MANCHESTER, N.H. — A bill pending in Congress would turn New Hampshire businesses that sell over the Internet into tax collectors for other states if they have more than $500,000 in remote sales.
“By imposing collection requirements on businesses that have no physical presence outside of their home state, the legislation under consideration stands to erode existing protections on state sovereignty,” U.S. Sen. Kelly Ayotte, R-N.H., said at a Senate Commerce Committee hearing Wednesday. Ayotte is a member of the committee.
“For non-sales tax states like New Hampshire, this is simply an unfair burden for our businesses to bear,” she said.
The debate over the so-called Marketplace Fairness Act has pitted large national players in the Internet space against each other. Amazon supports it; eBay opposes it. In Maine, Gov. Paul LePage is urging passage of the bill. First District Rep. Chellie Pingree is the only member of Maine’s delegation to support it.
In June, Lepage said, “A damaging inequity exists in the retail marketplace because some online retailers are not required to collect Maine sales tax, but Maine retailers are,” he said. “Not only does this hurt Maine businesses, it hurts the state.”
Brian Bieron, eBay’s senior director for federal relations, said with municipal and county taxes added on to state taxes across the country, a nationwide Internet seller would have to keep track of more than 9,600 tax jurisdictions under the proposed legislation.
“This is going to fundamentally change the rules,” Bieron said. “So where today it’s New Hampshire law that governs the sales of the New Hampshire business, this is all about making the law of the government of the buyer the law that applies to the New Hampshire business,” he said.
The proposed changes threaten New Hampshire’s tax-free advantage, UNH professor Neil Niman said. “We’ve built our retail economy on the advantages of no sales tax, and this just seems like the first step toward eliminating one of our most important advantages.
“I think we need to be more concerned than just Internet business; it could impact all businesses,” said Niman, who chairs the Economics Department.
“If this Marketplace Fairness Act is extended to sales on the Internet, what’s going to stop them from one day extending it to brick and mortar businesses?” Niman said. “So, are we going to see Macy’s or Sears being compelled in the Rockingham Mall or Fox Run Mall to collect sales taxes for the state of Maine or Massachusetts?”
Amazon’s vice president for global public policy Amazon, Paul Misener, said at Wednesday’s Senate hearing, “Amazon believes that Congress should authorize the states to require out-of-state sellers to collect the sales tax already owed, and we strongly support enactment of S. 1832, a bipartisan bill already before the Senate.”
Although the bill would give businesses an exemption from collecting other states’ sales taxes for up to $500,000 in out-of-state sales, that number is low compared to other measures of small business size, Bieron said.
“The Small Business Administration currently defines a small business who’s an online retailer as being a small business up until $30 million in sales,” he said.
U.S. Sen. Jeanne Shaheen, D-N.H., is cosponsor of the Ayotte-Wyden resolution to ensure that Congress does not place unfair tax collection burdens on small businesses, spokesman Faryl Ury said.
Ayotte joined with Sen. Ron Wyden, D-Ore., last fall to introduce the bipartisan resolution, but it hasn’t passed the Senate.
NobleSpirit, a Pittsfield-based coin and stamp dealer using eBay as its sales platform, said the state collection regime would benefit Amazon.
“Their infrastructure … is structured so they can deal with these issues,” said Joe Cortese, owner of NobleSpirit. “This a is a strategic advantage that they have that puts them ahead of the competition in terms of all of the small business sellers.”
“If policy-makers decide to impose new sales tax collection burdens on small businesses and force them to collect and remit in 9,600 tax jurisdictions nationwide, the legal, compliance and administrative costs alone would undoubtedly make it harder and in many cases impossible, to enjoy the opportunities and benefits that come with access to the Internet marketplace,” Cortese wrote in a letter to Ayotte, which she submitted at the Senate Commerce Committee hearing.
Fred Kocher, president of the New Hampshire High Technology Council, said, “Our position is that it negatively impacts mall online retailers that would be required to collect sales taxes not only in state but out of state.”
“The argument has been that it’s unfair that online retailers are exempt from taxes when retailers that have stores on main street have to pay taxes, but the counter argument to that is the stores on main street have online sales, too, so they benefit from not having taxes on Internet transactions,” Kocher said.
But there is no blanket exemption from collecting sales taxes for Internet retailers. Under the 1992 Quill decision, which predates large-scale Internet commerce, businesses that have a physical presence in a state with sales tax have to collect that sales tax on their sales there.
The issue parallels the fracas created years ago when Massachusetts tried to force Town Fair Tire to collect sales from Massachusetts residents who purchase tires from the firm’s New Hampshire stores. New Hampshire legislators responded by passing a law barring businesses from revealing customer information to other states that seek it for the purpose of collecting taxes.
The Massachusetts Supreme Court struck down the state revenue officers’ six-year effort to force Town Fair to collect the tax.
“It wasn’t right in that case; it isn’t right in this case,” said former U.S. Sen. John E. Sununu, R-N.H. “The more you tax something, the less of it you’re going to get.
“If we really believe, as I do, that the Internet is an engine of innovation and job creation and entrepreneurship, then we should be very, very careful before we start piling on with the kind of taxes and fees and regulations that are going to stifle that economic growth,” he said.
Sununu, who is chairman of the board of the Waterville Valley Ski Resort, helped enact a seven-year ban on Internet access taxes in 2008. The legislation did not directly address the issue of state sales taxes on Internet purchases. He also consults for PricewaterhouseCoopers LLP.
“This is the government forcing businesses to collect taxes for other states,” Sununu said Friday. “Why should a business in Manchester, New Hampshire, have to collect taxes on behalf of the state of South Carolina or the state of Arizona?” It might not even be constitutional,” Sununu said.
(c)2012 The New Hampshire Union Leader (Manchester, N.H.)
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