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.