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December 11. 2012 11:53PM

NH may benefit as Mass. taxes Internet sales


 

Internet sales giant Amazon.com Inc.'s purchase of a Massachusetts company a mere 15-mile jaunt from the New Hampshire border could mean more economic refugees from the Bay State spending their money at tax-free Granite State businesses.

"I think there could be an opportunity for New Hampshire retailers," said Nancy Kyle, executive director of the state Retail Merchants Association.

Amazon's recent purchase of robotics firm Kiva Systems of North Reading, Mass., for a reported $775 million gave the company a physical presence in Massachusetts. Under U.S. Supreme Court rulings, a company must have a physical presence in a state before it can be forced to collect a sales tax on customers from that state.

On Tuesday, Massachusetts Gov. Deval Patrick and Amazon agreed that Amazon will start assessing the sales tax on purchases made by Massachusetts customers beginning in November 2013. The sales tax in Massachusetts is 6.25 percent of the purchase price.

Some in New Hampshire are concerned that the agreement could give traction to proposed federal legislation that would force Internet businesses here to become tax collectors for states that, unlike the Granite State, impose a state sales tax.

Kyle said the retailers association doesn't take a position on the so-called Main Street Fairness Act because of the implications for businesses with an Internet presence.

"Our New Hampshire-based retailers do not have an infrastructure to collect a state tax," Kyle said. "There would have to be a type of concession for sales-tax-free states," she said.

2011 sales study

A study by a Gloucester, Mass. firm, based on 2011 sales figures, projected that if Massachusetts levied sales tax on all Internet purchases, New Hampshire stores would have captured 10 percent of the business from Bay Staters looking to avoid the tax.

The study was done by Cape Ann Economics for the Massachusetts Main Street Fairness Coalition, which backs imposing that state's sales tax on Internet transactions.

Cape Ann's economists projected if all Internet sales in Massachusetts become subject to the sales tax, retail sales in New Hampshire would have seen a $2 billion spike in 2011, and could increase to $3.8 billion dollars annually by 2020.

Ultimately, the impact of the Amazon agreement in New Hampshire depends on consumer choices in Massachusetts -- whether people looking to avoid that state's sales tax turn to other e-retailers or opt to drive over the border to make their tax-free purchases in person at New Hampshire retailers.

Unfair burden?

Patrick and Amazon called on Congress to enact legislation to allow states to impose their sales taxes on residents who buy from out-of-state online retailers.

Forty-five states, -- as well as a variety of territories, counties and cities -- impose state sales taxes. Kyle said just keeping track of the tax that would have to be charged for individual states would be a complicated undertaking for Granite State companies involved in e-commerce.

Under a 1967 Supreme Court decision, a retailer must have a physical presence in a state to be required to collect that state's sales and use taxes.

Revisiting that decision in 1992, the justices upheld the ruling. But the court has said since its decision was based on the Constitution's due process clause, Congress is "free to decide whether, when, and to what extent the States may burden interstate mail order concerns with a duty to collect" sales taxes in the buyer's state.

In hearings in August, Sen. Kelly Ayotte spoke against passing the bill to let sales tax states charge a sales tax on purchases from out-of-state e-commerce companies.

"For non-sales-tax states like New Hampshire, this is simply an unfair burden for our businesses to bear," she said.

A spokesman for Gov.-elect Maggie Hassan used the occasion to repeat Hassan's opposition to a sales tax in New Hampshire.

"Governor-Elect Hassan believes New Hampshire's lack of an income or sales tax is a competitive advantage for our state's economy," spokesman Mark Goldberg said in an e-mail response.

Massachusetts becomes the ninth state to levy a sales tax on amazon.com purchases, joining California, Kansas, Kentucky, New York, North Dakota, Pennsylvania, Texas and Washington, the company said.

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Bill Smith may be reached at wsmith@unionleader.com.



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