Good luck with that tax thing, Bay State

New Hampshire has long stood out among New England states for its lack of “broad-based” taxes–both sales and income. Its slightly smaller but much more populous (6.4 million vs. 1.3 million) neighbor to the south, Massachusetts, has a 5% sales tax, the fifth-largest urban agglomeration in the U.S., a history of pissing away money, and a big-ass budget deficit (about $1.1 billion). It also has shitty roads, obnoxious motorists, people with indecipherable accents, and a great marathon or two, and is home to both most of my best friends and a good many of my better running performances, all of which is beside the point.
It should not surprise anyone that New Hampshire retailers set up shop in border areas. Even in relatively low-population West Lebanon (near Dartmouth College), big-box stores have opened their doors in locations convenient to several exits off I-91 and I-89 across the Connecticut River from Vermont. But the commercial potential in these areas pales in comparison to that along the MA-NH border along I-95 (Portsmouth), I-93 (Salem), and the Everett Turnpike (Nashua), locales to which people have flocked for years. During both skiing and boating seasons, even in a shitty economy, the weekend traffic across the MA-NH border is massive.
Now, in the culmination of years of simmering resentment, the Massachusetts Department of Revenue is filing suit in New Hampshire to try to compel people from the Bay State to pay the 5% tax on certain items purchased north of the border:

The Massachusetts Department of Revenue has ordered Town Fair Tire Centers, a Connecticut-based company with stores in Massachusetts and New Hampshire, to charge Bay Staters a 5 percent sales tax on purchases in New Hampshire. The Bay State requires residents to pay a little-known “use tax” when they buy certain items in New Hampshire for use in Massachusetts.
This case puts the onus squarely on the company.
“The retailer is not in control of what the customer does with the product,” said David J. Nagle, an attorney representing Town Fair Tire Centers.
The Massachusetts Department of Revenue reviewed sales five years ago at Town Fair Tire locations in Manchester, Nashua and Salem. It then levied a $108,947 tax assessment. The company appealed, but the Massachusetts Appellate Tax Board found a “definite link” between Massachusetts and Town Fair Tire.
“The purchases at issue in this case were not cash-and-carry transactions, but instead involved tires installed on vehicles operated by Massachusetts residents,” the board concluded last June.

Well, no shit. Welcome to the real world.
The litigants claim that they are not trying to set the stage for a general policy:

“In this case, where it was Massachusetts cars with Massachusetts plates that were registered in Massachusetts, we felt we couldn’t ignore it,” Revenue Department spokesman Robert Bliss said. “It does not have widespread applicability, in our view. It does not address someone going up to Best Buy in Salem, New Hampshire, and buying a widescreen TV, because you can’t be sure if they’re not taking it to their mother in Concord, New Hampshire.”

Some have seen through this veneer of bullshit:

Two law professors who studied the case disagree.
“Taken to its logical extreme, that rule would require a nationwide retailer to determine the residence of all its customers,” professors John Swain and Walter Hellerstein wrote in the trade publication State Tax Notes.
They added: “Indeed, a nationwide retailer might be asked to obtain representations about the place of intended use of each and every product in a customer’s shopping cart.”

Complicating the issue is the fact that Connecticut (6%) and Rhode island (7%) both have a higher sales tax than Massachusetts does. Does this mean that Massachusetts retailers need to check customers’ driver licenses and collect the extra tax where necessary?
Also, people who live in Mass. and buy things in N.H. are already expected to report this every April 15 (don’t laugh…OK, go ahead and laugh).
I’m no law scholar, but I suspect that this is complete horseshit and will go exactly nowhere.

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  1. #1 by Gray Gaffer on February 6, 2009 - 1:16 am

    It gets worse. On the Internet. For example, here in WA State, a web based business has to charge tax to WA customers based on their precise address. This is because sales tax varies by city, and by incorporation status of the neighborhood. Several other states, including NY, already do this, and more are getting ready. It won’t be long before ‘use’ tax gets charged wherever the vendor is located. And having had to help implement that particular site, I can tell you it is not easy, and the economic consequences of getting it wrong can bankrupt a small business. WA also levies a use tax in general. More, they estimate what every business would have spent statistically on out of state purchases and send you a bill. You have to then show why you think the bill should be different. No laughing, horse-shit certainly, but it is already law and being enforced.

  2. #2 by Gray Gaffer on February 6, 2009 - 1:16 am

    It gets worse. On the Internet. For example, here in WA State, a web based business has to charge tax to WA customers based on their precise address. This is because sales tax varies by city, and by incorporation status of the neighborhood. Several other states, including NY, already do this, and more are getting ready. It won’t be long before ‘use’ tax gets charged wherever the vendor is located. And having had to help implement that particular site, I can tell you it is not easy, and the economic consequences of getting it wrong can bankrupt a small business. WA also levies a use tax in general. More, they estimate what every business would have spent statistically on out of state purchases and send you a bill. You have to then show why you think the bill should be different. No laughing, horse-shit certainly, but it is already law and being enforced.

  3. #3 by Tony P on February 6, 2009 - 1:42 am

    That’s ok, here in RI we have a higher tax rate for purchases than MA, except ours doesn’t apply to clothing, books, etc.
    But for big purchases everybody I know goes to either Seekonk, MA or North Attleboro, MA to make their big ticket purchases.
    The big joke is that under RI law, you’re on you honor to report the purchase and pay the 2% difference in taxes, they cover this under a think called a ‘use tax’.
    And of course RI is signed on with a group arguing that even entities that don’t have a brick and mortar presence in the state have to collect sales tax when RI residents purchase goods from them online.
    I’m sorry but Uniform Commercial Code pretty much leaves interstate taxation to the federal government, not the states.

  4. #4 by rpenner on February 6, 2009 - 2:08 am

    California wants residents to pay what they owe when they save on sales taxes by purchasing out of state. I think this is also called ‘use tax.’

  5. #5 by Epicanis on February 6, 2009 - 7:26 am

    You should be ashamed of yourself for picking on Massachusetts, who is surely only imposing these taxes to pay for vital services for its citizens.
    Do you have any idea how much Boston alone spends on emergency police bomb-squad response to protect everyone from the dangers of blinking lights?!?!?

  6. #6 by Luci on February 6, 2009 - 1:22 pm

    Use tax is rather common and boring. If Mainers skip over to NH to buy stuff, they’d be wise to pay attention to how much is spent and where. Purchases over $1000 are expected to be reported. Don’t ever assume NH retailers and internet sellers won’t tell Revenue Services.
    In the pursuit of tax collection, should we be surprised at any show of zeal by the state and local collectors?
    MA is naturally only using all those tire tax revenues to keep the road routes for the Boston Marathon in tip top shape. (PS -My ex beat your best time by 3 min 9 sec, albeit some years in advance of your cool 2001 time)

  7. #7 by Luci on February 6, 2009 - 1:22 pm

    Use tax is rather common and boring. If Mainers skip over to NH to buy stuff, they’d be wise to pay attention to how much is spent and where. Purchases over $1000 are expected to be reported. Don’t ever assume NH retailers and internet sellers won’t tell Revenue Services.
    In the pursuit of tax collection, should we be surprised at any show of zeal by the state and local collectors?
    MA is naturally only using all those tire tax revenues to keep the road routes for the Boston Marathon in tip top shape. (PS -My ex beat your best time by 3 min 9 sec, albeit some years in advance of your cool 2001 time)

  8. #8 by Albigensian on February 6, 2009 - 2:06 pm

    “New Hampshire has long stood out among New England states for its lack of “broad-based” taxes–both sales and income” — but, surely that’ll change when NH’s Supreme Court finds a constitutional requirement for such taxes (because the rights of the poor are being unconstitutionally abridged by not providing adequate services to them, perhaps).
    In any case, Massachusetts should just pass a per-tire tax for the privilege of driving on Mass. roads. A tax certificate must be displayed on all vehicles, with a whopping fine for replacing the tires without replacing the certificate. It would, of course, apply to non-residents as well– anyone who uses the state’s roads.
    And, as far as I know, Chicago, IL currently has the highest salex tax in the USA, at 10.25 percent. There’s also an extra 12.75 cents per gallon tax on gasoline sold in Chicago (above state and federal motor fuel tax. And, a tax on bottled water.

  9. #9 by Brian X on February 6, 2009 - 9:02 pm

    Businesses pay attention to use taxes in MA because they’ll get whacked at tax time if they don’t; for everyone else, no one cares enough to report it. In any case, I can’t see this as holding up in court; MA has no jurisdiction across the border.

  10. #10 by Brian X on February 6, 2009 - 9:02 pm

    Businesses pay attention to use taxes in MA because they’ll get whacked at tax time if they don’t; for everyone else, no one cares enough to report it. In any case, I can’t see this as holding up in court; MA has no jurisdiction across the border.

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