Appeal Filed in Halstead Bead Remote-Seller Sales Tax Case

Halstead Bead, represented by a team from the National Taxpayers Union Foundation’s Taxpayer Defense Center, the Pelican Institute, and the Goldwater Institute, filed an appeal this week with the U.S. Court of Appeals for the Fifth Circuit in its ongoing lawsuit challenging the enormous tax compliance burdens Louisiana places on interstate small sellers. Earlier this year, a federal judge in the Eastern District of Louisiana dismissed Halstead’s lawsuit, interpreting the Tax Injunction Act to mean it should be filed in state court, not federal court.

Halstead and its legal team argue that dismissal was unwarranted and that the case should be considered on the merits. The brief explains that the U.S. Supreme Court in South Dakota v. Wayfair found that states could impose remote sales tax collection obligations as long as those obligations were not overly complex or burdensome. Louisiana’s current sales tax, however, creates an onerous set of barriers to selling in-state for any out-of-state business.

The District Court’s reasoning in its dismissal would prevent businesses harmed by an unconstitutional tax structure from being heard in court. Halstead Bead would like to sell to Louisianans and remit sales taxes, but the state’s “bewildering labyrinth of regulatory requirements” makes it impossible to do so. Halstead is urging the Fifth Circuit to reverse the lower court’s ruling and allow Halstead to get their day in court to consider the merits of the case.

“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 impenetrable web of local variations,” said Joe Bishop-Henchman, NTUF Executive Vice President and lead attorney on the case. “The state says we can pay and file for a refund, but there is no refund to ask for when the problem is how to pay, not how much. Halstead wants to remit all applicable taxes. We should be able to bring our evidence to court, and so the District Court should be reversed.”

Halstead Bead is a small Arizona-based family-run craft and jewelry wholesaler owned by Hilary and Brad Scott that makes online sales across the country. Louisiana’s burdens are so extreme that Halstead has had to cease sales to the state. Louisiana forces remote sellers to comply with the local sales tax laws of 63 different parishes with no alternative or state-centralized method of filing. Halstead’s brief cites numerous national tax experts who observe that Louisiana’s regulatory burden is notoriously convoluted.

“Brad and Hilary cannot know what tax rate to apply in Louisiana,” said Tyler Martinez, NTUF senior attorney. “Some parishes vary their rates based on things like ‘Road Zone 2, North of Intercoastal Canal’ or ‘Fire District Number 1.’ There are no state-provided maps or online Geographic Information Systems to help. The definitions change parish-by-parish. If Brad and Hilary have a question, there’s no one to turn to for a quick answer. And if they get it wrong, they are personally liable for not doing it correctly.”

The case is Halstead Bead v. Richard. Halstead Bead is represented by Joe Bishop-Henchman and Tyler Martinez from the National Taxpayers Union Foundation, Sarah Harbison and James Baehr from the Pelican Institute, and Timothy Sandefur from the Goldwater Institute. For more information or to talk with the legal team representing Halstead, contact NTUF Vice President of Communications Kevin Glass at 703-699-8670 or at kglass@ntu.org.