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NH man victim of Florida's sales tax gotcha

New Hampshire Union Leader

July 28. 2018 9:38PM

Ralph Epifanio's family visits the iconic boot outside the L.L. Bean flagship store in Freeport, Maine, in 2010. Ralph Epifanio is in the back. From left, are daughter Katherine, wife Stephanie and sons Andrew and Christopher. His daughter Melissa is not present. (Courtesy)

Ralph Epifanio

WEST LEBANON - A retired teacher from Canaan protested loudly upon learning the hard way of a new legal wrinkle that forced him to pay a Florida sales tax on a backpack he bought for his wife at an L.L. Bean store here in New Hampshire's Upper Valley.

A special session of the New Hampshire Legislature last Wednesday was a failure after infighting among tribes in the House of Representatives prevented anything from getting done to defend the Granite State's vaunted status as a state with no broad-based tax.

For five weeks, the state's political elite has been consumed by the landmark South Dakota vs. Wayfair decision of the U.S. Supreme Court that ended a 50-year ban against states collecting sales taxes on purchases made in other jurisdictions.

South Dakota and more than 20 other states pushed this 5-4 decision that highlighted items bought online.

This isn't the only way, however, that states are getting more aggressive and creative when it comes to how they can export their tax base. The clear goal is to collect more money from transactions that don't occur within their boundaries.

Enter Ralph Epifanio, who spent his working life teaching special education for 33 years on Long Island along with other pursuits; he was publisher of a running magazine and author of more than 70 articles on history.

He chose New Hampshire to retire in because of its no-tax image.

"No sales tax. That's why I bought 150 acres here, register my car here, do everything in New Hampshire except hunker down and make it through your winters because my house has no heat," Epifanio said.

"So I spend six months in Florida, and the moment it starts to get too hot and muggy, I'm high-tailing it back to New Hampshire."

Epifanio's sales tax sticker shock at L.L. Bean happened because he was searching for a backpack or a book pack to buy for his wife, Stephanie. Their wedding anniversary is on Monday, and she still works as a tutor, he said.

His wife is back in their winter home in DeLand, Fla.

Last Wednesday, Epifanio spotted the backpack he was looking for in the rear of the L.L. Bean in West Lebanon.

The news got even better when the store kicked in for free the cost to put Stepanie's monogram on the bag and to ship it right to her Florida home once that detailing was done.

As a satisfied Epifanio strode out of the store, he pulled up short and exploded upon reading the receipt.

There it was tacked onto his bill of $79.96, the word "tax" and $5.20 next to it.

That's 6.5 percent.

Why that amount? Florida's sales tax is 6 percent but like many states it permits local jurisdictions to add their own sales taxes, and Volusia County where DeLand is located has a sales tax of .5 percent.

Sticker shock

"I couldn't believe this. I've been sending packages, carloads of stuff from New Hampshire back to other states, my son in Washington, D.C., my daughter last year in Baltimore, to ourselves in Long Island, friends as gifts. Never had to pay any sales tax from here," Epifanio said.

"How could this be?" Epifanio wondered. He questioned whether it was related to the Wayfair decision.

A determined Epifanio pursued more than half a dozen customer service representatives with L.L. Bean and supplied the New Hampshire Union Leader with all of that correspondence.

The answer is it's not related to the Wayfair ruling but another example of states sending tax collectors beyond their borders.

An L.L. Bean representative known as Jayne put it best.

"Good morning Mr. Epifanio, Thank you for reaching out to us regarding your recent purchase. Because the book pack is being shipped to Stephanie in Florida, we are required to charge the Florida sales tax. This is required by law and the sales tax is paid to the state of Florida," Jayne said.

"Had you taken the bag with you, there would not have been any sales tax." If Epifanio had shipped it to his Canaan home after the monogramming was done, he'd have paid no sales tax. Of course, then Epifanio would have had to pay to ship the pack to his wife.

Another L.L. Bean rep named Nancy pointed out this is a recent change.

"I can understand your frustration, however, this is something that L.L. Bean is required to do based on Florida state tax laws. It began on June 1, 2018," Nancy wrote.

As everyone knows, you can go online anywhere in the world and buy something from L.L. Bean.

When it comes to brick and mortar locations, L.L. Bean isn't everywhere. The main and outlet stores are in 17 states that spread from Maine to Utah and from New Hampshire down to Virginia.

There are no stores in Florida and therein lies the rub.

Florida got creative

Florida state law was changed to require that anyone who shipped a product from a store in another state to a consumer in Florida had to pay the sales tax on it.

A third L.L. Bean customer service official named Tania said recent federal law expressly gave states this power to pursue sales taxes in the following states where the chain has no "physical presence."

"Alabama, Hawaii, Oklahoma, California, Kentucky, Texas, Florida, Mississippi and Washington," Tania wrote.

"Sales tax must be collected on all sales occurring in or shipped to customers in those states. This includes sales in all channels: Retail, phone, Web, mail order. We are not able to assist you in not paying tax if an order is shipped to any of the states mentioned above."

Brian McCuller, a lawyer and CPA with Tennessee-based LBMC, wrote that many public officials didn't realize the Wayfair decision will extend beyond online purchases as it expressly invites all states to pursue these sales tax payments based on the lack of a physical presence.

"This decision applies to all companies in any industry including service providers, not just online retailers. Any company that has previously not collected sales tax on taxable sales into a state because they didn't have a physical presence in the state may now have a sales tax collection obligation in that state," McCuller wrote on his blog right after the ruling.

Florida's elected leaders and media outlets were among those who cheered the loudest at the Wayfair ruling since at $24 billion a year its sales tax is by far the single largest source of money for the Sunshine State.

"You've got to have a modern sales tax, so we don't have to have any other kind of tax that people don't want," said Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group. "So, by relying on a sales tax, you have to make sure it's modern and up to date."

Epifanio said state officials and the congressional delegation need to wake up to the reality these states could erode the entire New Hampshire Advantage if Congress fails to pass a federal law to protect sales coming from New Hampshire, Montana, Alaska, Delaware and Oregon where there is also no sales tax.

"It's not much money, but it's the tip of the iceberg," Epifanio said.

"We are approaching the fall when 1.5 million people come to New Hampshire to look at the leaves. When it rains, they go shopping. If I've gotta pay a sales tax to ship that item back home why am I buying it here? This is something New Hampshire needs to get a handle on and in a hurry."

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