Supreme Court ruling means N.H. retailers may have to collect taxes on out-of-state sales

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    In this April 13, 2018, photo, packages from Internet retailers are delivered with the U.S. Mail in a apartment building mail room in Washington. Clicking "checkout" on an online purchase could cost more after a Supreme Court case being argued April 17. (AP Photo/Jessica Gresko) Jessica Gresko

Monitor staff
Published: 6/21/2018 2:51:28 PM

New Hampshire businesses that ship to customers in other states may have to start collecting those states’ sales tax following a U.S. Supreme Court decision Thursday, and they’re not happy about it.

“Most of what we do is out of the state. We ship stuff all over the place,” said Jeff Bart, one of the owners of Granite State Candy Shoppe on Warren Street. “I am going to be burdened with the administration portion of collecting sales tax and paying it on a monthly basis. I don’t have a mechanism in place to do it ... How am I going to know of all the states that collect sales taxes, all the regulations and details?”

On Thursday, the U.S. Supreme Court, by a 5-4 decision, overturned a decades-old decision that prevented sales tax from being collected on most online sales.

This possibility has been opposed by all four of New Hampshire’s federal legislators as well as the Sununu administration because it will impose a burden on many state companies but bring no benefit to the Granite State’s coffers. New Hampshire is one of only five states that lack a sales tax and can’t profit from online sales.

“Thousands of small businesses ... must not be forced to become tax collectors for other states,” Taylor Caswell, commission of the New Hampshire Department of Business and Economic Affairs, wrote in a statement. He said he is “working with state leaders to determine a path forward” in response, although it’s not clear what the state could do.

Nancy Kyle, president and CEO of the New Hampshire Retailers Association, said the potential complexity is great facing businesses selling to any of the 45 states with sales taxes.

“People think there are 45 different taxes they may have to collect, but there are literally thousands. Cities can impose a tax, municipalities, counties – there are thousands of combinations,” Kyle said.

This concern was part of the argument given by Chief Justice John Roberts in his dissent Thursday. He wrote that the ruling “breezily disregards the costs that its decision will impose on retailers. 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, each with different tax rates, different rules governing tax-exempt goods and services, different product category definitions, and different standards.”

The change will also raise costs for most online shoppers, who almost never pay any sales tax at the moment.

Thursday’s ruling is the culmination of a long fight over sales taxes on purchases that are not made at a physical store, beginning with questions about catalog sales through the mail. That debate lead to a 1967 U.S. Supreme Court ruling, reaffirmed in 1992, which said a community can collect sales tax only from companies that have a presence within their borders, such as a store or distribution warehouse.

Writing for the majority in Thursday’s 5-4 ruling, Justice Anthony Kennedy said the 1992 decision, Quill Corp. vs. North Dakota, was no longer applicable because the growth of internet sales had altered the economic landscape, unfairly hurting brick-and-mortar stores. For example, online behemoth Amazon did not come into existence until three years after the Quill decision.

“The physical presence rule has long been criticized as giving out-of-state sellers an advantage. Each year, it becomes further removed from economic reality and results in significant revenue losses to the states. These critiques underscore that the rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause,” he wrote. “Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers.”

The issue has become more pressing in recent years as online sales have cut into sales from brick-and-mortar stores, thus hurting tax revenue for many communities. The Government Accountability Office estimated in 2017 that state and local governments could have collected an extra $8.5 billion to $13 billion if out-of-state sellers had to collect sale tax.

The current ruling came about after South Dakota passed a law in 2016 requiring most online retailers to collect sales tax when they sell goods to the state’s residents, regardless of whether they had any physical presence. The resulting lawsuit made it to the Supreme Court.

Details will depend on how the various states institute laws, but many smaller New Hampshire firms are likely to be exempt. The South Dakota law that led to the Supreme Court case, for example, applied only to companies that sold at least $100,000 worth of material or had at least 200 separate sales per year in that state.

Thursday’s Supreme Court ruling will not affect sales in physical stores in New Hampshire.

David Brooks bio photo

David Brooks is a reporter and the writer of the sci/tech column Granite Geek and blog, as well as moderator of Science Cafe Concord events. After obtaining a bachelor’s degree in mathematics he became a newspaperman, working in Virginia and Tennessee before spending 28 years at the Nashua Telegraph . He joined the Monitor in 2015.

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