobby Jindal (R) vetoed a bill that would have leveled the playing field for the state’s Main Street retailers. H.B. 555 required remote retailers with a broad network of affiliates in the state to collect and remit sales tax in the state. In a letter to Louisiana’s Clerk of the House of Representatives, Jindal said he vetoed the bill because challenges to “affiliate nexus” bills in several states have forced states to change their laws to conform with a court decision.
“It is disappointing that Gov. Jindal has opposed leveling the playing field for Louisiana’s Main Street retailers yet again,” said ABA Senior Public Policy Analyst David Grogan. Jindal opposed similar legislation in 2011, H.B. 641, which did not pass the state legislature. “For too long, Louisiana retailers have had to work at a disadvantage to remote retailers that are not collecting sales tax. H.B. 555 would have recouped lost sales tax revenue that would help Main Street retailers and their communities.”
Grogan said that Jindal’s reference to challenges to affiliate nexus laws may be a case of confusing two different types of sales tax laws. New York’s affiliate nexus law, passed in 2008, was challenged three times in state court by Amazon and Overstock, and each time the challenges failed. In December 2013, their challenge to the law was brought to the U.S. Supreme Court; however, the justices declined to hear the case, signaling a victory for sales tax fairness proponents and the affiliate nexus law model.
A 2013 legal challenge by the Direct Marketing Association to an Illinois affiliate nexus law in the state’s Supreme Court was victorious on the grounds that the law was discriminatory because it only applied to online retailers. In January 2015, new rules issued by Illinois’s Department of Revenue, which broadened the affiliate nexus law to include catalog, mail order, and similar retailers, as well as remote online retailers, went into effect.
Colorado’s e-fairness law was also successfully challenged, though that law was not an affiliate nexus law; it required remote retailers to report sales data to the state. An eventual review of the law by the U.S. Supreme Court sent the challenge to federal court in March 2015. In the concurring opinion regarding the Colorado decision, Supreme Court Justice Anthony Kennedy wrote that it was time to reconsider the 1992 Quill vs. North Dakota Supreme Court decision, which opponents of e-fairness usually cite when arguing that states have no right to require remote sellers to collect and remit sales tax unless those sellers have a physical presence in the state.
“Given these changes in technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the Court’s holding in Quill,” Kennedy said. “A case questionable even when decided, Quill now harms States to a degree far greater than could have been anticipated earlier.”
In the meantime, Colorado has since passed an affiliate nexus law in an attempt to level the playing field and recoup lost sales tax revenue.
In vetoing the Louisiana legislation, Jindal explained: “Until Congress acts on the federal level to address the Commerce Clause issues with affiliate nexus and establish a uniform law on how states should handle companies that have no physical presence within their borders, House Bill No. 555 exposes Louisiana to expensive litigation that has budgetary implications for critical services like healthcare and higher education.”