Sales-Tax-Free New Hampshire Plots Post-'Wayfair’ Protections

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By Aaron Nicodemus

While most states are welcoming the additional sales tax revenue that may come to their coffers as a result of the South Dakota v. Wayfair decision, sales-tax-free New Hampshire is looking at the decision from the opposite side.

Granite State businesses aren’t equipped to handle sales tax collection, elected officials say, and the U.S. Supreme Court’s decision to remove the physical-presence standard will place an unfair administrative burden on them.

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.

Gov. Chris Sununu (R) says he will call the legislature into a special session to craft “comprehensive legislation” meant to help the state’s businesses avoid collecting sales tax in other states.

New Hampshire is one of five states that doesn’t impose a sales and use tax. Sununu has said the Wayfair decision may force their state’s businesses to collect sales and use taxes in up to “10,000 state and local jurisdictions in which they have no physical presence.”

Other states that don’t impose a sales and use tax are Alaska, Delaware, Montana, and Oregon.

Possible Legislation

Sununu previously announced that the legislature should consider erecting hurdles for out-of-state taxing authorities, such as:

  •  requiring they notify the New Hampshire Department of Justice if they seek to audit or impose tax collection obligations on a New Hampshire business;
  •  requiring “written determination from the New Hampshire Department of Justice that the authority’s statutes provide certain protections and meet strict requirements";
  •  requiring they 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
  •  requiring they show that the other state’s law won’t impose an unconstitutional burden on New Hampshire businesses.

Special Session

Sununu will formally request a special legislative session at the governor and executive council meeting July 11. The session will be called by the leaders of the House and Senate no later than Aug. 15, he said.

“In calling a special session the Executive Department intends on working with the General Court to pass comprehensive legislation which takes every feasible and legally permissible step to protect New Hampshire citizens and businesses from any and all attempts to impose sales and use tax obligations on New Hampshire,” Sununu wrote.

According to the House calendar, the special session will begin July 25. A Senate legislative spokeswoman told Bloomberg Tax that while that is the expected date, it is still subject to the council’s vote.

‘Wayfair’ Unfair?

Other legislative leaders in New Hampshire also bristled at the implications of Wayfair on Granite State businesses. The legislature has created a joint task force to study the issue in preparation for the special legislative session.

Sen. Jeb Bradley (R), the task force’s vice chairman, told Bloomberg Tax July 9 that he expects representatives of the state Attorney General’s office, the state Department of Revenue Administration, and other tax-related experts to testify.

Asked if the legislation might make New Hampshire more attractive to e-retailers in the future, Bradley said his priority is to protect the state’s existing online retailers.

“We’ll let the future take care of itself,” he said. “My priority is to protect people already in business from being forced to collect sales taxes from other states.”

The task force will hold its first meeting on July 12. It set a July 19 deadline to issue a recommendation and report.

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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