CONWAY — Gov. Chris Sununu made his displeasure with the U.S. Supreme Court known last week, when he said a recent decision regarding internet sales tax will make life hard for New Hampshire business owners who want to sell products across state lines.
However, the House on Wednesday gutted a bill proposed by Sen. Jeb Bradley (R-Wolfeboro) intended to prevent the court's decision from burdening businesses.
When Sununu visited The Conway Daily Sun on July 19, he touched on the recently decided (June 21) Supreme Court case, South Dakota v. Wayfair Inc., on whether online home-goods retailer Wayfair had to collect sales tax in a state (South Dakota) in which it had no physical presence.
The court held, 5-4, that is possible.
Justice Anthony Kennedy, who recently announced his upcoming retirement, wrote the decision, joined by Justices Samuel Alito, Ruth Bader Ginsburg, Neil Gorsuch and Clarence Thomas.
"The Wayfair decision is an absolutely tragic decision by the U.S. Supreme Court," said Sununu. "It basically says that New Hampshire businesses that currently have no sales tax and sell products on the internet will now have to be the tax collectors for other states and municipalities."
Sununu used an example of a New Hampshire candy store that sells many products online.
"So, a guy in Hoboken, N.J. wants to buy a pound of fudge. Now (the candy store owner) has to figure out what is the Hoboken, N.J., tax, what's the New Jersey sales tax and he has to include that into his system and have a different answer for everybody buying that product," said Sununu.
There are about 10,000 taxing jurisdictions (such as states and cities) in the United States, the governor said.
In Wayfair, South Dakota sued the online retailer, a Massachusetts-based furniture company, to have them collect sales tax to all orders shipped to customers in South Dakota, and the court gave the state a hand.
"Helping respondents' customers evade a lawful tax unfairly shifts to those consumers who buy from their competitors with a physical presence that satisfies Quill (a prior decision) — even one warehouse or one sales person — an increased share of the taxes," state's the Supreme Court's syllabus (summary) on the decision adding the physical presence rule gives an "arbitrary advantage" to online retailers.
The Supreme Court overturned its decision in Quill. It also vacated the decision of the Supreme Court of South Dakota which was based on Quill. The Supreme Court remanded the case back down, meaning more details are to be worked out.
Sununu said it is an issue of states' rights, noting that New Hampshire is "fiscally responsible" and doesn't need a sales tax.
He said the state government is looking for ways to legally protect the state and its businesses from the Wayfair decision.
For example, in early July, Senate President Chuck Morse (R-Salem) and House Speaker Gene Chandler (R-Bartlett) announced a joint task force to review draft legislation to address the decision. The draft was written by the staff from the Attorney General's Office and governor's legal counsel. Their report was due July 19.
"Our goal is basically to create every possible barrier that you can imagine, so that even if we are forced to do it, it would be really hard for any jurisdiction to try to do it," said Sununu, explaining the point of the task force.
Bradley was vice chair of the task force and prime sponsor of Senate Bill 1 that the task force reviewed.
The task force consisted of 17 lawmakers. Bradley was the task force member from Carroll County.
According to Bradley, the decision will have an even more dire impact than Sununu let on. Even brick-and-mortar stores, he said, might be required to collect taxes on behalf of other states.
In other words, if a Maine resident bought an expensive rug in Conway, the state of Maine could audit the rug store and demand a sales tax payment if the store sold a certain amount of goods to Maine residents. Alternatively, the Conway store might have to collect tax at the point of sale.
"That would undermine the incentive to shop in New Hampshire," said Bradley. "It would undermine the New Hampshire advantage, which in its purest form is no sales tax and no income tax."
The task force heard testimony on the legislation from the public last week.
The legislation would do a number of things, Bradley said, such as:
• Out-of-state taxing jurisdictions would have to register with the New Hampshire Attorney General's Office before taking any action against a business.
• The AG's office would be required to vet the taxing jurisdiction to make sure it was legitimate.
• Before a taxing jurisdiction asks New Hampshire businesses for information or audits, the AG has to make sure the jurisdiction is complying with New Hampshire and federal law and constitutions.
• The taxing jurisdiction would have to make "every effort possible" to collect tax from its own residents first asking New Hampshire businesses to do it.
• The taxing jurisdiction would have to reimburse New Hampshire businesses for the expenses of collecting the taxes. The AG's office would get a cut to cover its costs.
"These are all things that initially we think are defensible, constitutional and within the construct of what the U.S. Supreme Court did," Bradley said.
"There's a lot that's in flux because the U.S. Supreme Court remanded (Wayfair) back to South Dakota for further review."
However, after SB 1 passed the Senate unanimously, the House on Wednesday voted 164-151 to amend the bill to create a study commission. The Senate then voted 23-0 to disagree with the House.
"It was totally unexpected," said Bradley of the House vote. "The fact we failed to get something to the governor leaves New Hampshire merchants vulnerable to out of state taxing jurisdictions coming and and saying 'pay me.'"
Rep. Jerry Knirk (D-Freedom) was one of the four Carroll County representatives to vote against SB 1.
"Many of us felt this was a rushed and ramrodded through without a deliberative process," said Knirk, who locally was joined by Lino Avellani (R-Wakefield), Ed Comeau (R-Brookfield) and Edie DesMarais (D-Wolfeboro).
Knirk said conservative representatives voted with him because they felt SB 1 didn't go far enough.
Sununu expressed frustration with the House vote. “The people of New Hampshire sent us to Concord to get things done, and today, the New Hampshire House failed to do their job," Sununu said in a statement Wednesday.
Bradley hopes the Legislature will resolve the issue in a month or so and that Congress will step in.
U.S. Sen. Jeanne Shaheen (D-N.H.) opposed the decision. She and fellow Democrat Sen. Maggie Hassan are filing legislation to overturn the decision.
"N.H. small businesses do not have the time or resources to become tax collectors for other states," Shaheen stated on Twitter.
Democratic gubernatorial candidate Molly Kelly also released a statement slamming the Wayfair decision.
“This Supreme Court ruling is a blow to New Hampshire’s small businesses that should be focused on reaching customers, creating jobs, training employees and boosting local economies across the Granite State — not collecting sales taxes for other states," said Kelly.