Normand v. Wal-Mart.com USA, LLC

• Decision Date: 29 January 2020
• Docket Number: 2019-C-00263
• Citation: Normand v. Wal-Mart.com USA, LLC, 340 So.3d 615 (La. 2020)
• Parties: Newell NORMAND, Sheriff & Ex-Officio Tax Collector for the Parish of Jefferson v. WAL-MART.COM USA, LLC
• Court: Louisiana Supreme Court

340 So.3d 615

Newell NORMAND, Sheriff & Ex-Officio Tax Collector for the Parish of Jefferson

v.WAL-MART.COM USA, LLC

No. 2019-C-00263

Supreme Court of Louisiana.

January 29, 2020

Jeffrey A. Friedman, Pro Hac Vice, Charles Caffey Kearns, and Martin E. Landrieu, for Applicant-Defendant.

Kenneth Charles Fonte, for Respondent-Plaintiff.

WEIMER, Justice.^*

The writ application in this case was granted to determine whether the lower courts correctly ruled that an online marketplace is obligated as a "dealer" under La. R.S. 47:301(4)(l) and/or by contract to collect sales tax on the property sold by third party retailers through the marketplace's website. Because an online marketplace is not a "dealer" under La. R.S. 47:301(4)(l) for sales made by third party retailers through its website and because the online marketplace did not contractually assume the statutory obligation of the actual dealers, that is, the third party retailers, the judgment of the trial court and the decision of the court of appeal are reversed and vacated.¹

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Wal-Mart.com USA, LLC ("Wal-Mart.com") operates an online marketplace at which website visitors can buy products from Wal-Mart.com or third party retailers. From 2009 through 2015, Wal-Mart.com reported its online sales in Jefferson Parish of its products and remitted the required sales tax to the Louisiana Department of Revenue and ex-officio tax collector for Jefferson Parish, then Sheriff Newell Normand (Tax Collector). The reported sales amount did not include proceeds from online sales made by third party retailers through Wal-Mart.com's marketplace. Following an attempted audit for this period, Tax Collector filed a "Rule for Taxes" (a summary proceeding under La. R.S. 47:337.61 ) on February 16, 2017, alleging Wal-Mart.com "engaged in the business of selling, and sold tangible personal property at retail as a dealer in the Parish of Jefferson,"² but had "failed to collect, and remit ... local sales taxes from its customers for transactions subject to Jefferson Parish sales taxation." In addition, Tax Collector alleged that an audit of Wal-Mart.com's sales transactions was attempted, but Wal-Mart.com "refused to provide [Tax Collector] with complete information and records" of Jefferson Parish sales transactions, particularly, those conducted on behalf of third party retailers. In connection with online marketplace sales by third party retailers, Tax Collector sought an estimated $1,896,882.15 in unpaid sales tax,³ interest, penalties, audit fees, and attorney fees. Wal-Mart.com was then ordered to show cause on May 2, 2017, why judgment should not be granted in favor of Tax Collector.

On April 6, 2017, Wal-Mart.com answered and opposed this rule, asserting exceptions of no right of action and no cause of action and urging it "was not the dealer in the retail sale transactions at issue." In its affirmative defenses, Wal-Mart.com stated that Tax Collector failed to "clearly articulate why [Wal-Mart.com] was required to collect local sales tax on the third-party retail sales transactions." Wal-Mart.com also alleged violations of the Due Process Clause, the Commerce Clause, the Internet Tax Freedom Act (see generally 47 U.S.C. § 151 et seq. ), and the Uniform Local Sales Tax Code. Attached to Wal-Mart.com's answer was a motion for "a scheduling conference to set necessary pretrial deadlines and to set this matter for hearing/trial." The trial court set the requested scheduling conference for May 2, 2017. Thereafter, the matter was set for trial on August 1, 2017.

Tax Collector's pretrial memorandum was confined to its objection to Wal-Mart.com's use of summary exhibits "concerning individual purchase transactions" at the trial, which it alleged to be in violation of La. C.E. art. 1006. In its pretrial memorandum, Wal-Mart.com stated that Tax Collector "has refused to provide a factual or legal basis for its allegation of unpaid sales tax" related to "sales between sellers of goods [that is, third party retailers] and customers seeking to purchase them" facilitated by Wal-Mart.com's online marketplace. Wal-Mart.com urged that is was the third party retailers–as the actual sellers–that are the dealers for purposes of third-party sales.

The trial of this matter was conducted on August 1, 2017, and October 26 and 27, 2017. Upon completion of the trial, the trial court held open the record for 30 days to allow Wal-Mart.com to supplement the record with documentation requested by Tax Collector.

On November 22, 2017, Wal-Mart.com supplemented the record with additional evidence related to sales by third party retailers on the online marketplace. With the consent of Wal-Mart.com, Tax Collector's objections to Wal-Mart.com's supplementation was filed on January 3, 2018, more than 30 days after the November 22, 2017 supplementation, and the deadline for filing post-trial memoranda was set for February 5, 2018.

In its post-trial brief filed on February 5, 2018, Wal-Mart.com stated that it provides a service to third party retailers who are charged a fee. "This service has three primary components: connecting customers with Marketplace Retailers; providing one checkout system so customers can purchase from multiple Marketplace Retailers without entering their payment and shipping information separately for each item; and processing payments and protecting against fraud." Relying on statutory and regulatory provisions, Wal-Mart.com argued that "[s]ales tax is thus collected by the dealer who physically transfers title or possession of the item being sold as the seller in the transaction," i.e. , here the third party retailers. Because Wal-Mart.com never had physical possession of the property sold by third party retailers, Wal-Mart.com urges that its is not a dealer in the context of third-party sales. According to Wal-Mart.com, Tax Collector's assertion that Wal-Mart.com is a dealer in marketplace transactions involving third party retailers is "nothing more than [an] unsupported legal conclusion."

In its February 5, 2018 post-trial memorandum, Tax Collector asserted for the first time that Wal-Mart.com is a dealer relative to third-party sales under La. R.S. 47:301(4)(l), which arguably "does not limit, either expressly or implicitly, a ‘dealer’ to a person who transfers the title and/or possession of the product to the end consumer for a stated price." According to Tax Collector, had the legislature intended the term "dealer" to be so restricted, there would have been no need to enact La. R.S. 47:301(4)(l).

After the trial and receipt of post-trial memoranda, the trial court in written reasons found that "the obligation to collect and remit local sales and use taxes is imposed on a ‘dealer’, and that the statutory definition of ‘dealer’ is not limited to a retail seller" that transfers title or possession of the merchandise to the end customer. According to the trial court, Wal-Mart.com "overlook[ed] the definition of ‘dealer’ set forth [in] La. R.S. 47:301(4)(l)," which the court found "clearly applies to [Wal-Mart.com's] Marketplace Program," and it "does not limit, either expressly or implicitly, a ‘dealer’ to a person ‘who transfers the title and/or possession of the product to the end consumer for a stated price.’ " The trial court observed that Wal-Mart.com "brings retailers and customers together, facilitating retailers ‘gaining new customers, providing various services such as facilitates transaction, facilitating payment processing, and taking on risks of fraudulent activity and customers, as well as advising and making sure the retailer's products are found by potential new customers.’ " For this reason, Wal-Mart.com was found to be engaged in "regular or systematic solicitation of a consumer market" in Jefferson Parish so as to make Wal-Mart.com a dealer under La. R.S. 47:301(4)(l) for sales on its online marketplace by third party retailers. Accordingly, Wal-Mart.com was held to be responsible for the sales tax obligation arising from the sales by third party retailers through its online marketplace.

"Of particular significance" to the trial court were the contractual requirements that purchasers of third-party sales use Wal-Mart.com's checkout system and that Wal-Mart.com "collect all proceeds from such transaction."⁴ In light of these contractual requirements, the trial court found that third party retailers were precluded from collecting sales tax on third-party sales directly from purchasers. By judgment dated March 2, 2018, Wal-Mart.com was ordered to pay $137,944.25 in unpaid sales tax, interest, and attorney fees to Tax Collector.

On appeal, the trial court's judgment was affirmed. Normand v. Wal-Mart.com USA, LLC , 18-211, p. 7 (La.App. 5 Cir. 12/27/18), 263 So.3d 974, 980. Wal-Mart.com's subsequently-filed application for rehearing was denied on January 16, 2019.⁵

Afterwards, Wal-Mart.com's writ application filed with this court on February 14, 2019, was granted for consideration of whether Wal-Mart.com is obligated to collect and remit sales tax on sales by third party retailers that are facilitated through Wal-Mart.com's online marketplace. Normand v. Wal-Mart.com USA, LLC , 19-0263 (La. 5/6/19), 319 So.3d 847. Resolution of this issue depends on whether Wal-Mart.com is a dealer under La. R.S. 47:301(4)(l) relative to sales by third party retailers and, if not, whether Wal-Mart.com contractually assumed the obligation of third party retailers to collect sales tax from purchasers in connection with third-party sales made through Wal-Mart.com's online marketplace. In response to Wal-Mart.com's writ filing, Tax Collector filed a motion to dismiss, questioning this court's jurisdiction to consider the merits of this case.⁶

DISCUSSION

Motion to Dismiss

Pertinent to Tax Collector's motion to dismiss is La. R.S. 47:337.61, which authorizes the collection of unpaid taxes by use of a summary proceeding and provides:

In addition to any other

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