Post-'Wayfair’ Protections on Tap in New Hampshire

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By Aaron Nicodemus

New Hampshire Gov. Chris Sununu (R) has announced he wants to help prevent Granite State businesses from having to collect sales tax in other states in the wake of the South Dakota v. Wayfair decision.

Sununu said he intends to call a special legislative session to craft the legislation. New Hampshire is one of five states that doesn’t impose statewide sales tax

“With this proposal, we will send a message to every out of state taxing jurisdiction and authority. If you try to come into our state and force our businesses to collect a sales tax in manner that violates our laws or the United States Constitution, you will be in for the fight of your life,” Sununu said in a June 28 press release. “Working together, we will do everything in our power to prevent other States from violating this principle by imposing arcane sales and use tax obligations on New Hampshire businesses.”

In the June 21 Wayfair decision, the Supreme Court threw out its 1992 rule in Quill Corp. v. North Dakota.Quill, which states like the petitioning South Dakota for years have tried to “kill” through lawsuits and regulation, prohibited states from imposing sales tax collection obligations on vendors lacking an in-state physical presence.

Sununu said he will support legislation that “will erect every possible and constitutionally permissible legal and procedural hurdle to prevent other states from forcing our businesses to collect sales and use taxes.”

He said he will issue a proclamation for a special session before the July 11 governor and council meeting. The proclamation will “authorize the legislature to convene in a special session to consider legislation that will protect our businesses from improper attempts by other states to force our businesses to collect sales and use taxes.”

Requirements for Out-of-State Taxing Authorities

Some of those hurdles include requiring out-of-state taxing authorities to:

  •  notify the New Hampshire Department of Justice if they seek to audit or impose tax collection obligations on a New Hampshire business;
  •  receive “written determination from the New Hampshire Department of Justice that the authority’s statutes provide certain protections and meet strict requirements";
  •  show that some of the protections include “a safe harbor for a certain amount of sales, a prohibition against retroactive enforcement, a safe harbor for small businesses, and other strict requirements"; and
  •  show that the other state’s law will not impose an unconstitutional burden on New Hampshire businesses.
Sununu also said that the New Hampshire Department of Justice will be empowered to file “an expedited suit to block any attempt to impose tax collection obligations undertaken in violation of this new law.”

“The South Dakota v. Wayfair decision attempts to strip our state of this distinction and may impose burdensome tax obligations on our businesses and our citizens,” Senate President Chuck Morse (R) said in a statement. “This decision does not recognize how sales tax-free states like New Hampshire have drawn many citizens to live, work and start a business here for that very reason. I support Governor Sununu’s plan to fight back against this decision because of the untold effect it would have on our state’s economy and small businesses.”

Mark Nebergall, president of the Washington-based Software Finance and Tax Executives Council, told Bloomberg Tax that New Hampshire could take other steps.

It could deny other states from accessing New Hampshire’s courts in debt collection assistance, when the debt is based on a failure to collect another state’s sales and use taxes, he said. New Hampshire could also prohibit its county recorders of deeds from accepting notices of lien, when the lien is based on a failure to collect taxes, or enact laws denying the ability of another state to seize the vendor’s property in New Hampshire.

“I’m sure there likely would be constitutional challenges to such steps, based possibly on the full faith and credit or equal protection clauses, perhaps balanced by the age old maxim that a state will not assist another in the enforcement of its tax laws, but that’s for the lawyers to figure out,” he said.

State to Leave National Group

New Hampshire also responded June 28 to the National Conference of State Legislatures’ (NCSL) support of South Dakota by withdrawing from the state group. In a news release, Speaker of the House Gene G. Chandler (R) said the state was “frustrated” with the motives of the NCSL.

“New Hampshire is very proud to have no sales tax. Our retail business community thrives as a result of our no sales tax environment. To ask our retailers to collect taxes for dozens of other states is a huge burden on them, and will likely jeopardize their ability to do business online with out-of-state customers. We are certainly disappointed in the Court’s decision, but we are more frustrated that NCSL has championed legislation in congress to force a remote sales tax, and cheered the recent court decision,” Chandler said.

“Effective today, the New Hampshire House will no longer pay any dues or fees to NCSL or any other organization that supports or promotes a national remote sales tax policy. It’s unconscionable that New Hampshire business will have to participate in fueling the growth of government in other states,” Chandler said.

To contact the reporter on this story: Aaron Nicodemus in Boston at anicodemus@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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