N.H. Legislature Fails to Pass Challenge to Internet Sales Tax

Jul 25, 2018

State lawmakers failed to pass a bill Wednesday that backers say would have protected New Hampshire businesses from having to collect sales taxes on behalf of other states.

The outcome, during a special session of the Legislature, was a surprising turn given that leadership in both parties and Governor Chris Sununu backed the broader bill.

The issue stems from a U.S. Supreme Court ruling issued in June in the case of South Dakota v. Wayfair that clears the way for other states to force New Hampshire businesses to collect their sales tax when they sell a product into that state. The decision overturned 50 years of precedent, and is considered a burden on businesses in the Granite State that have little or no experience collecting and remitting sales taxes.

In response to that ruling, a task force of lawmakers spent last week crafting a bill that created a series of hurdles for out of state taxing jurisdictions, including a requirement that they register with the New Hampshire Attorney General before attempting to collect a sales tax.

The Senate unanimously passed that bill Wednesday morning. But when the House began debate on the measure minutes later, a floor amendment came forward that gutted the bill, leaving only the creation of a study commission.

That amendment passed 164-151, garnering bipartisan support from lawmakers.

“There were real issues with the bill that was proposed,” said Representative J.R. Hoell, a Republican from Dunbarton. “The bill actually created a roadmap for outside states to compel our corporations to collect their taxes.”

Another concern with the bill was that it would create what Representative Jackie Cilley, a Democrat from Barrington, called a “false sense of security.”

“Many businesses would have stood back and said, ‘I’m going to send the request for those taxes to the Attorney General’s office, and I’m not going to pay them’...Well, the problem is, in the meantime, you start racking up late fees, penalties. It would have had the exact opposite effect of protecting our businesses.”

The House’s move surprised and angered many members of the Senate, who were called back into an unusual summer session to pass the amended bill. Rather than go along with the creation of a study commission, the Senate again voted unanimously to non-concur, ending the session – and the bill’s chances.

“What just happened...is an insult to the legislative process,” said Sen. Lou D’Allesandro, a Democrat from Manchester.

He was echoed by Republicans, including Sen. Regina Birdsell, who called the House’s action “an absolute insult to our business community.”

Senate President Chuck Morse vowed to hold another special session later this summer to pass some form of legislation.

In a statement from Governor Chris Sununu, however, it isn’t clear if another special session is in the cards.

“While the House wastes time, they left our state’s small businesses vulnerable to being forced to collect other state’s sales taxes,” said Sununu in a statement. “I have already spoken with the Attorney General and his office will do everything in its power to protect New Hampshire’s small businesses.”