The American Spectator - Political Hay
"The Tentacles of Taxachusetts"
By Daniel J. Flynn on 5.13.2009
Hard times breed harebrained schemes. This is especially true, whether one speaks of individuals, businesses, or governments, when it comes to money. As the economy continues to shrink, elected officials continue to devise ever more imaginative rackets to siphon money from the shrinking economy.
Washington, D.C. Mayor Adrian Fenty proposes a $51-a-year "streetlight user fee." A state legislator in Oregon, home to such macro microbrews as Rogues Ales and Widmer, wants to tag a $50 tax on every full barrel of beer produced in, or imported to, his state. Empire State assemblyman Felix Ortiz, perhaps the nation’s most prolific author of vice taxes, has a litany of bills before the New York state legislature imposing a $10 tax on visitors to strip clubs, a 25¢-cent tax on bottles of beer and wine, and a fatso tax on soda, sweets, and video games.
The tax schemes leave observers amazed both at the ingenuity behind them and at the idiocy in their counterproductive, killing-the-goose-that-lays-the-golden-egg mentality that primarily targets commerce. The money grab that beats all others in its outside-the-box thinking is the demand by Massachusetts that out-of-state stores collect sales taxes for the Bay State.
Last week, Massachusetts' Supreme Judicial Court heard arguments in Town Fair Tire v. Massachusetts. In the coming months, the Supreme Judicial Court will decide the issue at hand: whether Massachusetts has the right to force businesses in New Hampshire to collect Bay State sales taxes when selling items to Massachusetts residents. Given the recent vote in the Massachusetts House of Representatives to increase sales taxes by 25 percent, the impulse to dam the flood of Massachusetts shoppers into sales-tax-free New Hampshire grows stronger among Bay State officials perpetually frustrated with potential tax dollars flowing north across the border.
Town Fair Tire v. Massachusetts revolves around a tax bill presented to three New Hampshire Town Fair Tire (TFT) stores by the Massachusetts Department of Revenue. The bill stems from a Massachusetts audit of the New Hampshire stores covering the period of October 2000 to April 2003. The Bay State estimated that it lost revenue justly owed to it due to more than 300 border-crossing shoppers, and demanded that TFT -- which has numerous stores in Massachusetts as well -- pony up $108,947 in taxes, interest, and penalties.
TFT's invoices revealed customers listing Massachusetts addresses. "Based upon the evidence, and in the absence of evidence to the contrary, the [Tax] Board inferred that the vehicles owned or operated by Massachusetts residents also bore Massachusetts registration plates ('license plates') and certificates of inspection ('inspection stickers'), which provided additional evidence to TFT of the intended place of use of the tires," the state's appellate tax board judged. Massachusetts assumed that the addresses on the invoices were connected to cars with Massachusetts plates and inspection stickers, the presumed sight of which should have prompted tire technicians to alert clerks to assess a 5 percent tax upon the sale. But New Hampshire sales clerks don't even collect sales taxes for their own state's government. Could their southern neighbors really have expected them to collect sales taxes for Massachusetts?
Massachusetts' appellate tax board ruled that TFT’s stores just over the New Hampshire border should have collected sales taxes for Massachusetts because "TFT benefitted from the many services provided by the Commonwealth, including fire and police protection, road maintenance and other municipal services by virtue of its retail operations in the Commonwealth." But the "retail operations" that benefitted from such services collect and remit Massachusetts sales taxes. The case is about the practices of three Town Fair Tire stores in New Hampshire, not the twenty-five TFT locations in Massachusetts.
The "use tax" law Massachusetts cites is more than forty years old and has never been interpreted in this manner before. The onus has been on Massachusetts taxpayers, rather than out-of-state merchants, to remit the "use" tax. New Hampshire vendors, then, could not have foreseen the new interpretation of this old law. This is doubly the case given that the tires purchased in the Granite State would not be "used" in the Bay State (if at all) until after the transaction. Aside from all this, there is the Orwellian description of a tax collected at the point of sale as a "use tax." One can call a tax collected during a trade of money for goods a "use" tax. But it's still a sales tax.
Whatever one calls it, the cross-jurisdictional tax blatantly violates the U.S. Constitution. Through its commerce clause, that document ensured a massive free-trade zone that has for more than two centuries prevented interstate trade wars of the sort that Massachusetts has launched. Massachusetts, in a greedy grab for more dollars, has imperiled a key component of American prosperity.
New Hampshire has responded through a bill that forbids its businesses to share customer information with other states. The state senate passed it unanimously, a house committee unanimously referred the bill to the larger body for consideration next week, and the governor supports the measure. "I am greatly disturbed that Massachusetts has ordered a retail store in New Hampshire to collect and remit an out-of-state use tax on certain over-the-counter sales at the store's New Hampshire locations," New Hampshire Governor John Lynch explains. "We should not allow Massachusetts to turn New Hampshire businesses into tax agents for Massachusetts."
If the case seems too preposterous to pass legal muster, consider that the muster it must pass is that of the Massachusetts Supreme Judicial Court. The same body that five years ago divined a right to gay marriage in the oldest constitution in the world now considers whether to read the commerce clause out of the U.S. Constitution. The Massachusetts Supreme Judicial Court's willingness to do the former suggests that it is quite capable of doing the latter.
Daniel J. Flynn, the author of A Conservative History of the American Left, blogs at www.flynnfiles.com.
Gov. John Lynch, center, signs into law a bill that saves New Hampshire businesses from collecting Massachusetts’ sales tax on purchases in New Hampshire stores. He is surrounded by state representatives and business owners during the signing ceremony at Rockingham Electric in Newington on Thursday (7/9/2009). (Scott Yatesfirstname.lastname@example.org).
"Lynch signs bill to protect Granite State against Massachusetts tax: N.H. declines tax collection for Massachusetts"
By Dave Choate - email@example.com - July 14, 2009
NEWINGTON — Calling a Massachusetts lawsuit that could require New Hampshire businesses to collect sales taxes on goods sold here on behalf of its neighbor "outrageous," Gov. John Lynch came to the Seacoast to sign a bill into law Thursday (7/9/2009) to protect Granite State businesses from having to collect taxes for any other state.
Flanked by legislators and local business people at a ceremonial signing at Rockingham Electrical Supply Co., Lynch spoke about the protections for businesses gained in Senate Bill 5, which counters a lawsuit by state of Massachusetts. The lawsuits seeks $108,000 from Connecticut-based retailer Town Fair Tire Centers, which has locations in Seabrook and Portsmouth. Massachusetts claims these stores and others in New Hampshire failed to collect its "use" tax from customers.
The lawsuit drew sharp criticism Thursday (7/9/2009) from those in attendance in Newington. Many said New Hampshire should not have to do the tax collecting work of another state.
Portsmouth Chamber of Commerce President Doug Bates said a requirement that New Hampshire collect sales taxes for Massachusetts could hurt revenues for New Hampshire businesses, who rely on sales from out-of-staters who drive over the border to buy in "tax-free New Hampshire."
"It's one more attack on the New Hampshire advantage," he said.
Lynch called New Hampshire business- and consumer-friendly, and condemned the burden he said businesses would face from having to record the residence of customers and provide the information to out-of-state tax collectors, essentially leading to the collection of sales tax for Massachusetts.
Lynch noted that Senate Bill 5 was passed with support of a wide range of legislators and residents. He added that the fact that the bill was not submitted until partway through the current legislative session showed that it was an important issue with plenty of support among lawmakers.
"There's broad support for this bill," the governor said.
When asked about Massachusetts' response to New Hampshire's new law, Lynch said the state had recently increased its own sales tax. The Boston Globe reported in May 2009 that the increase was from 5 percent to 6.25 percent (effective 8/1/2009).
"We encourage them to continue in that direction," he said, drawing laughter from those in attendance.
State Sen. Maggie Hassan, D-Exeter, a sponsor of the bill, said the measure was needed to shield the state's right to set its own tax structure.
"This protects businesses and it protects consumers," she said.
According to the law, "The state of New Hampshire does not impose a sales tax on customers making purchases of goods and services in New Hampshire, nor on goods and services purchased by its residents out of state for use, storage, or consumption in New Hampshire."
Material from The Associated Press was used in this report.
Cars, many from Massachusetts, fill the parking lot at Market Basket in Seabrook on Saturday, August 1, 2009. (Photo by Scott Yatesfirstname.lastname@example.org)
"Seabrook, N.H. parking lots 50 percent Mass. plates"
By Gina Carbone / Portsmouth Herald, Sunday, August 2, 2009, www.bostonherald.com - Northeast
SEABROOK, N.H. — Donna Jameson isn’t happy about the 25 percent sales tax hike that went into effect Saturday in the Bay State, reports the Portsmouth Herald.
"I think it stinks," Jameson said. "It’s really awful."
But the Amesbury, Mass., resident isn’t worried for herself. As a border resident, the jump from 5 percent to 6.25 percent won’t affect her too much, since she’s been shopping in sales tax-free New Hampshire for years — including an Aug. 1 trip to the Seabrook Kohl’s.
"I’m upset for the other people who can’t do what I do," she said, including the elderly and disabled who have limited transportation options. "The older people. It’s really going to affect them."
According to the Massachusetts Senate, the tax hike will generate $633 million, with $80 million more from expanding the sales tax to alcohol purchased in grocery and package stores.
But others argue the tax will only push more shoppers to the Granite State.
"Maybe we should call this the New Hampshire economic stimulus bill," Republican state Sen. Robert L. Hedlund of Weymouth, Mass., told the Boston Globe.
Parking lots for the larger stores off Route 1 in Seabrook were just about 50/50 between Mass. and N.H. plates on Saturday. Many of the shoppers, like Jameson, were border town residents who regularly drive north to save money.
"I always come here anyway," said Michelle Drolet of Amesbury, while shopping at Kohl's. "I'm p—-ed off at the tax hike, though."
"I think it'll affect a lot of people, especially in the economic slump we're in," said Geraldine Berry of Amesbury.
Joanne Meade of Holliston, Mass., stopped at Lowe's during a visit to the dog track. The tax hike "certainly will be" an issue for her family. "We're very unhappy with it. I feel bad for people who are unemployed right now."
John Cleary owns homes in West Newbury, Mass., and Wolfeboro, N.H., and regularly shops in Seabrook. But that doesn't mean the tax won't affect his life.
"It's going to," Cleary said. "It's going to be a major issue."
Jamie Brassil of Merrimac, Mass., brought her kids to the Seabrook Wal-Mart to buy diapers and bathing suits. They always shop there, so she wasn't too concerned about the tax hike affecting her. "It might," she said.
Clara and Jere Hovey of Newburyport also shop frequently at the Wal-Mart. Clara called the tax "awful." But what can they do about it? "Vote him out," Jere said. "Vote (Gov. Deval) Patrick out!"
Susan Pratt of Merrimac spent about $30 at the Lowe's in Seabrook, choosing it over the Lowe's in Methuen, Mass.
"I feel bad for the small business people," Pratt said. "There are times that I will shop at the small shops in Newburyport because I want them to stay in business." Anyone who lives close to the border is definitely going to go to New Hampshire, she said.
"The only time I shop in Massachusetts is if it's an emergency and I'm out of something," Pratt said. "All the people that I've talked to — I think people are just so tired of paying the high taxes."
"Top Bay State court rebuffs cross-border tax grab"
By THE ASSOCIATED PRESS via The New Hampshire Union Leader, August 25, 2009
Boston – Massachusetts' highest court has ruled the state has no right to collect taxes from a retail chain that sold tires to Massachusetts residents in New Hampshire.
Massachusetts authorities said their case was narrowly focused, but others saw broader implications. Massachusetts recently raised its sales tax; New Hampshire has none.
The state Department of Revenue tried to collect about $109,000 in taxes from Connecticut-based Town Fair Tire Centers after a records examination found 313 invoices in the New Hampshire stores listed Massachusetts addresses for buyers.
The state said it was owed the sales tax those customers would have been charged in Massachusetts.
But the court ruled Tuesday those invoices weren't enough under state law to presume the tires were actually used in Massachusetts.
The text of the decision follows, with footnotes and most case citations removed for clarity:
TOWN FAIR TIRE CENTERS, INC. vs. COMMISSIONER OF REVENUE.
APPEAL from a decision of the Appellate Tax Board.
We consider in this appeal whether a vendor who sells "tangible personal property" to a Massachusetts resident is obligated to collect and remit Massachusetts use tax where the customer purchases and takes delivery of the merchandise outside the Commonwealth. Following a sales and use tax audit of Town Fair Tire Centers, Inc. (Town Fair), concluding, among other things, that certain automobile tires had been sold at Town Fair's New Hampshire stores to Massachusetts residents and inferentially were installed on vehicles registered in Massachusetts, the Commissioner of Revenue (commissioner) assessed use tax and related penalties against Town Fair for failing to collect use taxes on those tire sales. Town Fair appealed to the Appellate Tax Board (board), which ruled in favor of the commissioner, finding that the automobile tires at issue were intended for use in the Commonwealth. Town Fair appealed from the board's decision ... and we transferred the case here on our own motion. Because we conclude that the applicable Massachusetts statutes do not permit the Commonwealth to assess use taxes against a vendor in circumstances such as these, we reverse.
1. Background. We summarize the facts found by the board, except where noted. Town Fair is a Connecticut corporation whose principal business is the retail sale and installation of automobile tires. During the "period at issue" in this matter, October 1, 2000, to April 30, 2003, Town Fair operated sixty stores in New England, including eighteen stores in Massachusetts and three stores in New Hampshire. Town Fair collected and remitted Massachusetts sales tax on tire sales at its Massachusetts stores, as well as sales tax on tire sales at its stores located in those other States that impose a sales tax. It did not collect Massachusetts use tax in connection with the sale of tires at its stores outside Massachusetts.
In 2003, an auditor with the Department of Revenue (department) commenced a sales and use tax audit of Town Fair for the period at issue. By agreement with Town Fair, the auditor utilized a "block sampling" method, selecting a single month, September, 2002, for review. The auditor's examination of records from, inter alia, Town Fair's three New Hampshire stores for that month identified 313 invoices in which the invoice listed a Massachusetts address beneath the name of the purchaser. Many -- but not all -- of the invoices listed a Massachusetts telephone number, and certain purchasers who paid by check provided a Massachusetts driver's license. The invoices included the vehicle make and model, but there was no information regarding the State of registration, license plate number, or inspection sticker information of the vehicles. There is no evidence that any of the tires sold in the 313 transactions under review were actually stored or used in Massachusetts, the board made no such finding, and the commissioner does not argue otherwise.
Based on the 313 invoices listing a Massachusetts address, the auditor identified the sale in each case as having been made to a Massachusetts resident and, "[c]oncluding" (in the board's words) that those purchasers "would use the tires installed on their vehicles in the Commonwealth" (emphasis added), the auditor determined that Town Fair should have collected and remitted Massachusetts use tax for the 313 sales. The commissioner subsequently assessed Town Fair approximately $108,947 of uncollected use taxes based on those sales. Town Fair applied for an abatement, which the commissioner denied. Town Fair then appealed to the board ... which affirmed the commissioner. The board found "[b]ased upon the Massachusetts addresses, telephone numbers and driver's license information contained in the record" that the tires sold by Town Fair in the pertinent transactions "were installed on vehicles owned or operated by Massachusetts residents." Based on the same evidence, and "the absence of evidence to the contrary," the board "inferred" that the vehicles "also bore Massachusetts registration plates ('license plates') and certificates of inspection." From this, the board "found" that the sales at issue "were sales of tangible personal property to be stored, used or consumed in Massachusetts" (emphasis added), and held that the commissioner "properly assessed" Town Fair for use tax in connection with those sales. We now turn to the merits.
2. Discussion. a. Standard of review. The decision of the board interpreting a statute "will not be reversed or modified if it is based on a correct application of the law and if it is based on substantial evidence." "We review questions of statutory interpretation de novo ... giving 'substantial deference to a reasonable interpretation of a statute by the administrative agency charged with its administration enforcement.' " "[P]rinciples of deference" are not, however, "principles of abdication," and an incorrect interpretation of a statute by an administrative agency is entitled to no deference.The duty of statutory interpretation rests ultimately with the courts. In our judgment the board has interpreted the statutes at issue in a manner that cannot be sustained.
b. Statutory framework. The use tax and the sales tax "are complementary components of our tax system, created to 'reach all transactions, except those expressly exempted, in which tangible personal property is sold inside or outside the Commonwealth for storage, use, or other consumption within the Commonwealth.' " The use tax is governed by the provisions in G.L. c. 64I. Section 2 of that chapter imposed an excise tax, at the rate of five per cent of the sales price, "upon the storage, use or other consumption in the commonwealth " of tangible personal property that is "purchased ... for storage, use or other consumption within the commonwealth " (emphasis added). Liability to pay the use tax generally falls on the purchaser who uses the property subject to the tax. Purchasers may, however, offset against such liability any tax paid on that property to a vendor under the laws of another State.
At issue here is the application of G.L. c. 64I, § 4, which concerns a vendor's obligation to collect use tax where such a tax is imposed under G.L. c. 64I, § 2. Vendors "engaged in business in the commonwealth" who sell tangible personal property or services "for storage, use or other consumption in the commonwealth" are required to collect the tax from the purchaser and give the purchaser a receipt, unless the "storage, use, or other consumption" is not "taxable" at the time of sale, in which case vendors are required to collect the tax when storage, use, or other consumption "becomes taxable." Where a vendor is required to collect use tax and fails to do so, the tax is "owed by the vendor to the commonwealth."
c. Application of G.L. c. 64I. In upholding the commissioner, the board noted Town Fair's "numerous arguments as to why the transactions at issue did not come within the scope of the statute," but concluded that "those arguments were based on a misinterpretation of the relevant law." Town Fair counters that a vendor's liability for use tax under G.L. c. 64I, § 4, "does not arise in connection with an out-of-State sale merely by virtue of the purchaser's intending to store, use or consume merchandise in Massachusetts," as the board held (emphasis added). Rather, a vendor is liable for use tax under G.L. c. 64I, § 4, only if the tires "were actually stored, used or consumed in Massachusetts." We agree. It is axiomatic that a use tax must be paid by a purchaser (or collected by a vendor) only if a tax is due. See G.L. c. 64I, § 2 (defining when use tax is imposed). Thus, G.L. c. 64I, § 4, imposes no obligation on a vendor to collect use tax unless and until the "storage, use or consumption of tangible personal property" occurs in Massachusetts, either at the time of sale or at some later point. There is no evidence that the tires sold by Town Fair were actually stored, used, or consumed in Massachusetts, and the board did not make such a finding. Because the statute is unambiguous, we "follow the ordinary meaning of the words."
The board acknowledged that there was no evidence of actual use of the tires within the Commonwealth. In order to bring the tire sales within the scope of the use tax statutes, the board first "found" that the sales were to Massachusetts residents because of the Massachusetts residence and telephone information listed on the invoices. It then viewed the evidence "against the backdrop of motor vehicle registration and operation requirements of the Commonwealth," and "inferred" that the tires were installed on vehicles that "bore Massachusetts license plates and inspection stickers." From this the board reasoned that evidence of actual use or storage in Massachusetts is not required because, in the board's words, "the liability for the [use] tax arises at the time of the purchase if the purchaser's intent is to use the property in the Commonwealth" and "the use tax is properly imposed if the purchaser intended to use the tires in the Commonwealth at the time of purchase" (emphasis added). The board's conclusion is untenable. It is not supported by the language of the statute. Use in the Commonwealth is a necessary prerequisite.
For her part, the commissioner acknowledges that "intent" to use the goods in Massachusetts is not sufficient to trigger the use tax. In her view, "compelling circumstantial evidence" that the tires were sold to Massachusetts residents and installed on vehicles registered in Massachusetts leads, in her words, "to the presumption" that the tires "indeed were used in Massachusetts." Her argument fails. The Legislature has specified with particularity the circumstances in which "for use in the Commonwealth" permissibly may be presumed. See G.L. c. 64I, § 8 (a ) (presumption that sale is "for storage, use or other consumption" in Massachusetts arises where tangible personal property is sold "for delivery in the commonwealth"); G.L. c. 64I, § 8 (f ) (presumption that personal property shipped or brought into Commonwealth within six months of purchase is purchased "for storage, use or other consumption in the commonwealth"). There is no Massachusetts statutory presumption of use in the Commonwealth where personal property is sold to a Massachusetts resident outside the Commonwealth, even where the goods purchased out of State may be affixed to property registered in Massachusetts. We will not recognize a presumption that the Legislature has not established.
The absence of a statutory presumption that a vendor's knowledge that a purchaser is a resident of Massachusetts will permit a finding that the goods purchased out of State were purchased "for" use in Massachusetts and actually used in the Commonwealth is particularly significant because Legislatures in other States have enacted just such a presumption. The Legislature may, of course, enact such a presumption, but in the absence of any such statutory authorization, it is error to rely on a presumption that tires sold to a Massachusetts resident outside the Commonwealth were actually used in the Commonwealth. And the principles of interpretation of tax statutes preclude us from "engrafting such language on the statute as written."
Decision of the Appellate Tax Board reversed.
I loved this story when it first broke. Mass won't reign in their spending and they won't admit that their entitlement programs are killing the state. No, instead they go through all the trouble, and money to go after this one company and their customers. Absolutely amazing.
- Craig, Manchester
I have to say, Mass can blame itself for this entire mess. There is no sales tax in New Hampshire. Period. So if goods are purchased here we are under no obligation to collect YOUR taxes. What? Is Dumbell Patrick going to post a guard at the Mass/NH border and insepct all the vehicles for any goods purchased in NH? And tax any "suspect" goods?
Yikes. Maybe I shouldn't have given them any ideas.
- Alison, Manchester
Gov.Patrick is out of control. This whole case is a waste of tax payers money. A ten year old could predict the outcome. This is just another reason to vote him out of office. He has no chance of winning this time.
- James, Boston
In response to Melissa; Yes if there was more proof that the tires were going to be used in MA Town Fair Tire would be required to collect the taxes. It's pretty typical that NH stores collect taxes on items sold when they are delievered to MA or ME (where they also have a sales tax), but trying to tax tires is ridiculous! How is this any different from them trying to tax clothes that people buy in NH, or anything else. I'm just glad I live in NH.
- Mike, Manchester NH
The ruling is hilarious. NH "won" not because the tax was unconstitutional according to article I, but because the receipts do not constitute proof of where the tires will be used. isn't the mere fact of residency in MA enough to assume that the tires will be used in MA? If not what is a person doing with their car registered in MA?
Don't worry, the country will continue to ignore the constitution and very principles that help define the United States. We even have a supreme court justice who has no position on whether or not an individual has the right to self defense. I do not mean with a firearm, merely the right to defend oneself from harm.
Will this country right it self peacefully or will it take a second civil war to restore the constitution, fiscal responsibility and self accountability?
- Michael Layon, Derry
Mass law already requires Mass Subjects to include purchases made out of state on their tax forms! Thankfully their court system agrees that it isn't New Hampshire businesses responsibility to be their arm of the tax man!
And since MA just raise their taxes, I hope more people come to New Hampshire to support our state and that our legislatures don't decide to take advantage of it by enacting an(other) unconstitutional tax.
- Jay, Manchester
I work in Mass and figure I have paid thousands in sales tax to their businesses during this time, who do I sue to get that money back?
- Dan, Rindge NH
I hope that our tax and spend liberal comrads here in NH will take note that out of state people come here to buy things because there is no sales tax and keep a sales tax out of NH.
- Rob, Manchester
Wow...some common sense finally prevails. Had they ruled in favor of the Dept of Revenue, would that mean I could file to get past sales taxes that I paid in MA returned? The scary thing is the court stated the invoices were insufficient proof of usage in MA. Are they saying that if there was more proof then the DOR could demand the money? Yikes! I am so glad I live in NH.
- Melissa, Manchester
Ahhhh Mass again not happy with just taxing their own state now lets see who we can get to pay us too! Stay in your own back yard and be happy you have that!
- Cheryl, Manchester,NH
"Taxpayers win one"
By Boston Herald Editorial Staff, Wednesday, August 26, 2009, www.bostonherald.com - Editorials
Let the border wars begin!
Yes, the state’s highest court yesterday gave Massachusetts taxpayers a reprieve from state efforts to collect taxes on items bought in New Hampshire. But it may not last long.
This could just be one small taxpayer victory in a much larger war.
The Supreme Judicial Court in a unanimous ruling found the state Department of Revenue could not collect some $109,000 in “use” taxes - the equivalent of a sales tax - from the Town Fair Tire Co. for purchases made by Massachusetts residents in its New Hampshire stores (the Connecticut-based firm has stores in all three states).
It was surely no secret that had the decision gone the other way that all those big box stores just over the border in New Hampshire - Sears, Costco, Best Buy - would have been next on Revenue’s list.
Yes, first they came for our tires, then our toasters.
But the court decision was also rather narrowly decided - on the state statute, not the broader issue of whether the effort to impose cross-border taxes was a violation of the U.S. Constitution’s commerce clause.
In fact, the SJC told the Legislature exactly how to fix the state law - as the decision noted, other states have already done. And the potential loss of sales tax revenue could run to well over $100 million.
Meanwhile, of course, New Hampshire has already approved a law that shields its retailers from having to collect or share information about purchases made by out-of-staters.
So the Massachusetts Legislature, which seems intent on squeezing every last penny out of Bay State taxpayers, can indeed “fix” the law. But lawmakers would do so at their own political peril (not that that’s ever stopped them before) - and set the stage for the inevitable return of the issue to the courts.
Even they couldn’t be that stupid - or greedy.
"Tyrannachusetts: An illegal tax grab"
NH Union Leader, Editorial, 8/30/2009
Thank God for state borders and sober judges.
Massachuetts tax collectors have been so hungry for revenue that they spent the last six years attempting to violate state law to get it. Last week they failed after the Massachusetts Supreme Judicial Court read the applicable statutes and said to the tax man, "Ummm. No."
With a bogus argument that twisted the clear meaning of plainly worded statutes, the Massachusetts Department of Revenue began in 2003 to try to turn three Town Fair Tire stores in New Hampshire into revenue agents for the commonwealth. The department determined that the New Hampshire stores must collect and remit the Massachusetts sales tax any time their employees sold tires to a Massachusetts resident.
But the statute authorized no such thing. In fact, the law clearly states that only vendors "in the commonwealth and making sales of tangible personal property or services for storage, use or other consumption in the commonwealth" must collect the sales tax at the time of the transaction. For sales outside the commonwealth, the law states: "The excise shall be paid by the taxpayer."
The Department of Revenue tried to argue that New Hampshire vendors had to collect and remit the use tax because the use of the tires within the Bay State could be "inferred." It then threw in a backup claim that "the liability for the [use] tax arises at the time of the purchase if the purchaser's intent is to use the property in the Commonwealth" (emphasis added).
The Supreme Judicial Court struck down this blatantly illegal revenue grab by writing that a) use has to be proven, not "inferred," and b) "There is no Massachusetts statutory presumption of use in the Commonwealth where personal property is sold to a Massachusetts resident outside the Commonwealth.... We will not recognize a presumption that the Legislature has not established."
Thus the court dismissed the state's claim by revealing it to be entirely baseless.
What's most concerning about this case is that the Massachusetts Department of Revenue willfully twisted the statutes to try to grab the cash. The court noted that the revene commissioner "acknowledges that 'intent' to use the goods in Massachusetts is not sufficient to trigger the use tax." But she went after the money anyway by trying to claim that "circumstantial evidence" leads "to the presumption" that the tax was due even though no one could prove it.
When the state, knowing it doesn't have the facts, nonetheless tries to tax you on "circumstantial evidence" and "presumption," how is that anything short of tyrannical?
Blessedly, even if Massachusetts changes its law to allow tax collections based on the "presumption" of in-state use, New Hampshire vendors are protected.
This summer legislators passed a law barring businesses from revealing customer information to other states that seek it for the purpose of collecting taxes. So Massachusetts might eventually be able to collect sales taxes in Maine or Connecticut, but not here.
Chalk up another victory for the New Hampshire Advantage.
I know this may be a really basic thought and I do not have a law degree but I always thought that if you buy something in a state where there is no sales tax you don't pay one. I know the understand the use tax issue but even still. This sounds like something Rhode Island would do too.
- Steve Micke, Freedom
What is this "New Hampshire Advantage" that I keep hearing about. Is it the one that draws all sorts of retail jobs to this state and as I recently saw an add on one door "Wanted Area Manager , starting at $10.00 an hour , retail experience needed". They are certainly not high paying jobs. They might help a local tax base until you add in the traffic mitigation costs which include maintenance in winter and summer plus police and fire and let's not forget the air pollution. Right now the state has a push on to over ride all local zoning and planning regulations to dense pack housing so that they minimize the footprint of each housing unit on a zero lot so that living can be "affordable" or " low income" because people can't afford to buy anything with what they make.
Is the New Hampshire Advantage" the fact that there is a solid wall of vehicles heading south on I-93 , I-95 and Rt 3 every day to go to high paying jobs in Mass where they all have to pay a Massachusetts state income tax and get nothing in return for it. Business that pay a real income move to states that give them a property tax break and incentives to hire employees. Mass still draws in businesses that pay good wages because they have public transportation to draw in the younger workers that have left New Hampshire and they give the companies property tax breaks. Even so Mass is fighting a loosing battle because states like Virginia and the Carolinians offer companies 10 years with no property taxes at all plus money to hire more local people at a decent wage. What do the states get in return to cover the lost property tax revenue? They get an income tax from the workers so if you earn more you pay more but guess what they are not property tax dependant to pay all the bills like we are here under the New Hampshire Advantage. My old house in Virginia lists at $100,000 more than my house here and yet the tax there is 1400 while my tax here in $6500. Explain that to me because I'm on disability retirement so I don't get raises in my income but I do get raises in my property taxes.
- Don Armstrong, Henniker
The closing paragraphs are absolutely wrong. Americans have an innate right to travel between the states, purchase products, and bring them back to their home states untaxed. 'Use' taxes are unconstitutional.
Or we could set up customs agents at state borders and require declarations.
- Steve, Manch
You can be sure Tire Fair stores in Mass. will be hounded by the Dept. of Revenue til they are bankrupted by the state. God help them for fighting the tax man.
- Bob H, Londonderry
Great, now we can get back to the serious work of sucking the blood out of surrounding states who have decided to actually fund their governments with a sales tax. They did vote it in but we have done everything possible to subvert their democratic decision. Shame on us, and then we don't fund our stuff. Worst of all possible worlds.
- Bob, Deerfield
Hey, it didn't work. How about finding a new horse to beat. Slow day?
- Tom, Dover-Foxcroft, Me.
Many years ago I was discussing state income taxes with a fellow New englander who served with me in the Navy. He came from outside Boston, and like many of us from high tax states had changed residence to Florida when he started flight school. He recounted how he got a call from the MA tax department asking him why he had not filed his income taxes for several years. He stated he had paid his taxes up until he became a Florida resident, as which point the tax collector asked him who in the MA government gave him permission to change residency. He says he hung up after laughing at the tax man. The arrogance of tax collectors in general is absurd, those in MA are just more so.
- Jeff, Goffstown
massachusetts should be forced to reimburse town fair tire for legal fees!
- tom, manchester nh
A very interesting ruling and one that I did not expect from a Massachusetts Court, I frankly expected that the rule would go against the store. I then thought that it would go to the U.S. Supreme Court in Washington, DC causing needed less expense to both states. As the activity clearly was in violation of the laws not allowing tariffs between the states. Under the Articles of Confederation which the US was governed under before our present constitution tariffs were allowed and all trade between the states suffered badly and everyone lost.
- Albert, northwood
"N.H. makes holiday pitch"
By Boston Herald editorial staff, Friday, November 27, 2009, bostonherald.com - Editorials
They sure do have some creative marketing folks up there in New Hampshire. Then again in this dismal economy the sales-tax-free Granite State actually has something to market!
The latest effort to woo visitors from Massachusetts, which has made it a lot tougher on retailers, hotels and inns during this economic crisis, is the “Stay and Shop” campaign.
Hotels are hoping that shoppers already planning to come north this weekend to avoid the sales tax - and there will be plenty of them - will decide to make an overnight of it, or a whole weekend. They’re offering everything from rides to the mall to free gift-wrap.
Let’s see, what could Massachusetts offer . . .
Well, we know businesses can’t advertise that they’ll waive the 6.25 percent sales tax - remember, that’s against the law!
And along with the hike in both the state sales and lodging taxes, cities and towns are slapping even higher local increases on hotel stays. So businesses around here will just have to make do with hanging out the “big discount” signs and hoping for the best. Happy Black Friday!
On 11/27/2009, M10 wrote:
The unfortunate and critical part of the liberal brain that is \"out to lunch\" in understanding economics, is simply taxation needs an input source of funds constantly. As liberals wear out the capital sources of taxes; businesses and taxpayers; a retraction of spending is proportionate to tax increases. Keep increasing taxes while a recession is in place and the recession grows worse. The path of least resistance of taxation is finding a way to avoid them entirely or do without the service or product. We are in that stage right now. New Hampshire is the shining city on the hill, for the moment anyway, but will emulate Mass misery within 10 years thanks to liberal infiltration. The typical liberal mindset is to remove all sanctuaries of tax avoidance believing that once removed, the taxpayer will be happier to pay the tax.
This is completely polluted thinking. Most people/taxpayers with jobs are no longer receiving 5-9% wage increases each year. As you increase taxation an equal and opposite reaction occurs in consumer spending; it stops or is tightened. Mass towns and cities pigged out over the past 30 years with spending in schools, Taj Mahal buildings and those lovely government pensions and health plans for teachers and municipal employees which suck up the taxpayer treasure. So, as towns and cities refuse to cut the fat from budgets while increasing taxes, the taxpayer/consumer confronts the reality of incoming wages can no longer supporting critical family basics such as food, mortgage payments, college tuition etc. Eventually people will move out of a high tax liberal area and opt for North Carolina or other western state where liberals are as rare as tax decreases. Why be a sitting duck and take the shots of taxation knowing the liberals will take you right down to skeletal remains? You move or die. Now with a declining tax base, the liberals have an enormous monster they created; There are more people sucking at the teat of the government (51% of America does not pay an income tax) than there are taxpayers \"sharing\" their confiscated income, and that population of people will grow due to the domino effect of government economically growing and populating with poorer and poorer people. Then our form of \"government\" goes down.
All for the wet dream of redistribution of wealth, supporting teachers, affirmative action, non-taxation of colleges and real estate properties, unions which are seen more as human voting blocks rather than a drag on an economy, Government pension plans and health plans which should be seeded with money of the employee and not other taxpayers.
You escape this cavern of futility by massively dropping taxes and making more available to the taxpayer with a 15% across the board flat tax and eliminate the IRS letting state governments collect the tax and deal with enforcement. At the same time mandated town and city budgets can grow no more than the percentage population growth not the economic climate.
I believe this economy is intentional to destroy the best economic engine in the world. The guilt the Marxists feel over America and slavery then making a modern day slave of former taxpayers, is not economic justice. It is the facade of compassion with which marxism and communism grow. The big lie. We have seen it with global warming and the grotesque lie to eliminate proven sources of energy in wealth producing countries.
Over-taxation and trusting big government is a journey into hell.
BUSINESS RECRUITMENT | Boston Globe Editorial
"Think bigger, Granite State"
The Boston Globe, Editorial, July 17, 2011
WHILE MASSACHUSETTS was settled by religious pilgrims, New Hampshire was launched as a commercial fishing outpost. It was pro-business from the start. And while the two shared the same government for 38 years, Britain’s King Charles II eventually awarded New Hampshire its own royal status in 1679. In all likelihood, that’s when the two colonies began squabbling over which was the superior place to do business.
It’s an entertaining argument - lower taxes versus more services, better education versus more freedom from regulation - but ultimately less important than it might seem. Economic competition between Massachusetts and New Hampshire, like that between Boston and Cambridge or any other couple of neighbors, makes little sense in a global economy. Every region of the country, and every state in this region, is in it together.
Michael Bergeron, the New Hampshire official who specializes in luring Massachusetts companies over the border, is thinking too small, as he drives his unmarked Ford Fusion in search of new deals. Biotech, high tech, financial services, and insurance companies are drawn to this region largely by universities, hospitals, and educated workers. If such businesses have a lower-cost option for their back-office or manufacturing operations in southern New Hampshire, that can help attract them to New England. Since workers cross the border in both directions, it matters little to them whether the office is in Nashua or Methuen.
It matters more, of course, to the state and local governments - whether the jobs and tax receipts are credited to Deval Patrick or John Lynch. But far better for Patrick and Lynch - and the other New England governors - to combine their energies and figure out how best to compete with China, Germany, India, or Japan.
Bergeron could use some frequent-flyer miles to make up for those construction delays on Route 93.
"Massachusetts tax law changes could create accounting headaches for N.H. businesses"
By Ben Leubsdorf, Concord Monitor staff, August 19, 2013
New Hampshire, without either a sales tax or an income tax, has long promoted itself as an alternative to Massachusetts. But what happens in Massachusetts doesn’t always stay in Massachusetts.
On July 24, the Massachusetts legislature overrode a veto from Gov. Deval Patrick and passed a transportation funding bill that raised the cigarette tax by $1 a pack and increased the gas tax by 3 cents a gallon.
It also made more subtle changes to tax laws, extending Massachusetts’s 6.25 percent sales tax to computer and software services (what opponents have labeled the “tech tax”) and changing sourcing rules for the state’s income tax. The former took effect July 31, and the latter takes effect in the 2014 tax year.
Those changes could affect New Hampshire businesses with customers in the Bay State, creating a “compliance nightmare,” said Kathryn Michaelis, a member of the tax practice group at the law firm of Rath, Young and Pignatelli.
The Monitor sat down with Michaelis last week to get the details on these two tax-law changes, and what they could mean for companies based in the Granite State.
Let’s start with the so-called “tech tax.” How does that work?
Basically, the tech tax is an extension of Massachusetts’s 6.25 percent sales and use tax to cover certain computer and software services. . . . We obviously don’t have a sales and use tax here in New Hampshire, but historically, those states that had a sales and use tax really applied the tax to tangible things. You go into a store, you buy something, you see the tax. They did not historically apply the sales and use tax to services, and so this has been a trend over the last decade or so, where states are looking – or I should say, grappling with trying to find new sources of revenue, and one of the avenues that they’re using is to look at their sales and use tax base and try to expand it to cover stuff other than just tangible, personal property.
So this is what Massachusetts did, because before the tech tax, the sales and use tax only applied to one service, telecommunications services, which is pretty narrow. They’ve now expanded this to attempt to cover this new type of service, which, again, is computer and software services, and there are some long definitions and it’s highly confusing. . . . There’s two types of services that it covers. The first one is called computer system design, and that is planning, consulting, designing of computer systems that integrate computer hardware, software and communication technologies. . . . The second one is software modification services. So if you go in and modify, integrate, enhance, provide updates to software, it covers that as well.
Unfortunately, the legislation was not clear on exactly what they mean by this.
So how does this affect New Hampshire businesses?
New Hampshire businesses, tech businesses in particular, are going to be subject to the tech tax if, essentially, three things occur.
One, if it provides taxable computer and software services. . . . Two, if they are conducting those types of services, they have to ask, “Well, is it sourced to Massachusetts?” . . . Unfortunately, those rules are somewhat complex as well.
The third one, and this is really the critical one for New Hampshire businesses or any business outside of Massachusetts, is if that New Hampshire business has “nexus” with Massachusetts. And when I say nexus, what that really means is, does the business have a physical presence in Massachusetts? That can be anything from an office, it can be anything from no office but I have employees down there running around, sales people that are visiting customers – even if it’s for a few days, that constitutes physical presence.
That last one is key for New Hampshire businesses to know, because if the New Hampshire business has no physical presence in Massachusetts, it has no legal obligation to collect and remit the tech tax.
So, how does the change that Massachusetts made to its income tax rules work? And again, how will that apply to New Hampshire once that goes into effect in 2014?
That’s the first point, is, it doesn’t go into effect until 2014. But New Hampshire businesses should really start to look at what they’re doing, and where they’re doing it, now so they can prepare.
The change that happened on the income tax side was basically a shift from what we call “cost of performance” to “market-based” sourcing. I’ll give you a simple example: . . . Let’s say I’m a consulting firm in Concord, N.H., and this is my only office. If I provide services to Massachusetts customers, the old rule would look to where I performed those costs: right here in Concord, so that would be sourced to New Hampshire and Massachusetts would not include that income in their tax base. Under a market-based rule, it looks to where the customer is located. So if I’m up here in New Hampshire only, and I haven’t set foot in Massachusetts, but my clients and my customers are in Massachusetts, that is now a Massachusetts sale.
The income tax sourcing is going to affect New Hampshire service businesses. It’s going to affect everything from law firms, accounting firms, engineering firms, unfortunately the same tech firms we talked about under the tech tax are going to get hit with this – any other service-based business that provides services and has Massachusetts customers.
Again, the old rule looked to where you performed the services. The new rule says, “We don’t care about that. We’re just going to look to where your customer is, and if your customer is in Massachusetts, that income is sourced to Massachusetts for the purpose of its income tax.”
Doesn’t it raise constitutional questions if Massachusetts is trying to reach across the border and collect taxes in a state that has chosen not to have an income or a general sales tax?
Hopefully, they will administer it within the constitutional boundaries, with respect to the sales and use tax. I will say on that point, though, we are definitely going to have cross-border issues with regard to the tech tax. . . . But I think there are benefits that we might derive, too, long-term benefits based upon what Massachusetts has done. I think that we might see a migration of companies that might come up here because the compliance burden, the tax burden, might be significant in their businesses. And it also might give New Hampshire tech firms a competitive advantage over Massachusetts tech firms, because they won’t have a 6.25 percent sales tax. . . .
The problem we have, on the cross-border issue here, is that our consulting firm we just used as our example? It’s now going to be subject to tax in both New Hampshire and Massachusetts on the same income, because New Hampshire has the cost of performance rule. So if I’m up here, with my only office in New Hampshire, New Hampshire taxes that under the Business Profits Tax. Now, that same income is going to go in the tax base for Massachusetts.
So it’s not dollar-for-dollar double taxation, but it is double taxation in the sense that the same income is being taxed by more than one state.
What’s your advice to companies that might be affected by one of these two changes?
I think right now, in particular for the tech tax, New Hampshire businesses need to assess whether or not they’re providing taxable services, how they’re providing it to Massachusetts customers, and determine whether or not their business systems are currently capturing the type of information they need in order to properly determine whether or not it’s a Massachusetts sale. And they need to do that right now, obviously, because if they are subject to tax, the first return is due Sept. 20.
The other thing they need to do, for the tech tax, is really take a long, hard look at whether or not they have Massachusetts presence, and whether or not that’s worth it, given the compliance burden and tax costs that they might have to carry.
On the income tax side, it’s really a matter of looking at where you’re doing business and where your customers are and whether your business systems are able to capture that sufficiently.
(Ben Leubsdorf can be reached at 369-3307 or email@example.com or on Twitter @BenLeubsdorf.)
- Jonathan Melle
- Amherst, NH, United States
- I am a citizen defending the people against corrupt Pols who only serve their Corporate Elite masters, not the people! / My 2 political enemies are Andrea F. Nuciforo, Jr., nicknamed "Luciforo" and former Berkshire County Sheriff Carmen C. Massimiano, Jr. / I have also pasted many of my political essays on "The Berkshire Blog": berkshireeagle.blogspot.com / I AM THE ANTI-FRANK GUINTA! / Please contact me at firstname.lastname@example.org
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