Online Sales Tax Ruling Called 'Disastrous' for N.H. Economy

Jun 21, 2018

Supreme Court of the United States
Credit SCOTUS

A major U.S. Supreme Court ruling out Thursday could force New Hampshire businesses to collect a sales tax on behalf of other states.

 

The case of South Dakota v. Wayfair centers on how to treat items sold online, and whether states that impose a sales tax, such as South Dakota, can require businesses who sell goods to South Dakota residents to collect and remit those taxes.

 

Many online companies and the five states without a sales tax, including New Hampshire, argued that it would be unfair to impose such a burden. But the Supreme Court, in a 5-4 decision, sided with South Dakota.

 

The reaction in New Hampshire has been swift, and it is unambiguous.

 

“It is 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,” says Governor Chris Sununu. “I think it is unconscionable that they would ask our businesses to become, basically, tax collectors for other states.”

 

New Hampshire Attorney General Gordon MacDonald submitted a legal brief in the case, arguing the state should be exempt from such rules.

 

[You can read NHPR’s previous coverage of this topic here.]

 

New Hampshire’s congressional delegation has also loudly warned about the impact this ruling could have on small businesses.

 

“This is a disastrous decision for New Hampshire’s economy and does not take into account the day to day challenges of running a small business,” says Senator Jeanne Shaheen.

 

U.S. Senator Maggie Hassan, as well as Representatives Carol Shea-Porter and Annie Kuster, also issued statements criticizing the court’s decision.

 

The decision in South Dakota versus Wayfair upends more than a half century of legal precedent. The court ruled in 1967 that states can’t force businesses located in other states to collect on their behalf. That case centered on mail order catalogue companies, a relic of an earlier economy.

 

“And that’s a major premise of the court’s opinion--hey, if you didn’t notice, a lot has changed in 50 years,” says Ian Samuel, a lecturer at Harvard Law School.

Samuel says in this decision, the court is recognizing that in an age of online shopping, states are losing out on too much revenue that is rightfully theirs to collect.

 

But in New Hampshire, where aside from the tax on rooms and meals, both brick and mortar and online merchants have little experience with sales taxes, let alone tax codes from other jurisdictions.  

 

Nancy Kyle, with the New Hampshire Retail Association, says it is going to be a bureaucratic nightmare.

 

“There are municipal taxes, there are county taxes, there are city taxes. There are literally thousands of combinations, and a New Hampshire-based business does not have the infrastructure to do that,” she says.

 

On a practical level, what this means is that New Hampshire companies which sell goods online may have to invest in software that can do the calculations and payments automatically.

 

The Supreme Court’s division on this case didn’t fall along the usual liberal-conservative fault line. Joining the 5-member majority were Justices Neil Gorsuch and Ruth Bader-Ginsburg, what court watchers would consider a rare area of agreement between the two.

The minority opinion, led by Chief Justice John Roberts, argued that a so-called internet sales tax should not be left in the hands of judges, but rather is an issue that is better handled by Congress.

 

Congress for decades, though, hasn’t been able to reach an agreement on how best to handle the topic. A key sticking point for New Hampshire lawmakers has always been that the state’s businesses remain exempt from any nationwide requirement.

 

(This post was updated Thursday afternoon with additional interviews and comments from Governor Sununu at his news conference.)