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New Hampshire firm in its opposition to interstate internet sales tax


As one of five states without a general sales tax and one of just two that also has no income tax, a more fitting motto for New Hampshire than “Live free or die” may be “Live tax free or die.” But while it may be a stretch to say New Hampshirites would rather die than pay taxes — at least in this day and age — they’re certainly willing to fight to defend their right to buy and sell goods tax free. In the coming months, that fight is likely to intensify.

Generally, states can only tax a business with a substantial connection to (i.e., physical presence in) the state, or nexus. As a result, an ecommerce business based in New Hampshire doesn’t have to collect and remit California, New York, or Texas tax on sales delivered into those states. New Hampshire wants to keep it that way.

This physical presence standard was upheld by the Supreme Court of the United States in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). In its ruling, the court noted that Congress may be better suited than the court to decide the matter of interstate sales tax; and since Quill, the battle over remote sales tax has been largely legislative. That’s about to change.

Remote sales tax debate stagnates in Congress

To date, federal efforts have centered largely on either expanding the right of states to tax sales by remote sellers, or more aggressively prohibiting it. Legislation for the former includes the Marketplace Fairness Act (MFA), the Remote Transactions Parity Act (RTPA), and to a lesser degree, the Online Sales Simplification Act (OSSA), which exists in draft form only. As its name suggests, the No Taxation Without Representation Act would permanently prohibit states from taxing remote sales. 

This is a divisive issue, with forceful proponents and opponents on each side. As a result, Congress has hit a wall. There’s been no vote on the issue since 2013, when the Senate approved the MFA 2013.

States enter remote sales tax fray

Frustrated with the lack of resolution at the federal level, many states have sought alternative solutions to the issue of untaxed remote sales. Some are holding online marketplaces liable for the tax on their third-party sales; some say the presence of web cookies on in-state software triggers nexus; and some have broadened nexus to include referrals from in-state businesses or economic ties to the state. More than one state developed policies, in part at least, to directly challenge the physical presence standard upheld by Quill.

Until recently, these efforts have drawn a blank. Then, in January 2018, the Supreme Court agreed to reconsider Quill’s physical presence precedent in South Dakota v. Wayfair, Inc. A decision is expected in June.

Like most other non-sales-tax states, New Hampshire is staunchly opposed to taxing interstate sales. In 2013, Senators Kelly Ayotte and Jeanne Shaheen joined the minority in voting against the MFA. Now Governor Chris Sununu and Attorney General Gordon MacDonald are preparing to petition the Supreme Court to let Quill stand.

Forcing New Hampshire businesses to collect sales tax would be “outrageous”

Governor Sununu and Attorney General MacDonald plan to submit an amicus curiae to the Supreme Court by the end of March. In it, they’ll urge the court to uphold Quill and defend New Hampshire businesses’ right to sell goods tax free. They’re looking to coordinate efforts with the other sales-tax-free states: Delaware, Montana, Oregon, and Alaska (which has local but no statewide sales tax).

Making New Hampshire businesses collect and remit tax in other states won’t happen without a fight, according to Gov. Sununu: “I am going to do everything in my power to fight this outrageous attempt to force New Hampshire’s businesses to collect out of state taxes. We are a no sales tax state. That applies across the board, to our citizens and those in other states. Period.”

Attorney General MacDonald added, “The Wayfair case directly implicates the interests of the State and its citizens, including countless New Hampshire business owners engaged in retail sales.” Department of Business and Economic Affairs Commissioner Taylor Caswell noted: “Expanding state sales tax authority over interstate commerce … will have a major impact on one of New Hampshire’s built-in economic advantages — our willingness to … forego sales taxes of any kind.”

As New Hampshire prepares to make its case, states like Hawaii are moving forward with efforts to tax remote sales their own way. Learn more about these and other sales and use tax issues at Avalara Sales Tax 360.


Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.