Defeat Won’t End La. Sales Tax Collection Debate

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BATON ROUGE (AP) — Louisiana voters may have rejected a constitutional amendment to start the centralization of the state’s sales tax collections, but that doesn’t mean lawmakers and outside groups are giving up on trying to make the change.

A coalition of right-leaning organizations and an Arizona-based business that sells jewelry-making supplies have sued in federal court, challenging the current patchwork method of differing local government agencies collecting sales taxes.

Republican legislative leaders are reviewing the possibility of reintroducing the legislation for another try at the ballot box. House Speaker Clay Schexnayder said the Legislature’s staff is researching if lawmakers can pass the proposal again in the 2022 regular legislative session or if they’d have to wait until the 2023 session because of limits on when tax bills can be considered.

“It’s something that I believe helps our state, helps us move forward, so we’re going to keep pushing it,” said Schexnayder, a Republican from Gonzales who sponsored the failed amendment. “We’re not going to give up on it. We just have to find a path.”

Meanwhile, it remains unclear if there will be any fallout between the legislative leadership and New Orleans Mayor LaToya Cantrell, who helped sink the constitutional amendment.

Lawmakers proposed streamlining the sales tax collection process through an eight-member commission, rather than through the more than 50 local government agencies ranging from sheriffs and mayors to school boards that currently do the work. The constitutional change — a long-sought goal of business groups — passed the Legislature with unanimous support from Republicans and Democrats and the backing of Democratic Gov. John Bel Edwards.

But voters this month rejected the proposal. Uncertified results from the secretary of state’s office show 52% of those who voted in the low-turnout election opposed the change.

Houma Rep. Tanner Magee, the House’s second-ranking Republican leader, said the close vote — with about 15,000 more people voting against the amendment than for it — shows passage is worth retrying. He suggested more education could improve the proposal’s chances in a future election.

“I think there’s definitely a base there to build off of. I wasn’t really disheartened,” Magee said.

Supporters of centralization say Louisiana is one of only three states that handle sales tax collections through a hodgepodge of local government agencies. They argue it’s too burdensome for businesses to navigate the complex tax filing and remittance process.

Critics of the constitutional amendment pointed to uncertainty on the details of how the sales tax commission would work, because lawmakers still had to draft the specific regulations. They also argued it could tie up sales tax collections in state bureaucracy.

Cantrell didn’t publicly object to the centralization effort when it moved through the Legislature. But she came out strongly in opposition ahead of the election, arguing the commission could withhold sales taxes owed to municipalities when state officials are unhappy with local decisions. She called it a “state power grab.”

The New Orleans mayor’s opposition followed the August decision of the Bond Commission — which includes legislative leaders and statewide elected officials — to temporarily hold up millions for state construction work around New Orleans, at least partially because of the city’s coronavirus response.

The Bond Commission approved the financing a month later. But that delay was part of the reason Cantrell opposed the sales tax centralization effort, according to her spokesperson Beau Tidwell.

“It was not a tit for tat, but that really highlighted for us why it was such a concern,” Tidwell said. “That was a really big red flag about what could happen.”

The construction dollars temporarily held up by the Bond Commission, however, are discretionary. The sales tax dollars are not. Lawmakers note that distinction.

“You’re not owed a project in Bond Commission,” Magee said. “Sales tax money is very different.”

Tidwell said Cantrell also had concerns that lawmakers haven’t passed legislation spelling out how the sales tax commission would work. “It was so nebulous,” Tidwell said.

Only days after voters rejected the constitutional amendment, some groups that pushed for passage wasted no time with a different approach, filing a lawsuit in New Orleans federal court that seeks to upend the current tax collection system as unconstitutional.

The lawsuit could complicate legislative efforts to revisit the constitutional amendment proposal if it’s successful and a judge decides how the state should collect sales taxes, Schexnayder said.

“The lawsuit that was filed puts us and the locals in a really bad spot,” he said.

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