A business in New Hampshire sends an item, purchased online, to a customer in Massachusetts. Should the New Hampshire business have to collect Massachusetts sales tax from that customer and pass it on to the Bay State? According to a U.S. Supreme Court ruling this summer, the answer to that question is yes. In June the nation's highest court ruled that if a retailer ships an item to a customer in another state, that receiving state can demand that the retailer collect sales tax on the sale.
This ruling is a blow to New Hampshire businesses, who are now subject to the sales tax laws in roughly 10,000 cities, counties, and states. Granite State businesses are facing software upgrades and new hires to manage sales tax collection.
Limit sales taxes with red tape?
In July, the New Hampshire House and Senate met in a special session to vote on a proposed solution: a bill that would require any government that wanted to collect sales tax in New Hampshire to jump through a series of legal hoops. Ideally, those regulations would have made it so difficult for other states to collect sales taxes from New Hampshire retailers that many of them would choose not to bother unless a business was making a large number of online sales inside their borders. Supporters argued this was the most realistic and pragmatic approach to the problem posed by the Supreme Court ruling.
That bill did not pass.
Ban sales taxes and bet on a lawsuit?
A large portion of legislators believed that the proposed regulations wouldn’t protect New Hampshire businesses – instead they just created a roadmap for sales tax collection. Those legislators support a bill outlawing all sales tax collection in New Hampshire.
Such a bill would almost certainly face a lawsuit; the outcome of that lawsuit is less certain.
The U.S. Supreme Court is unlikely to simply overturn its previous decision, although there is a new justice on the bench: Brett Cavanaugh. He may be open to a new ruling that favors New Hampshire’s right to reject a sales tax.
Supporters of an outright ban also believe that their lawsuit would prevail because it would focus on small businesses. The original Supreme Court lawsuit was focused on the giant online retailer Wayfair.
What is the next step in NH?
Several New Hampshire legislators have requested 2019 bills to address sales taxes for online retailers. The texts of those bills are not yet public, but the bills generally fall into the two categories described above: strictly regulate sales tax collection or ban sales tax collection outright.
Meanwhile the New Hampshire Department of Justice is asking businesses to report every time they are contacted by an outside “taxing authority” – usually another state – related to sales tax collection. The Department of Justice can verify if a claim is legitimate or a scam, but they will not provide legal or tax advice to any business.
At the federal level, New Hampshire’s U.S. Senators Jeanne Shaheen and Maggie Hassan recently introduced legislation that would limit sales tax collection to large businesses with over $10 million in annual sales. That bill faces a difficult journey through a Republican-controlled Senate and Democratic-controlled House, where most legislators represent states that benefit from sales tax revenue.
Weigh in and we’ll bring your voice to Concord
How should NH respond to efforts by other states to collect sales taxes from NH businesses?
1. Try to make sales tax collection as difficult as possible through strict regulations and red tape for other taxing states.
2. Put in state law that NH businesses are not required to collect out-of-state sales taxes, leaving the taxing jurisdiction to collect the taxes directly from their citizens.
3. NH does not attempt to challenge the court ruling, and enforces out of state sales tax obligations.
Comment below to have your say. We’ll take your opinions and share them with elected officials who are debating this issue, as part of our Citizen Voices campaign. Learn more.