On January 8, 2025, New Hampshire introduced a significant bill, HB 135, aimed at shielding local businesses from the complexities of sales tax collection mandated by other states. The legislation asserts that “no New Hampshire business shall be required to collect sales taxes for a foreign jurisdiction unless mandated by Congress or New Hampshire law.”
This stance aligns with the state’s long-standing opposition to requiring its retailers to collect sales taxes for out-of-state customers, highlighting concerns about the intricate and often burdensome nature of state sales tax regulations.
Scott Peterson, vice president for tax policy and government relations at Avalara, emphasizes New Hampshire’s consistent position on this issue. He explains, “They have always been the most vocal against the belief that their in-state retailers should have to collect sales tax on behalf of customers in other states.”
Peterson elaborates that New Hampshire’s retailers find the task of navigating varying sales tax regulations across states unnecessarily complicated, prompting the state to protect their interests. However, Peterson cautions that such legislation may face challenges, stating, “One state can’t simply pass a law saying that no other state can force a New Hampshire retailer to collect their sales tax.” Instead, he describes HB 135 as an appeal for neighboring states to simplify compliance processes for New Hampshire businesses.
This legislative effort has sparked a complex dialogue among states. Peterson notes that state attorneys general and governors often hesitate to criticize one another publicly regarding these types of issues. “Both Democrats and Republicans agree that retailers need to comply with existing state-by-state sales tax laws,” he says, indicating a bipartisan recognition of the inherent challenges.
Currently, there is no active legal process to challenge this proposed legislation. Peterson adds that, should disputes arise between state jurisdictions, they would likely escalate directly to the Supreme Court.
The Uncertain Paths Ahead
As New Hampshire navigates this potentially contentious situation, numerous questions remain unanswered:
- Will New Hampshire soften the language of HB 135 to facilitate meaningful reforms?
- How willing are other states to adapt to accommodate New Hampshire’s regulations?
Peterson suggests that the likelihood of other states adjusting their policies to align with New Hampshire’s legislation is low. He highlights that legal resolution may be the most productive route, stating, “Probably the only way to deal with the present proposed legislation is to attempt to drag neighboring states into court.”
The future of HB 135 remains uncertain, with the possibility that it could linger for a year or more unchallenged. Peterson points out that it is likely that eventually, another state may pursue legal action to enforce its sales tax collection against New Hampshire retailers. Such cases could arise from out-of-state businesses seeking to compel compliance based on the revenue owed to their respective states.
Nevertheless, he speculates that New Hampshire retailers may resolve to comply with other states’ regulations despite the proposed legislation. This approach would allow them to avoid potential legal pitfalls — a pragmatic decision, given the complexities of breaching state laws.
“There is a risk for retailers who could find themselves liable for back sales taxes if they wait for New Hampshire’s law to play out in court,” Peterson warns. He concludes by noting that “it’s clear that New Hampshire has not fully considered the burden that this bill may impose on their in-state retailers.”
As the situation develops, it will be crucial for New Hampshire businesses and policymakers to stay informed about the implications of HB 135, its potential legal challenges, and how best to navigate the evolving landscape of sales tax legislation.
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