On­line taxes irk sales-tax free states

New Hamp­shire, four other states don’t im­pose own sales tax.

Austin American-Statesman Sunday - - TECH SUNDAY - By Elaine Povich

The “Live Free or Die” state of New Hamp­shire is also the “Live Sales-Tax Free” state, one of only five that do not col­lect any tax on re­tail pur­chases. And de­spite a U.S. Supreme Court rul­ing in June al­low­ing states to col­lect sales taxes when their res­i­dents buy on­line, some of New Hamp­shire’s on­line re­tail­ers don’t want to help other states col­lect their money.

New Hamp­shire law­mak­ers tried a cou­ple of months ago to write a law that would have set up a se­ries of hur­dles for other states that want New Hamp­shire re­tail­ers to col­lect sales tax on their res­i­dents’ pur­chases. The bill called for out­side tax author­i­ties to first regis­ter with the New Hamp­shire at­tor­ney gen­eral, pay a fee and then prove the con­sti­tu­tion­al­ity of the sales tax. The leg­is­la­tion failed — partly be­cause of fears it would ex­pose the state’s small busi­nesses to lit­i­ga­tion from other states — but the re­sis­tance re­mains.

“It’s ex­tremely un­for­tu­nate that re­tail­ers who do not have to col­lect taxes for the state of New Hamp­shire are go­ing to be put in the po­si­tion of hav­ing to col­lect for other states,” said Nancy Kyle, pres­i­dent and CEO of the New Hamp­shire Re­tail As­so­ci­a­tion, rep­re­sent­ing 900 busi­nesses in the state. “This is a very dif­fi­cult thing for small re­tail­ers to im­ple­ment.”

The New Hamp­shire case il­lus­trates the com­plex­i­ties of col­lect­ing on­line sales taxes, es­pe­cially for re­tail­ers in New Hamp­shire and the other four states — Alaska, Delaware, Mon­tana and Ore­gon — that don’t im­pose their own sales tax. The Tax Foun­da­tion, a non­profit study group, es­ti­mates there are about 10,000 sales tax ju­ris­dic­tions in the coun­try, in­clud­ing not only state gov­ern­ments but also city, county, tribal and spe­cial district gov­ern­ments. That poses spe­cial dif­fi­cul­ties for re­tail­ers in non-sales-

tax states.

“Delaware does not im­pose a sales tax, and we will not be en­forc­ing any form of sales tax or use tax against out-of-state sellers,” said Les­lie Poland, com­mu­nity re­la­tions co­or­di­na­tor for the Depart­ment of Fi­nance.

How­ever, Delaware Di­rec­tor of Rev­enue Jen­nifer Hud­son said in a state­ment that ven­dors in Delaware “may be re­quired by other states to col­lect sales taxes due in those ju­ris­dic­tions on re­mote sales made to res­i­dents of those ju­ris­dic­tions.” She did not say how that would be en­forced.

The Mon­tana Depart­ment of Rev­enue is­sued a state­ment ad­vis­ing on­line re­tail­ers that sell to buy­ers out­side the state to “please seek com­pe­tent le­gal ad­vice on how to pro­ceed with col­lect­ing and re­mit­ting sales tax.” The depart­ment did not pro­vide any guid­ance.

Christo­pher Galdieri, a pro­fes­sor at St. Anselm Col­lege in Manch­ester, New Hamp­shire, who pays close at­ten­tion to state pol­icy, pre­dicted that many New Hamp­shire re­tail­ers won’t col­lect any sales tax un­til they get clearer di­rec­tion.

“A lot of these busi­nesses are fig­ur­ing, ‘When some­body tells me when to start col­lect­ing, and how, I’ll do it, but un­til then I won’t worry about it,’” Galdieri said.

The New Hamp­shire Leg­is­la­ture likely will re­visit the failed sales tax bill, Galdieri said, be­cause be­ing an­ti­tax is “part of the state’s iden­tity,” and peo­ple don’t want to be iden­ti­fied with col­lect­ing taxes, even for other states.

Colorado is a prime ex­am­ple of a state with mul­ti­ple sales tax ju­ris­dic­tions that could pose cal­cu­la­tion prob­lems for on­line re­tail­ers beyond its bor­ders.

Colorado’s Rev­enue Depart­ment an­nounced re­cently that it will start re­quir­ing out-of-state on­line sellers with at least 200 trans­ac­tions in Colorado, or $100,000 worth of sales an­nu­ally, to col­lect and re­mit Colorado sales taxes. But Joseph Bishop-Hench­man, ex­ec­u­tive vice pres­i­dent at the Tax Foun­da­tion, wrote that Colorado has a “big prob­lem” be­cause it re­lies on its 349 county, city and district lo­cal sales tax ju­ris­dic­tions to over­see the col­lec­tion of sales taxes. That fact makes it dif­fi­cult for out-of-state on­line re­tail­ers to cal­cu­late and send in the cor­rect tax to the cor­rect ju­ris­dic­tion.

Other states that levy a sales tax are en­coun­ter­ing their own com­pli­ca­tions. For ex­am­ple, South Dakota, the state that started it all by bring­ing the South Dakota v. Way­fair, Inc. case to the U.S. Supreme Court, had to de­lay on­line sales tax col­lec­tion un­til it called a spe­cial ses­sion of the Leg­is­la­ture to pass a new law ex­plic­itly al­low­ing it. Repub­li­can Gov. Den­nis Dau­gaard signed the mea­sure ear­lier this month.

But in five states — Hawaii, Maine, Mis­sis­sippi, Ok­la­homa and Ver­mont — col­lec­tions have al­ready be­gun, ac­cord­ing to the Sales Tax In­sti­tute, a train­ing and ed­u­ca­tion firm for busi­nesses. A dozen more will start Oct. 1, fol­lowed by oth­ers in Novem­ber and Jan­uary.

“There are now 30 states (out of 45 states and D.C. with a sales tax) that have an­nounced en­force­ment or have leg­is­la­tion” in the works, said Diane Yet­ter, founder of the Sales Tax In­sti­tute. She said Cal­i­for­nia and South Carolina also plan to pro­ceed but have not yet ap­proved leg­is­la­tion.

“States have moved quickly,” she said. “A few be­lieve they need to pass en­abling leg­is­la­tion, but most re­cently more are mov­ing for­ward through reg­u­la­tions rather than leg­is­la­tion. It re­ally de­pends on how the state’s cur­rent def­i­ni­tion of re­tailer do­ing busi­ness is writ­ten.”

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