The New Orleans-based Pelican Institute and other groups have appealed a federal district court ruling earlier this year that dismissed a challenge to Louisiana’s sales tax system as unconstitutional, overly burdensome for businesses and convoluted.
The appeal was filed Oct. 12 in the U.S. Court of Appeals for the Fifth Circuit on behalf of an Arizona-based craft and jewelry wholesaler, Halstead Bead, whose owners ceased their sales in Louisiana because the company couldn’t navigate the complex parish-by-parish tax structure that lacks any centralized filing method.
Pelican, the Goldwater Institute and the National Taxpayers Union Foundation’s (NTUF’s) Taxpayer Defense Center initially filed the lawsuit in the Eastern District of Louisiana, but a district judge rejected their arguments, concluding that the lawsuit should had been filed in state court due to the provisions of the federal Tax Injunction Act.
The Louisiana state director for the National Federation of Independent Business (NFIB), Dawn McVea, said the district court’s reading of the Tax Injunction Act leaves remote sellers no neutral forum to challenge state sales tax systems.
Louisiana business groups have been pursuing a legislative solution to the sales tax concerns for years, McVea said, but so far that effort has not yielded tangible results.
“The issue of who collects sales tax even made it to the voters as a constitutional amendment last year,” she told the Louisiana Record in an email. “Unfortunately, though, so much negativity had been put out over the years by the local governments that this change to centralized collection would hurt them, that the amendment fell just shy of the majority it needed.”
In turn, Louisiana businesses are again turning to the courts to fix a tax system they view as one of the biggest problems for entrepreneurs, according to McVea.
The lead attorney in the Fifth Circuit appeal emphasized that businesses are not trying to overturn specific state sales tax rates but the underlying filing system.
“Halstead is not challenging any ‘assessment, levy, or collection’ of Louisiana taxes but rather the steps before assessment, like duplicative submission of monthly returns, fragmented definitions and exemptions that vary by parish, and an impenetrable web of local variations,” the NTUF’s Joe Bishop-Henchman said in a prepared statement. “… We should be able to bring our evidence to court, and so the district court should be reversed.”