Louisiana’s approach to sales taxes has created a red tape nightmare for businesses. With retailers forced to deal with a wide variety of local rules and mounds of tax paperwork just to be able to sell their products in the state, the hurdles are just too high for many companies to make it work.
That’s why today, the National Taxpayers Union Foundation (NTUF), the Pelican Institute, and the Goldwater Institute have teamed up with one small Arizona-based business to challenge Louisiana’s onerous sales tax structure, arguing that the state places an unconstitutional burden on businesses that wish to sell to Louisianans.
Halstead Bead, a family-owned jewelry and craft supply wholesaler based in Prescott, Arizona, has filed a lawsuit against Louisiana Secretary of Revenue Kimberly Lewis challenging the state’s complex sales tax system. Halstead Bead sells to customers across the country but avoids sales to Louisianans because of the immense burden the state’s antiquated system places on small businesses, especially online retailers.
Watch Halstead’s story here.
“The Supreme Court sent clear signals in its 2018 Wayfair decision that overly complex sales tax rules would be a violation of the Constitution’s due process and commerce clauses,” said Joe Bishop-Henchman, NTUF’s lead attorney in the case and the head of the Taxpayer Defense Center. “Economic nexus laws already represent an undue burden on small businesses, and Louisiana’s is the worst in the nation for small businesses to navigate. The Court said that sales tax complexity for small businesses cannot be a free-for-all for revenue departments, and the time is now to declare that in Louisiana, a boundary has been crossed.”
Halstead Bead estimates that the cost to comply with the current system is $2.28 for every $1 they collect in taxes from sales. Over the past three years, they have spent 7,700 hours and $297,000 on sales tax compliance. Across the country, small businesses that do the bulk of their sales online face rules and regulations from more than 11,000 local tax jurisdictions with which they must comply; failing to get sales tax remittance correct down to the penny carries the risk of criminal charges. Louisiana could ease the burden on small businesses by streamlining collection to one central collection point.
"Louisiana makes it extremely hard to do business in the state because of the countless hours and dollars it takes to ensure accurate compliance with all of the taxing jurisdictions," says Brad Scott, Halstead's Director of Finance. "We don't have the tools; we don't have the resources, but we still have outrageous compliance demands. It's overwhelming, and both businesses and consumers alike suffer because of the fragmented nature of the Louisiana sales tax collection system."
The Scotts just want Louisiana to remove these obstacles and treat small business sellers respectfully. They have been very patient but after the 2021 election results rejected a commission to review sales tax policy, it's clear that judicial relief is their only hope to fixing Louisiana's arbitrary and fragmented tax collection regime.
The lawsuit is Halstead Bead v. Lewis, and is filed in the Eastern District Court of Louisiana. For more information on the case or to speak with the clients bringing the suit or a member of the legal team, please contact NTUF Vice President of Communications Kevin Glass at 703-299-8670 or at kglass@ntu.org.
NTUF is a non-partisan research and educational organization dedicated to showing Americans how taxes, government spending, and regulations affect them. More information is available at ntu.org/foundation/.