Senators from New Hampshire and Oregon, two of five states with no sales tax, are calling for federal legislation to delay collection of sales taxes on internet transactions, as the U.S. Supreme Court’s decision in South Dakota v. Wayfair is expected to take effect on Jan. 1.
In a 5-4 vote on June 21, the Supreme Court ruled that states like South Dakota, which has a sales tax, could collect that tax from online retailers in other states that sell to South Dakota customers, including the five states like New Hampshire that do not have a sales tax of their own.
Current law allows those sales taxes to be collected only from online retailers who have a “brick and mortar” presence in the state collecting the taxes.
In a Nov. 28 letter to Senate Majority Leader Mitch McConnell and House Minority Leader Chuck Schumer, the four senators urge Congress to pass a law delaying implementation of the Wayfair decision for another year and prohibiting any collection of retroactive payments.
The letter is signed by New Hampshire Sens. Jeanne Shaheen and Maggie Hassan, and Oregon Sens. Ron Wyden and Jeffrey Merkley.
They note that some states have established implementation dates as soon as Jan. 1, 2019.
“As the Government Accountability Office has noted, integrating sales tax collection will require significant time and ‘labor intensive’ start-up costs for small businesses,” they write. “We do not believe it is realistic to ask small businesses to have these new systems set up shortly after the holiday season, which is the busiest time of year for retailers. This is especially true in states where firms have no experience collecting sales taxes.”
The four senators argue there is bipartisan support for a “runway or phase-in period,” for small businesses to comply with any new collection requirements.
“We also believe that a statutory ban on retroactive state sales tax collection is necessary to ensure that small businesses are not punished by cash-strapped states they have no relation to,” according to the senators.
The news of the Wayfair verdict in June triggered a flurry of activity at the State House, where Gov. Chris Sununu launched a task force to develop a response strategy. That task force recommended state legislation that would erect barriers to the collection of sales taxes by other states, but that bill failed in a special session of the state legislature in July.
Opponents of the bill argued that it was hastily conceived and actually created a road map for states that want to collect from New Hampshire.
After the bill was defeated, Sununu decided to take action on his own. The state set up a Wayfair hotline for businesses and launched a website, nheconomy.com/nosalestax, to serve as a central clearinghouse for information on the court decision.
The Department of Justice was directed to make Wayfair inquiries a top priority and assigned Senior Assistant Attorney General Frank Fredericks to handle them.
On Wednesday, Fredericks said the state received its first “legitimate contact” from a New Hampshire business regarding Wayfair-related issues on Nov. 20.
The online retailer, whom Fredericks declined to identify, was contacted by the state of Indiana, which passed a law on sales tax collection in October.
“The communication wasn’t a demand for payment or a demand to audit. It was more informational, so at this point we are just keeping track of what states are active and what they are doing.”
Any New Hampshire business contacted about sales taxes by someone claiming to be a taxing authority is asked to call the Department of Justice at 888-468-4454 or 603-271-3643.