One of the ways that New Hampshire distinguishes itself from other states is that we do not have a general sales tax. This is part of the “New Hampshire Advantage.” There has been a great deal of attention to the issue of sales taxes on internet sales with the recent U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. This was followed by Governor Sununu calling of a special session of the legislature in order to put forth legislation to protect New Hampshire businesses from having to collect sales taxes for other states. While the special session did not result in the passage of a bill, it did generate a great deal of attention in the news. The purpose of this article is to eliminate uncertainty regarding whether sales over the internet are subject to a sales tax for New Hampshire residents and to briefly discuss the obligations of New Hampshire businesses to collect the tax.
New Hampshire Residents Are Not Required to Pay Sales Taxes on Internet Sales
Both the Wayfair case and the legislation considered by the legislature addressed the obligations of businesses to collect sales taxes for other states. Both had nothing to do with whether New Hampshire residents are obligated to pay sales taxes on internet sales. For the most part, sales taxes are imposed on a state-by-state basis and the liability for the tax is determined by whether the purchaser is obligated to pay a sales tax based on where the product is delivered to. Thus, if a Massachusetts business sells a product for delivery to a New Hampshire resident in New Hampshire, there would be no sales tax due. This is true even though Massachusetts imposes a sales tax on its own residents. So, residents of New Hampshire will continue to enjoy the benefit of not paying sales taxes on products purchased for delivery to New Hampshire.
New Hampshire Businesses May Be Required to Collect Sales Taxes on Internet Sales
Whether a New Hampshire business is required to collect a sales tax for remote sales to other states depends upon the laws of each state and the businesses’ activity in the state. Approximately 24 states have laws similar to the South Dakota law considered by the Supreme Court in the Wayfair case. These laws do not require a physical presence in the state for a business to be obligated to collect that state’s sales taxes for sales delivered to its residents. Generally, these states require a minimum level of activity such as $100,000 in sales or 200 transactions in order for a business to be obligated to collect the tax. The states have varying approaches as to whether you look to the past year’s economic activity or the current year’s activity. Businesses that sell goods or services to customers in different states should review their obligations to collect sales taxes in light of the Court’s decision and the laws of each state in which it has significant activity. For more information on obligations to collect the sales tax please contact John F. Hayes, Alfano Law Office, PLLC at (603) 856-8348.
By: John F. Hayes, Esq., former general counsel to the New Hampshire Department of Revenue Administration.