On November 15, 2021, Arizona-based online seller Halstead Bead, Inc. (“Halstead”) filed suit in United States District Court, alleging that Louisiana’s local sales and use tax registration and remitting requirements unconstitutionally burden interstate commerce and violate the Due Process Clause of the Fourteenth Amendment.1 In the complaint, Halstead provided a detailed account of how the parish-by-parish sales and use tax registration and remittance requirements result in a compliance nightmare and injury to Halstead’s business. Halstead requested that the court declare Louisiana’s local sales and use tax registration and remittance requirements unconstitutional, permanently enjoin the enforcement of such requirements on Halstead and other out-of-state sellers, and award attorneys’ fees and nominal damages of $1.
Uncoincidentally, the lawsuit was filed on the first business day following a statewide election in which 52% of Louisiana voters rejected a constitutional amendment that would have established a new commission to oversee the collection and administration of all Louisiana state and local sales and use taxes. Less than 14% of registered voters in the state cast ballots on the proposed amendment.
As provided by Act 131 (2021 Regular Session), Amendment No. 1 on the November 13th ballot would have created the State and Local Streamlined Sales and Use Tax Commission (“Commission”) and authorized the Louisiana Legislature to enact legislation directing the Commission to provide for the electronic filing and collection of all sales and use taxes levied within the state.
The Commission was to be comprised of eight appointed members: two by the state executive branch, two by the state legislative branch, and four by organizations representing local government. Subject to the passage of enabling legislation, the Commission would have also been authorized to issue policy advice and to develop rules, regulations, and guidance to streamline and centralize the audit process for taxpayers. Further, the Commission was intended to absorb the current powers, functions, and responsibilities of both the Louisiana Sales and Use Tax Commission for Remote Sellers and the Louisiana Uniform Local Sales Tax Board.
Centralized sales tax administration has been discussed in Louisiana for many years, driven by the complaints of businesses making sales in the state that are subject to some of the most complicated and cumbersome sales and use tax laws and compliance requirements in the nation. While Act 131 represents the most significant progress made on centralization to date, rejection at the ballot was a major setback for the business community, prompting the need for at least one retailer so far (Halstead) to seek relief in federal court.
Three other constitutional amendments were also on the ballot. Only one passed—Amendment No. 2, which reduces the maximum individual income tax rate from 6% to 4.75% and eliminates the requirement for a federal income tax paid deduction for purposes of both individual and corporate income taxes. Amendment No. 2, provided by Act 134, was part of a package of income and franchise tax-related bills passed during the 2021 Regular Session, all of which were linked together and contingent upon Amendment No. 2’s success at the ballot. The approval triggers the implementation of Act 395, which provides for reduced individual income tax rates; Act 396, which decreases the number of tax brackets and reduces the rates for corporate income tax; and Act 389, which eliminates corporate franchise tax on the first $300,000 of taxable capital and reduces the rate on taxable capital in excess of $300,000. The reduced income tax rates provided by Act 395 and Act 396 apply for tax years beginning on or after January 1, 2022, while the reduced franchise tax rates on taxable capital in excess of $300,000 apply for tax periods beginning on or after January 1, 2023. The combined impact of this legislative package is intended to be revenue neutral.
Amendment No. 3, provided by Act 132, would have allowed certain levee districts to levy, without further voter approval going forward, an annual property tax of up to five mills for purposes of constructing and maintaining levees and flood protection. Amendment No. 4, provided by Act 157, would have authorized a larger portion of the state’s dedicated funds to be used for offsetting a projected budget deficit. Both Amendment No. 3 and Amendment No. 4 failed, garnering just 42% and 28% voter approval respectively.
1 Halstead Bead, Inc. v. Lewis et al., 2:2021-cv-02106.
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