A federal appeals court has dismissed a lawsuit brought by a small Arizona firm that argued Louisiana’s system for paying taxes on remote sales is so complex that it illegally stymies interstate commerce.
In a July 7 opinion, the Fifth Circuit Court of Appeals affirmed a federal district court’s finding that the federal Tax Injunction Act barred the lower court from hearing the claims advanced by the Arizona company Halstead Bead Inc. Halstead argued that Louisiana’s decentralized parish-by-parish sales tax system flies in the face of constitutional commerce provisions and due process.
“Hamstead asserts that it lacks an adequate state forum because state tribunals will hear only claims for refunds, which Halstead cannot do because it has not paid any Louisiana sales or use taxes,” the appeals court said in its opinion. “But Halstead is simply wrong. As explained, Louisiana law permits challenges to Louisiana tax laws to be heard in the (state Board of Tax Appeals) and in state court. …”
The New Orleans-based Pelican Institute – along with the Goldwater Institute and the National Taxpayers Union Foundation’s Taxpayer Defense Center – represented Halstead Bead owners Hilary Halstead Scott.and Brad Scott in the lawsuit.
“Both the Fifth Circuit and the Eastern District decided that the state court is the appropriate place for the Scotts’ challenge,” Sarah Harbison, the Pelican Institute’s general counsel, told the Louisiana Record.
In addition, the federal courts did not rule on the merits of the case, Harbison said. And while the case was moving through the courts, the Louisiana Legislature approved two bills that have since been signed into law, HB 171 and HB 558. These measures have reformed the way businesses calculate their gross revenues and allowed them to remit sales tax revenues through a central entity, the Uniform State and Local Sales Tax Board, rather than using a complicated patchwork of parish filing systems, Harbison said.
The plaintiffs are not likely to move their case to state courts since state lawmakers have addressed most of their concerns about the tax system through the passage of the two reforms, she said..
“But we’ll continue to push for tax reform to make it easier to do business in Louisiana,” Harbison said.