Halstead Loses Appeal on Remote-Selling Tax Burden

The Wayfair ruling is still making waves. 

While the ripple effects of the Supreme Court’s 2018 game-changing decision on nexus continue to challenge indirect tax teams, some state legislatures are notching incremental progress in creating smoother sailing for sales tax compliance activities. 

One ripple effect involves a federal court decision concerning a case alleging that Louisiana’s unique sales tax system poses excessive compliance burdens on remote sellers under Wayfair. (Louisiana is a home rule state in which each of the state’s 60-plus parishes sets their own sales tax rates.) The legal dispute pits Halstead Bead, an Arizona-based jewelry-maker, against Louisiana and its Department of Revenue. Halstead maintains that “Louisiana’s parish-by-parish sales-and-use-tax system is so costly to navigate that it runs afoul of the Dormant Commerce Clause doctrine and Due Process.” Several current state tax challenges involve the Commerce Clause, as my colleague, Vertex Chief Economist and Senior Tax Policy Director George L. Salis, has pointed out in his legislative updates. 

Halstead sought declaratory and injunctive relief against the enforcement of Louisiana’s tax system, but a district court dismissed the injunctive relief due to a lack of jurisdiction under the Tax Injunction Act. Halstead then appealed that ruling to the U.S. Court of Appeals for the Fifth Circuit. Last month, the appeals court affirmed the district court’s earlier ruling – which holds that the Tax Injunction Act prevents federal courts from having jurisdiction over this type of state tax matter. Here’s a passage from the Court of Appeals’ opinion: “The TIA is clear: ‘The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.’” The Court of Appeals reemphasizes that point by asserting, “State taxation … includes local taxation. The TIA bars federal jurisdiction over Halstead’s lawsuit.” 

This seems to signal the end of the Halstead litigation, which means that remote sellers who surpass Louisiana’s annual instate sales threshold of $100,000 revenue will continue to bear the burden of the state’s complex sales tax compliance requirements. By the way, the Pelican State’s town Sterlington in Ouachita Parish with the Sterlington Economic Development District No. 1 has the highest combined sales tax rate (12.95%) of any taxing district in the U.S., according to Vertex’s 2023 annual Mid-Year Sales Tax Rates and Rules Report.