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NH’s online retailers wary of sales tax ruling

New Hampshire Union Leader

June 22. 2018 2:50AM
The U.S. Supreme Court building 

New Hampshire online retailers could be on the hook to collect sales tax for dozens of states and thousands of locales after the U.S. Supreme Court on Thursday upheld South Dakota’s online sales tax law.

The 5-4 ruling opens the door for some New Hampshire-based retailers to be forced to collect sales tax from their online customers living in other states.

“It’s clear that none of those judges are from a low-tax state like New Hampshire because if they were, they’d know how outrageous the decision is,” Gov. Chris Sununu told reporters. “I think it’s unconscionable that they would ask our businesses to become basically tax collectors for other states.”

Most sales-tax states would need to pass legislation before seeking to collect the additional taxes online, although some have already enacted laws or regulations similar to the one in South Dakota, which prompted the lawsuit. States could enact minimum sales thresholds for triggering the online tax collection.

“I feel bad for the New Hampshire-based retailers because they don’t have the infrastructure in place to collect sales taxes,” said Nancy Kyle, president and CEO of the New Hampshire Retail Association, a 900-member organization that didn’t take a position on the tax.

“It’s going to be very difficult for New Hampshire-based businesses to comply with this,” she said.

The South Dakota statute limits sales tax collection to online retailers that ship $100,000 or more of goods or services into the state, or have 200 transactions with South Dakota customers in a year. But the court decision does not require states, counties and cities to establish such thresholds in order to force retailers to collect sales taxes on their behalf.

All but five states impose sales taxes. About 16 states already have laws that will let them require tax collection by internet retailers in the coming months, and more could follow quickly.

The justices, in a 5-4 ruling against Wayfair Inc., Inc. and Newegg Inc., overturned a 1992 Supreme Court precedent that had barred states from requiring businesses with no “physical presence” in the state, like out-of-state online retailers, to collect sales taxes.

Broader taxing power will let state and local governments collect an extra $8 billion to $23 billion a year, according to various estimates.

The ruling imperils a competitive advantage that e-commerce companies had over brick-and-mortar rivals.

“The large retailers are in favor of (the change) because they’re already paying sales tax in other states and it gave online-only sellers an unfair advantage,” Kyle said.

Chief Justice John Roberts Jr., who wrote the dissenting opinion, argued that the Supreme Court left this question to Congress in 1992, and Congress has not acted.

“Correctly calculating and remitting sales taxes on all e-commerce sales will likely prove baffling for many retailers. Over 10,000 jurisdictions levy sales taxes.”

“The burden will fall disproportionately on small businesses,” he wrote.

The state’s Democratic congressional delegation railed against the decision.

“New Hampshire’s lack of a sales tax is a competitive advantage for our state, and this decision will unfairly punish small businesses that are the backbone of our economy,” said Sen. Maggie Hassan.

Sen. Jeanne Shaheen called it “a disastrous decision for New Hampshire’s economy and does not take into account the day-to-day challenges of running a small business.”

Rep. Annie Kuster said, “this misguided ruling will subject (small businesses) to thousands of taxing jurisdictions and burdensome red tape across the country.”

Rep. Carol Shea-Porter said, “Other states shouldn’t be able to force Granite State business owners to navigate a complicated web of tax collection rules in order to collect and remit taxes that we don’t even have in our state.”

Taylor Caswell, commissioner of the New Hampshire Department of Business and Economic Affairs, said, “Imposing this new requirement on us isn’t just an administrative burden, it goes against what New Hampshire stands for: Live Free or Die.”

Kate Hopkins, policy manager for the fiscally conservative thinktank Americans for Prosperity, said “allowing states to reach across borders and collect state taxes from online retailers is taxation without representation that will harm small businesses the most.”

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