Halstead Loses Appeal on Remote-Selling Tax Burden

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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.

Blog Author

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Vice President of Tax Content and Chief Tax Officer

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Michael Bernard is the Chief Tax Officer of Transaction Tax. In his role, he provides insight and thought leadership around tax department operations, U.S. indirect tax, tax risk management, and tax policy, as well as emerging tax trends. He is an executive-level tax attorney with a diverse portfolio of experience in corporate tax, administration, and finance, including a substantive knowledge of U.S. and international tax laws.

Prior to joining Vertex, Michael was in various tax leadership roles at Microsoft Corporation for 28 years, the most recent being Senior Director – Tax Counsel. Michael led teams in the following functional areas: direct and indirect tax controversy, sales and use, business license, property, tax IT, SOX, and telecommunications. He also co-led a corporate taxpayer advocacy group with the Washington Department of Revenue and was a Director on the Board of the Washington Research Council. Michael has also testified before administrative and lawmakers at both the federal and state level.

Michael earned both a J.D. and a Bachelor of Science in Business Administration from Creighton University. He is a part-time lecturer of Law in the LLM program at the University of Washington School of Law. Michael also served on the board of directors, executive committee, and chaired committees for The Tax Executives Institute (TEI) for nearly 25 years.

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