BSW Tax Blog

Federal and Louisiana Taxes

Tag Archives: Louisiana Parish Tax Refund

Filing A Sales Tax Refund Does Not Interrupt Prescription For Unpaid Taxes

The right to collect unpaid taxes prescribes on December 31, three years from the year the tax was due. La. Const. art. VII, sec. 16. Likewise a taxpayer’s right to claim a refund for taxes paid expires on December 31 three years from the year the taxes were remitted. R.S. 47:337.79. For example, both the right to collect, or obtain a refund of, 2009 sales taxes would prescribe December 31, 2012.

 

The filing of a refund claim before the December 31 prescriptive date, interrupts the running of prescription as to the refund. The Louisiana Third Circuit held the filing of the claim did not, however, interrupt or suspend prescription for the purposes of collecting unpaid taxes. Cajun Industries, LLC v. Vermilion Parish School Board, Court of Appeal of Louisiana, Third Circuit, No. 14-22, May 14, 2014.

 

In Cajun, the taxpayer filed a refund claim for sales taxes in December 2010 for the tax periods 2007, 2009 and 2010. It filed second refund claim in 2011 for the tax periods 2010 – 2011. The collector denied most of the refund claim and the taxpayer appealed the denial in district court in May 2013.

 

In response to the taxpayer’s suit, the collector asserted that it had the right to offset any unpaid taxes against the refund and asked that it be allowed to audit the taxpayer to see if, in fact, there were any unpaid taxes for the years 2007 – 2011. The Third Circuit affirmed the trial court’s ruling that the taxpayer’s refund claim did not interrupt the running of prescription as to the collector’s right to collect taxes. The filing of a suit did, however, interrupt the running of such prescription pursuant to R.S.47:337.67. Accordingly at the time the suit was filed May 2013, any right to collect unpaid taxes for the years 2007, 2008 and 2009 had already prescribed while the 2010 and 2011 tax periods were still open.

 

While this holding will affect taxpayers with pending refund claims, its effect may be short lived since there is a bill pending in the Legislature, which would amend the law such that the filing of a refund claim would suspend the running of prescription. See H.B. 863, pg. 11. H.B. 863 is scheduled for floor debate on May 21, 2014.

Louisiana State and Local Sales Tax Refund Procedures Compared

Nicole F. Gould, M.B.A., J.D.
State and Local Tax Controversy

Of Counsel—Baton Rouge
Phone:
225.381.3165
nicole.gould@bswllp.com

Grounds for granting a refund of an overpayment due to:

 

State

Local

Taxpayer’s error in mathematical computation

X

X

Taxpayer’s construction of the law contrary to the collector’s at the time of payment

X

X

Taxpayer’s or Collector’s error, omission, or a mistake of fact of consequence to the determination of the tax liability

X

X

Collector’s change made in an assessment, notice, or billing

X

X

Subsequent determination taxpayer was entitled to pay tax at a reduced rate

X

X

Payment exceeded the amount shown on the return or voucher

X

X

La. R.S. 47:1621 and 337.77

Issuance and Reversal of the Refund:

 

State

Local

A refund ordered by judge must be issued in 45 days from the date the judgment becomes non-appealable.

X

Before the Collector issues a refund, he may determine if the taxpayer owes any other liability the Collector administers and credit that liability instead of issuing a refund.

X

X

Collector can use any collection means to recover a refund later-determined not an overpayment within 2 years from December 31 of the year the refund was paid.

X

X

Collector can use any collection means to recover a credit made later-determined not an overpayment within 2 years from December 31 of the year the refund was paid.

X

La. R.S. 47:1621, 1622, 337.77 and 337.78.

Interest on the refund of overpayment

 

State

Local

Interest is provided the taxpayer on an overpayment if it is credited against another liability.

*

X

Only 2% interest for first 60 days after the refund claim is made as penalty if the overpayment is due to taxpayer administrative error.

X

Interest begins to accrue at 2 % on an overpayment from the date of payment until the refund is requested.

X

Judicial interest accrues on an overpayment from the date of refund request, notice of payment under protest, or notice of intention to file suit to recover the overpayment until paid.

X**

Judicial interest accrues on an overpayment refund or credit beginning with the later of:  date the return was due, the date the first return for that period was filed, or the date the tax was paid until paid.

X

No interest is paid if taxpayer deliberately overpaid tax to gain interest.

X

X

No interest on refund or credit to pre-petition tax periods for taxpayers in bankruptcy.

X

X

La. R.S. 47:1624 and 337.80.

*Presumably, the state does not provide interest on an overpayment credited to the taxpayer’s account because there will be an offset of interest having accrued on the liability being credited.  La. R.S. 47:1624

**The local rate of interest on refunds initially appears to be less, but should be nonetheless judicial interest pursuant to La. R.S. 13:4202.

Deadline to Make Refund Claim

 

State

Local

Later of:i)      December 31st,  3 years from date the tax was due, orii)1 year from date the tax was paid.

X

X

Claim for refund must be filed with the Secretary before the deadline

X

Claim for refund must be received by the Collector before the deadline

X

La. R.S. 1623 and 337.79.

After the Refund is Denied or Ignored.

 

State

Local

If the Collector fails to act for 1 year or denies the refund claim, the taxpayer may request redetermination hearing within 30 days with the Collector.

X

The Secretary’s failure to respond to the refund claim is deemed a denial after 1 year.

X

Days from the Secretary’s/Collector’s date of certified mailing, denying the refund, the taxpayer has to appeal.

60

30

Forum in which the taxpayer appeals the denial of refund

BTA

District Court or Mandatory Arbitration

Once appeal is lodged, the Collector may assert a demand for any tax, interest or penalty due from refund tax period.*

X

X

La. R.S. 1625 and 337.81.

*The constitutional prescription of taxes should remain except for that amount needed to offset a refund claim.