As SCOTUS Considers Online Sales Tax, N.H. Weighs In

Apr 5, 2018

On Thursday, the State of New Hampshire filed a legal brief in the U.S. Supreme Court case South Dakota v. Wayfair, which is scheduled for oral arguments later this month.

The case could have huge ramifications for how businesses collect sales taxes when selling goods to customers across state lines.

South Dakota is challenging a decades-old legal precedent that says a business must only collect a sales tax if it has a ‘physical presence’ in the state that imposes the tax, such as a factory or office. The case law dates back to the late 1960s, when the Supreme Court ruled that companies that sold goods through mail order catalogs didn’t have to remit a sales tax if their company had no real presence on that ground in that state.

Forty-one states and South Dakota are now hoping to overrule that earlier case and a 1992 revisiting of the issue, citing the huge shift toward e-commerce and the ease with which businesses can sell goods to customers across the country. Those states contend by not mandating sales tax collection for goods sold online, they are missing out on billions of dollars in sales tax revenue.

In its brief, though, New Hampshire, one of just five states that doesn’t impose a sales tax, argues that it would be a bureaucratic nightmare and unfair for businesses here to have to calculate and collect the thousands of different state, county and municipal sales taxes imposed by other jurisdictions.

“It is unacceptable that New Hampshire businesses may be forced to act as tax collectors for other states. We will not sit idly by while Washington, D.C. and sales-tax reliant states try to raid the pockets of Granite Staters and increase the price of retail goods in New Hampshire,” writes Governor Chris Sununu in a statement.

New Hampshire, along with the respondents in the Supreme Court case, Wayfair, Inc., an online retailer, argue that this issue should be handled not by the Court, but instead by Congress.

Efforts to create some type of policy solution have failed in recent years. U.S. Senators Jeanne Shaheen and Maggie Hassan are both opposed to a current bill in Congress, the Marketplace Fairness Act, in part because it doesn’t exempt businesses in states such as New Hampshire from having to collect a sales tax for other states.

“Mandatory internet sales tax collection would do great harm to New Hampshire’s small businesses and economy,” said Senator Shaheen last month.

The Trump Administration through the Solicitor General has weighed in on the side of South Dakota and the majority of states.

Amazon, the country’s largest online retailer, along with many big sellers already collect sales tax from customers who live in states with a tax. Many small businesses say the burden of collection and filing additional taxes, along with the required software to calculate rates, could lead to higher prices.