Did a Louisiana resident merchant seaman owe Louisiana income tax and estimated payments even though federal law barred state withholding from the wages?

Plain-English summary

A Louisiana resident merchant seaman's wages remained subject to Louisiana income tax even though federal law prohibited state withholding from those wages.

The no-withholding rule was designed to prevent multiple states from withholding when seamen received pay in different ports. It did not prevent Louisiana from taxing its own residents.

Because no Louisiana tax was withheld, the seaman had to make estimated payments under the ruling when expected Louisiana liability after credits exceeded $1,000.

Withholding versus actual tax

46 U.S.C. § 11108 barred state and local withholding from covered seamen's wages. The Department distinguished that payroll rule from the underlying income-tax obligation.

La. R.S. 47:290 generally subjected a Louisiana resident's income to Louisiana tax unless an exemption applied. The ruling identified no exemption for merchant-seaman wages.

Other-state tax credit

If the seaman earned income in another state and paid that state an income tax, the ruling said a Louisiana credit could be available under La. R.S. 47:33, subject to restrictions and limitations.

Common questions

Q: Did the federal no-withholding rule make the wages tax-free?

A: No. It barred withholding, not Louisiana's resident income tax.

Q: Were estimated payments required?

A: Under the 2006 ruling, yes when expected Louisiana liability after credits exceeded $1,000.

Q: What if another state taxed the same income?

A: A credit could be available under La. R.S. 47:33, subject to its limits.

Q: Is the $1,000 threshold necessarily current?

A: No. It is the threshold quoted in this 2006 ruling.

Citations and references

• 46 U.S.C. § 11108 — state withholding from seamen's wages
• La. R.S. 47:33 — credit for tax paid to another state
• La. R.S. 47:116, 47:118, and 47:290
• Streckfus Steamers, Inc. v. Saint Louis, 472 S.W.2d 660 (Mo. Ct. App.), cert. denied, 409 U.S. 841 (1971)
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 06-004

Original ruling text

REVENUE RULING
NO. 06-004
MAY 10, 2006
PERSONAL INCOME TAX
LIABILITY OF RESIDENT MERCHANT SEAMAN FOR ESTIMATED PAYMENT

ISSUE
Whether a merchant seaman, who is a Louisiana resident, is required to make estimated payments for state income taxes to Louisiana despite the fact that no amounts for such taxes are withheld from his wages? DISCUSSION Under 46 U.S.C. § 11108, "[w]ages accruing to a master or seaman on a vessel in the foreign, coastwise, intercoastal, interstate, intrastate, or noncontiguous trade or an individual employed on a fishing vessel or any fish processing vessel may not be withheld under the tax laws of a State or any political subdivision of a State.” This provision is intended to prevent multiple withholding from wages of seamen who might be in ports of different states when they receive pay. Streckfus Steamers, Inc. v. Saint Louis, 472 S.W.2d 660 (Mo. App.), cert. denied, 409 U.S. 841 (1971). 46 U.S.C. § 11108 does not, however, prevent a state from lawfully imposing income taxes on its residents. Generally, Louisiana imposes an income tax on all income of a Louisiana resident. According to Revised Statute 47:290, a Louisiana resident’s income whether or not subject to withholding is subject to Louisiana income taxation, unless there is a provision exempting it. If there is no such provision, the income is subject to tax. Revised Statute 47:116 provides that “[e]very individual whose Louisiana income tax liability can reasonably be expected to exceed two hundred dollars for declarations of estimated tax for income tax years starting prior to January 1, 2001, and one thousand dollars for declarations of estimated tax for income tax years starting on and after January 1, 2001, after deducting all allowable credits shall be liable for filing of a declaration of estimated tax.” The estimated tax is the amount of the income tax that the individual estimates as the amount owed for the taxable year, minus the amount that the individual estimates as the sum of any credits allowable against tax. R.S. 47:116 C

If an individual underpays the estimated tax, an additional 12 percent per annum is added to the tax amount due for a taxable year. R.S. 47:118 CONCLUSION Since the merchant seaman is a resident of Louisiana, all of his wages are subject to Louisiana income tax, despite the fact that a merchant seaman’s wages are not subject to withholding. Because the wages are not subject to withholding, estimated tax payments must be paid in accordance with Revised Statute 47:116, if the Louisiana tax liability can reasonably be expected to exceed $ 1000. Note: If a merchant seaman earned income within another state jurisdiction and paid that jurisdiction an income tax on it, he may receive a credit for the tax against his Louisiana income tax, subject to certain restrictions and limitations. R.S. 47:33

Cynthia Bridges
Secretary

By:
Nina S. Hunter, Attorney
Policy Services Division
A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide guidance to the public and to Department of Revenue employees. It is a written statement issued to apply principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the department's position and is binding on the department until superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.