Louisiana’s Sales Tax Laws Are a Nightmare for Small Business Owners
To say that the internet has changed the way Americans shop and do business is an understatement. Products once available only through catalogues or brick and mortar stores can now be purchased with a few mouse clicks and show up at your door within days. Consumers benefit from the ability to choose from among a variety of products at different price points to suit their needs. Hilary Halstead Scott and her husband Brad are business owners who brought their products to the nationwide marketplace in the 1990s.
Hilary and Brad run Halstead Bead, Inc., a family-owned business specializing in jewelry-making supplies. The Halsteads live and work in Prescott, AZ but their jewelry supplies are available to crafters throughout the country through their eCommerce site—unless you live in Louisiana.
Halstead Bead limits its sales into Louisiana because of the state’s antiquated and overburdensome sales tax laws. The Louisiana state constitution allows more than fifty sales tax collection authorities, with collectors setting their own tax rates and categories. For example, in Lafourche Parish, there are several towns but also several consolidated road districts, each with its own sales and use tax rates. Tangipahoa Parish, with just over 134,000 residents, has nine different jurisdictions. And in Washington Parish, Halstead Bead must figure out which addresses are within the Fourth Ward but outside Bogalusa Limits. If the Halsteads get the rates wrong, they could be held personally liable for misapplied sales taxes. The compliance nightmare created by this scheme means that it is easier for the Halsteads to miss out on the opportunity to sell to Louisiana residents than to try to comply with our sales tax laws.
Louisiana’s sales tax regime violates the commerce Clause to the U.S. Constitution, and the Due Process Clause of the Fourteenth Amendment. That’s why the Pelican Institute, along with the National Taxpayers Union Foundation and the Goldwater Institute have joined to ask that a federal court declare Louisiana’s parish-by-parish sales and use tax registration an unconstitutional burden to interstate commerce. Louisiana’s patchwork sales tax collection scheme is contrary to the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair. In that case, the Court ruled that states could require sellers to collect and remit sales tax so long as the state’s rules did not create an undue burden on interstate commerce. Louisiana’s tax collection laws are patently unfair to out-of-state sellers like Halstead Bead.