Several local tax officials in Louisiana have asked a federal judge to dismiss a potentially far-reaching lawsuit that challenges the state’s parish-based sales and use tax system as unconstitutionally burdensome to out-of-state businesses.
The filing by tax officials from Lafourche, Tangipahoa and Washington parishes was filed late last month in the Eastern District of Louisiana. It asks Judge Jane Triche Milazzo to dismiss a case brought by an Arizona retailer, Halstead Bead Inc., with the support of public policy organizations such as the New Orleans-based Pelican Institute and the Goldwater Institute.
Halstead’s complaint says that taxation powers granted to parish tax collectors place an unconstitutional burden on interstate commerce and violate the Constitution’s due process clause. The lawsuit asks the court to bar the state and parishes from enforcing sales and use tax provisions against sellers outside of Louisiana.
But last month’s motion by parish officials calls the retailer’s arguments false and misleading and the characterization of out-of-state retailers’ financial burdens caused by the system exaggerated.
“If granted, the … relief requested by plaintiff would constitute one of the most pervasive and disruptive intrusions by a federal court into a state tax system,” the parish officials’ motion states.
Because Halstead engages in fewer than 200 sales or under $100,000 in taxable sales annually in Louisiana, it is not required to remit state and local taxes for those sales made in the state, according to the motion.
“Without an actual injury suffered by plaintiff – either present or anticipatory – the petition is reduced to nothing more than a general grievance of Louisiana’s state and local sales and use tax system,” the motion says.
But the Pelican Institute argues that the Arizona retailer has justification for challenging the Louisiana tax system.
“The state has thrown out contradicting arguments in an effort to prevent the case from getting its day in court,” Sarah Harbison, Pelican’s general counsel, said in an email to the Louisiana Record. “The suggestion that the Halsteads shouldn't be able to challenge Louisiana's onerous sales tax collection regime because they have ‘a pattern’ of criticizing bad sales tax systems is alarming and preposterous.”
The plaintiffs will challenge all the arguments parish officials have made in their motion to dismiss the case, according to Harbison.
“We would rather get to the issue at hand, but if the state wants to spend time on jurisdictional matters first, we will contest each claim they make,” she said.