N.H. to join Supreme Court fight against an internet sales tax

Monitor staff
Published: 1/31/2018 6:03:34 PM

New Hampshire will join arguments at the U.S. Supreme Court against a proposal to allow sales taxes to be collected online, a possibility that has long alarmed Granite State businesses worried that it will undercut their tax-free advantage.

The state plans to submit arguments to the court in the form of a friend-of-the-court brief, and anticipates coordinating with the four other states that have no sales taxes, Attorney General Gordon MacDonald said Wednesday.

“(The case) directly implicates the interests of the state and its citizens, including countless New Hampshire business owners engaged in retail sales,” MacDonald said in a press release. “It is important that these interests are represented as the Supreme Court considers this case.”

This issue has long united New Hampshire politicians: U.S. senators and representatives of both parties have opposed internetwide sales taxes.

If the case were to succeed, the ruling would require companies to collect sales tax for the state in which the customer is located.

Under current law, tax is collected based on the location of the company. New Hampshire has no sales tax, so businesses located in New Hampshire collect no taxes.

The outcome would not affect online sales to New Hampshire residents, nor would it affect physical sales by stores or businesses located in New Hampshire.

The issue gained traction Tuesday when Treasury Secretary Steven Mnuchin indicated President Donald Trump is open to an across-the-board internet sales tax, saying there are aspects of a national online sales tax the president “likes a lot.”

Many retailers around the country support an internet sales tax because they say brick-and-mortar stores are harmed by having to collect sales tax, while an online sale from an out-of-state company can avoid sales tax. States that collect sales tax also support the idea.

Under previous Supreme Court rulings dating back to the era of catalog sales, a state’s sales tax must only be collected by retailers that have a physical presence in that state. Consumers who purchase from out-of-state retailers are generally supposed to pay the state taxes themselves, but few do.

A total of 36 states and the District of Columbia had asked the high court to revisit the issue.

Internet giant Amazon.com fought for years against collecting sales tax but now does so nationwide. The case before the Supreme Court does directly affect other online retailers, including Overstock.com, home goods company Wayfair and electronics retailer Newegg, who are part of the case the court accepted.

States say the court’s previous rulings have also hurt them. According to one estimate cited by the states in a brief they filed with the high court, they’ll lose out on nearly $34 billion in 2018 if the Supreme Court’s previous rulings stand.

The Government Accountability Office, which provides nonpartisan reports to Congress, wrote in a report last year that state and local governments would have been able to gain between $8.5 billion and $13 billion in 2017 if they could require out-of-state sellers to collect tax on sales into the state.

The case the Supreme Court agreed to hear this month comes from South Dakota, which has no state income tax and relies on retail sales and use taxes for revenue. In 2016, South Dakota lawmakers passed a law requiring out-of-state sellers to collect and turn over sales tax to the state. The state’s highest court struck down the law, citing previous Supreme Court decisions, and South Dakota appealed.

(The Associated Press contributed to this report.)

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