As is now widely known, the Louisiana Legislature has adopted HCR No. 8, which purports to suspend the sales tax exemptions business utilities effective July 1, 2015. On July 1, 2015, the Louisiana Chemical Association (“LCA”) filed a declaratory judgment proceeding attacking the validity of HCR No. 8. The Legislature and the Louisiana Department of Revenue (the “LDR”) have contested the right of LCA to bring the suit on behalf of its members. The LCA suit was amended to add affected taxpayers as parties to the suit.
Kean Miller LLP advises affected taxpayers to make payment of the tax under protest and file suit within thirty days of the protest letter to the LDR in order to obtain optimum protection of your interests. While Louisiana law does allow for protest suits to be filed with the Louisiana Board of Tax Appeals (“BTA”), it is not clear that the BTA has jurisdiction over cases involving constitutional issues. Accordingly, it is recommended that the suit be filed in the 19th Judicial District Court rather than the BTA.
Since the LCA lawsuit was filed, the LDR has issued a statement discouraging payments under protest. In Statement of Acquiescence No. 15-001 (August 13, 2015), the LDR states:
Pending the outcome of the Lawsuit, taxpayers may pay the sales taxes, as they become due and then file an administrative claim for refund under La. R.S. 47:1621 utilizing the Louisiana Department of Revenue Claim for Refund of Overpayment Form (R-20127). If a final, non-appealable judgment is issued by a court of competent jurisdiction declaring HCR No. 8 to be unconstitutional, then LDR will acquiesce that the sales tax payments made pursuant to HCR No. 8 are overpayments within the meaning of La. R.S. 47:1621 regardless of whether the taxpayer initiated its own lawsuit or paid under protest. All claims for refund must be filed in accordance with the prescriptive period imposed by La. R.S. 47:1623.
It is very likely that the LDR is acting in good faith and attempting to ease the administrative burden of protests for both taxpayers and the LDR. This type of statement by the LDR is not fully binding on the LDR, however. The statement issued by the LDR states that it “is not binding on the public, but is binding on the Department unless superseded by a later [Statement], declaratory ruling, rule, statute, or court case.”
That is, the LDR’s position could change, particularly if a court ruled that payment under protest was the proper procedure. Accordingly, it is strongly recommended that taxpayers pay disputed taxes under protest as previously recommended. Protested taxes must be segregated by the LDR so that they can be promptly refunded.
Taxpayers who wish to preserve the right to a refund of the business utilities sales tax should pay under protest. Failure to protest payments may preclude the eventual refund of sales taxes paid even if the court determines that the tax is invalid. Additionally, taxpayers who do not protest and who are able to get the taxes returned may not receive interest on the returned taxes and may need to get an appropriation from the Legislature before the taxes are returned.