BY DAN JUNEAU
LABI

Louisiana has suffered over the years from a reputation of having politics unduly and negatively influence the business climate of the state. Louisiana’s nearly unique system for collecting and administering sales tax revenues is a particular problem when the Bayou State is compared to others. These two factors converged recently in a way that sends another negative message regarding how Louisiana businesses are treated in matters of taxation.

The issue centers on Louisiana’s system of sales tax collection, in particular the lack of centralized collection of sales taxes. In almost every other state, there is only one collector of the sales tax: the state. The money is collected centrally and disbursed back to the local governments in proportion to their local rate of taxation. Local jurisdictions pay the state a small fee to collect their taxes; however, they save money by not having to maintain an expensive and duplicative local bureaucracy to do the collections. In the other states, the central collector also conducts audits of taxpayers. If taxes have not been paid properly, the state collects the principal, interest and penalties for both the state and the local taxing entities. Businesses have to fill out only one form—not a multiplicity of them—when they submit their sales taxes. And they are subject to only one auditing entity—not scores of them.

Our antiquated system of sales tax administration results in Louisiana ranking at the bottom of “tax fairness” indicators among the 50 states. Our laws in this regard are bad enough. Unfortunately, a recent opinion written by our Attorney General, Buddy Caldwell, makes a bad situation worse.

Louisiana law prohibits entities that collect local sales taxes from contracting with private auditors on a contingency fee basis to audit sales tax returns. The logic for this is simple: auditing entities should not be tempted to treat taxpayers unfairly in order to increase their compensation from the local governments. These auditors have contracts that give them a percentage of the amount of money collected instead of being paid a flat fee or billing on an hourly basis to do the audits.

Some local governments have defied the law and continue to use contingency fee contracts. They have hidden behind the fig leaf of a flawed Attorney General’s opinion from years ago that found the contingency contracts not in conflict with the law. An Attorney General’s opinion is just that—one lawyer’s opinion, not something that changes a statute.

Senator Jack Donahue requested that Attorney General Caldwell’s office revisit the opinion written by one of his predecessors. Caldwell’s office did that and issued two new opinions that clearly cited legal reasons why the previous opinion was flawed. Then politics entered the equation. The contract auditors and the local collectors they work for leaned heavily on Caldwell to withdraw his new opinions. Their arguments centered upon their desire not to pay auditors out of their own funds rather than on any sound legal doctrine proving that the current law somehow allows contingency fee contracts. Attorney General Caldwell succumbed to the “pressure” put on him by a few sales tax collectors and reinstated the opinion written years ago. In doing so, he confirmed to the national business community that anti-business political chicanery is alive and well in Louisiana.

In the Bayou State, it often seems like for every step we take forward in improving our business climate, we tend to take two steps backward. Attorney General Caldwell’s recent sales tax opinion is a prime example of that syndrome. Some call it the “Louisiana Way.” It is the path to fewer jobs and less outside investment, things that are sorely needed in these trying times.

(Dan Juneau is president of the Louisiana Association of Business and Industry.)