We're Suing to End Louisiana’s Red Tape Nightmare for Small Businesses

November 15, 2021

Louisiana’s approach to sales taxes has created a red tape nightmare for businesses. With retailers forced to deal with a wide variety of local rules and mounds of tax paperwork just to be able to sell their products in the state, the hurdles are just too high for many companies to make it work.

That’s why today, the National Taxpayers Union Foundation (NTUF), the Pelican Institute, and the Goldwater Institute have teamed up with one small Arizona-based business to challenge Louisiana’s onerous sales tax structure, arguing that the state places an unconstitutional burden on businesses that wish to sell to Louisianans.

Halstead Bead, a family-owned jewelry and craft supply wholesaler based in Prescott, Arizona, has filed a lawsuit against Louisiana Secretary of Revenue Kimberly Lewis challenging the state’s complex sales tax system. Halstead Bead sells to customers across the country but avoids sales to Louisianans because of the immense burden the state’s antiquated system places on small businesses, especially online retailers. 

“Forcing a small business in Arizona to collect taxes for every parish in Louisiana is not reasonable,” said Jacob Huebert, the Goldwater Institute’s lead attorney in the case. “It’s also unconstitutional. State and local governments can charge sales and use taxes, but they can’t put up unreasonable barriers to selling across state lines—which is what Louisiana has done with its local sales tax scheme.”

“If Louisiana expects out-of-state businesses to collect its local sales taxes, it has to make it simple, with one set of rules and one tax collector for the entire state,” Huebert continued. “Louisiana’s neighbors and almost all other states have done that, and the Constitution demands that Louisiana do so as well.”

Halstead Bead estimates that the cost to comply with the current system is $2.28 for every $1 they collect in taxes from sales. Over the past three years, they have spent 7,700 hours and $297,000 on sales tax compliance. Across the country, small businesses that do the bulk of their sales online face rules and regulations from more than 11,000 local tax jurisdictions with which they must comply; failing to get sales tax remittance correct down to the penny carries the risk of criminal charges. Louisiana could ease the burden on small businesses by streamlining collection to one central collection point.

“Louisiana makes it extremely hard to do business in the state because of the countless hours and dollars it takes to ensure accurate compliance with all of the taxing jurisdictions,” says Brad Scott, Halstead’s Director of Finance. “We don’t have the tools; we don’t have the resources, but we still have outrageous compliance demands. It’s overwhelming, and both businesses and consumers alike suffer because of the fragmented nature of the Louisiana sales tax collection system.”

The lawsuit is Halstead Bead v. Lewis, and is filed in the Eastern District Court of Louisiana. For more information on the case or to speak with the clients bringing the suit or a member of the legal team, please contact Mike Brownfield by email at mbrownfield@goldwaterinstitute.org or phone at 602-633-8998.