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Fifth Circuit Hears Goldwater’s Challenge to Louisiana’s Irrational Tax Laws

May 2, 2023

The Fifth Circuit Court of Appeals will hear oral arguments today in a lawsuit brought by the National Taxpayers Union, the Pelican Institute, and the Goldwater Institute against Louisiana’s absurd sales tax laws. The laws in question require businesses to calculate sales taxes for each given jurisdiction or parish—a requirement so confusing and expensive to comply with that businesses like Arizona-based Halstead Bead Company avoid selling their products in that state. Such a barrier against interstate sales violates the Constitution’s “dormant commerce clause.”

The appeal—which will be argued by National Taxpayers Union Foundation’s Tyler Martinez—focuses not only on this unconstitutional burden on interstate commerce, but also on a preliminary question: can Halstead Bead even file the lawsuit in the first place? Under the federal Anti-Tax Injunction Act, federal judges aren’t allowed to halt the operation of tax-collection laws if the plaintiff could have sued in state court. But as we argue in our briefs, there’s no way Halstead Bead can sue in state court. Louisiana courts only allow taxpayers to challenge the constitutionality of tax laws if they first pay the tax and then seek a refund. But Halstead isn’t challenging their obligation to pay. They’re suing over the expense and burden of having to calculate and record every sale, based on the state’s bizarre rules letting every local community set different tax rates.


Only a few years ago, in a case called Wayfair, the U.S. Supreme Court said states could tax internet-based sales even if the seller is located in another state, but that there had to be a “safe harbor,” meaning a basic threshold of sales that weren’t taxed. That way a one-time eBay user can’t be forced to comply with the tax for selling a single item to someone in another state. Obviously, without such a safe harbor, states could disrupt interstate sales at will, which would violate the rule that only Congress can set interstate sales regulations. But Louisiana doesn’t have such a “safe harbor,” meaning that any seller anywhere faces a heavy regulatory burden if it sells things in Louisiana.

In recent years, some conservative justices have even gone so far as to argue that the entire idea of the “dormant commerce clause”—which prohibits states from using their legislation to disrupt the interstate market—should be abandoned. The rule, they say, unduly interferes with states’ ability to set their own policies. But that’s wrong: one of the primary goals of the Constitution was to bar states from causing interstate trade disputes. It’s necessary to limit state power to accomplish that—and to protect economic freedom.

You can learn more about the Halstead Bead case here.

Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute.



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