N.H. Lawmakers Finalize Language of Special Session Sales Tax Bill

Jul 19, 2018

Credit NHPR Staff

A committee of state lawmakers wrapped up work Thursday on bill sparked by a recent U.S. Supreme Court decision. The legislation seeks to block other states from collecting sales taxes from New Hampshire businesses that sell goods online.

The full House and Senate will vote on the bill next Wednesday during a Special Session in Concord. NHPR’s Todd Bookman joins host Emily Quirk for a conversation on what’s in--and not in--the legislation.

(This transcript has been lightly edited for clarity.)

First, break down the Supreme Court ruling...

This was the case South Dakota v. Wayfair, which has to do with when states with a sales tax can force businesses who sell goods to people who live in that state to collect and remit that sales tax for them.

So, if a New Hampshire business sells lobsters over the internet to a customer in South Dakota, pre-Wayfair, that business only had to collect sales tax is if it actually had a warehouse or an office also in South Dakota, some sort of physical presence.

As a result of this ruling, the so-called “physical presence” rule is out the window. South Dakota can now require that New Hampshire business to collect and remit South Dakota’s sales tax when it sells lobsters into the state.

There are some exceptions, though. Small businesses--businesses that don’t do $100,000 worth of sales in South Dakota--are still exempt. That’s a decent amount of lobsters.

But this doesn’t just apply to South Dakota?

Right, there are 45 states with a sales tax, and they can all now require any business in any state to essentially become their tax collector. Each taxing jurisdiction, which includes counties and cities that levy a sales tax, can also set different thresholds and rules. Is is suddenly an incredibly complicated area of tax law.

As you can imagine, none of this is going over well here in the Granite State.

The governor has called for a Special Session to pass some sort of bill to mitigate the impact on New Hampshire. And this week, a committee hammered out a draft. What’s in it?

The bill doesn’t explicitly prohibit or ban other states or taxing jurisdictions from attempting to collect this tax, though some lawmakers wanted to see that. But it does put up what can be thought of as hurdles.

For starters, any taxing jurisdiction, before they can approach a New Hampshire business and say, “I think you have sold something to one our residents, pay up,” that taxing jurisdiction will first have to register with the New Hampshire Attorney General and pay a fee.

Then, it will have to prove to the Attorney General’s office that its sales tax is constitutional,  that is complies with all laws, and that it isn’t unfairly targeting a small business.

And then finally, if the tax collection is deemed lawful, the business will be allowed to recoup whatever costs it incurred in collecting that tax. So, it the business had to buy special software to compute all these taxes, that sort of expense will be removed from the tax bill.

It sounds like this has some real teeth?

It does. All week, lawmakers have talked about how to strike a balance: how to try to protect businesses, but also acknowledge that this legislation is likely to going end up getting challenged by other states in court. And if you go to court, you want to win. That’s why there is no blanket prohibition in the law. There’s the belief that wouldn’t stand up.

So what’s next?

All 424 lawmakers are being called to Concord next Wednesday for a vote on this bill. It’s always foolish to predict the future, but I’m feeling foolish: my guess is this bill will pass. It may get tweaked, but there’s bipartisan support here. The committee recommended it today on a 17-0 vote.

After it’s passed, the governor will in all likelihood sign it. And then from there, likely, some court challenges.