New Hampshire Senate Bill 242 – Collection of Sales and Use Taxes
On July 19, 2019, Governor Sununu signed a bill into law that attempts to protect New Hampshire businesses from having to collect and remit certain sales and use taxes for other states.
Last year’s ruling in the South Dakota v. Wayfair case by the U.S. Supreme Court cleared the way for states to require businesses outside of their borders to collect and remit a sales tax on their behalf, even if they do not have a “physical presence” in that state, such as a store or warehouse.
The recent New Hampshire law requires taxing jurisdictions outside of New Hampshire to notify the New Hampshire Department of Justice at least 45 days before such jurisdiction attempts to collect any taxes from a New Hampshire company. The Justice Department will then review the legality of the tax and file suit if it deems the tax request to be unconstitutional.
Although this legislation appears to create some hurdles or barriers to the collection of sales taxes, we do not believe it alleviates the responsibility to do so under the current federal law.
The decision to not comply with required collection and remittance could be very costly. Many state tax laws allow the taxing authority to impose penalties and interest “per day” for remitting sales taxes late. If a taxing authority ultimately makes its way through the New Hampshire legal hurdles and prevails, business owners could be faced with substantial fines and penalties.
We encourage those businesses with sales taking place outside of New Hampshire to research and familiarize themselves with the new sales tax requirements under the Wayfair decision and determine if they should begin or continue to collect and remit sales taxes to ensure they remain in compliance with federal law. The risk is that any sales tax which is not collected will become the responsibility of the seller. Therefore, the failure to collect from a purchaser could have significant economic consequences.