An online remote seller, Halstead Bead, Inc., filed an appeal with the US Court of Appeals for the Fifth Circuit to review a trial court’s ruling that its constitutional challenge to Louisiana’s sales tax system can’t be heard in federal court.
Halstead is a small, family owned business that claims Louisiana’s “arbitrary and fragmented” sales tax system places unconstitutional burdens on interstate commerce.
“I fear for the future of our small business and a lot of others. ”
Collateral Cost of Louisiana’s Decentralized System
Louisiana has one of the most expensive and burdensome sales tax systems in the country. Its highest combined state and local sales tax rate is 12.95% for the city of Sterlington in Ouachita Parish, one of its 64 parishes.
High tax rates, combined with the costs of compliance related to having economic nexus in Louisiana including sales and use tax registrations and monthly returns even if there are no sales in that month, created a situation for smaller online retailers wherein they actually lose money on sales made into Louisiana.
Generally, based on current economic nexus thresholds, an online company has nexus with a mere 200 transactions for the transaction or sales threshold states, commonly known as “or” states. Even larger companies with a sophisticated, internal tax department have issues navigating all of the complexities and nuances with the varying state laws and compliance requirements.
In the near-term, smaller online retailers currently struggling with economic nexus issues should know that they are not alone. Members of congress are aware of the situation and there are companies such are Halstead Bead that are continuing the battle to resolve the related arbitrary and fragmented issues.