A major U.S. Supreme Court ruling last week could force New Hampshire businesses to collect a sales tax on behalf of other states.
The ruling in the case of South Dakota v. Wafair overturned more than 50 years of legal precedent. The decision is seen as a blow to New Hampshire businesses, which say collecting a sales tax on behalf of other states is burdensome.
Morning Edition Host Rick Ganley spoke with Taylor Caswell, a commissioner at the New Hampshire Department of Business and Economic Affairs, about how the state plans to respond.
(Editor's note: this transcript has been edited lightly for clarity.)
Governor Sununu and numerous state officials, you included, have come out against this ruling saying that it would be bad for the state's economy. Can you explain how this would affect the average New Hampshire small business owner for instance?
Sure, for years we have operated like every other state. There's a physical presence rule that goes with the charging of sales tax. And for years that's worked very well. This decision overturns that physical presence rule and says effectively that even if you sell as a retailer outside of New Hampshire to another state, you have to charge a sales tax for that taxing authority, that state or that locality into which you're selling, hold on to it, process it and then send it into that state at the end of the year, or at the end of the quarter. When you consider that there are 12,000 separate taxing entities across the United States, and you consider that New Hampshire is not one of them, it is a burdensome issue. And it's really one that, for me, emphasizes the fact that New Hampshire has had a very definitive affirmation that says we do not charge state sales tax. And we've done that to give our residents and our retailers a competitive advantage, quite frankly, and now that's in a lot of ways being taken away from us.
Okay, so what about consumers living in New Hampshire? You mentioned that New Hampshire advantage that we've always pushed.
Well, I mean one would imagine that the new administrative burden that is now going to be placed on our retailers is going to somehow find its way into the cost of products that inherently have never had sort of that tax addition to the cost. I think we're seeing a lot of employers, especially in downtown retailers that are looking for a way to supplement what they are selling right there on Main Street by being able to access the Internet in the same tax free way -- traditionally that we've been able to do it in New Hampshire. It takes away that option. And I haven't had an opportunity to talk to a lot of retailers just yet, but I have to imagine that the impact of collecting, and monitoring and applying to these 12,000 districts is going to be a burden on them. That's going to be a cost.
You released a statement last week saying that you're working with state leaders to determine a path forward at defending New Hampshire's business community from this decision. But what would that look like?
Yeah. Well, I mean we really need to better understand what the impact of this is going to be. And honestly I think that there is an issue here that Congress needs to probably take a look at. There are five states that choose not to have a sales tax, and I have to imagine the other four, in addition to us, are feeling much the same way. When you are talking about making a fundamentally significant impact on the country's economic future, economic development by taxing the Internet, that's something that probably should get a look at by Congress, and have an opportunity for states like New Hampshire to be able to make the case as to why we have made the decision to not charge a sales tax, and how now having to do so is going to impact our businesses.
And I think this would become a states rights issue in some respects, wouldn't it?
Yeah, I'll leave that to Attorney General McDonald as to how far they want to go with that. But I think that there is a case to be made. I mean seriously, we've been down the road of taxation without representation in the past where we have an authority outside of our state that says you must tax people regardless of whether or not that's something within your own state laws. And I have to say that didn't work out too well for the taxing people in that scenario.
All being said, this is a Supreme Court decision. What can New Hampshire reasonably do to shield businesses and consumers from the decision?
You know again, we're going to have to look at all of the options that we have, the way that we address sales tax internally. There are other states now that are going to have to adjust their own state laws in order to take benefit from this ruling, and adjust to the new Internet tax and how that's going to be done. So we have to kind of wait and see how different states go about it, make some decisions about whether there's anything we can do within the state, and then beyond that I think there's a case to be made that Congress probably should get into this issue a little bit more deeply.
But it seems like confusion is going to rain for a while.
Well I mean, I've heard that this is going to be into effect within 30 to 90 days. That's something that our retailers are going to have to really ramp up on, and we're going to have to see what we can do to help them.
So what advice would you give a retailer in New Hampshire right now?
Well I would say pay very close attention to what goes on the next week or two, and get an idea from us as we start to be able to really get into what the implications of this will be and what the requirements will be. We'll certainly be willing to work with businesses to answer any questions they might have.