Supreme Court of Louisiana Upholds Seller’s Right to Act as a Purchaser’s Agent for Refunds of Sales Taxes Paid Under Protest

In J-W Power Co. v. Louisiana, the Supreme Court of Louisiana (“Court”) held that a seller may act as a purchaser’s agent in connection with a refund claim for taxes paid under protest.

Instead of filing an administrative claim for refund with the Department of Revenue (“Department”), J-W Power Company (“Power”), a Texas gas compression service provider, filed suit in district court for a refund of sales taxes it collected from its Louisiana customers on full-service agreements.

Louisiana law specifically provides a process by which a purchaser may pay taxes to a dealer under protest (i.e., a purchaser notifies the Department that the purchaser has paid sales taxes under protest to a dealer and that the purchaser intends to file suit to recover the taxes). Louisiana law is silent as to whether a dealer may pay taxes under protest and file suit on behalf of its customers.

As required by Louisiana law, Power notified the Department by letter that it was remitting sales taxes collected from its customers under protest and intended to file suit for the recovery of such taxes. Power subsequently filed suit in district court, arguing that its customers expressly directed and authorized Power to protest the imposition of sales tax on full-service agreements and file suit on their behalf.

The Department asserted that Power had no right of action because Power was not the taxpayer and that Louisiana law did not authorize Power to act as its customers’ agent for the purpose of protesting the imposition of sales tax and filing suit for refund of the tax.

The Court disagreed with the Department, noting that the applicable statutory provisions neither authorize nor preclude an action by a purchaser’s agent or representative. The Court turned to the tenets of agency law stating that a principal may confer authority on a representative to act on the principal’s behalf. The Court extended this principle to the statutory notice requirement for payment of taxes under protest and the filing of a refund petition. Although the issue was not argued by either party, the Court noted that testimonial evidence established the existence of an agency relationship.

The Court’s decision to apply agency law to a payment of sales taxes under protest provides sellers and service providers with an opportunity to seek refunds on behalf of customers, so long as the statutory requirements are met and an agency relationship is established.

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Stephen J. Allen
Principal
Ryan
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steve.allen@ryan.com