The next chapter in New Hampshire’s anti sales tax saga

New Hampshire doesn't like sales tax. How far will it go to stop remote sales tax collection?

Former Governor Chris Sununu went to war when other states started requiring out-of-state businesses to collect and remit their sales taxes, spearheading policies to protect New Hampshire businesses from remote sales tax collection obligations. His anti-sales-tax legacy lives on in New Hampshire House Bill 135, the New Hampshire Department of Justice, and the work of Senator Maggie Hassan, who represents The Live Free or Die State in Congress.New Hampshire doesn't like sales tax. How far will it go to stop remote sales tax collection?

How New Hampshire protects businesses from sales tax collection

Introduced January 8, 2025, the HB 135 sales tax bill states that no New Hampshire business shall be required to collect sales taxes for a foreign jurisdiction (aka, another state) unless mandated by Congress or New Hampshire law. It's a bold little bill that piggybacks on other actions the state has taken in this area.

It also shows complete disregard for sales tax policy.

How sales tax works

Sales taxes are set by state and local governments. There are no federal sales tax regulations in the United States, and states generally don't have a say in each other's sales tax laws - though some do have strong opinions about how other states should handle personal income tax. "Connecticut and New York have been in a decades-long battle over the income earned by Connecticut residents whose employer is in New York," observes Scott Peterson, Vice President of Government Relations at Avalara.

Additionally, the Streamlined Sales and Use Tax Agreement (SSUTA or simply SST) provides a road map for states seeking to simplify and modernize sales and use tax administration, but only 24 states are members of SST.

A jurisdiction can only impose a sales tax collection obligation on businesses that have a nexus - or a connection - with that jurisdiction. Having a physical tie to a state is one of the most common ways for a business to establish sales tax nexus, and it used to be the only sales tax nexus trigger. However, in June 2018, the U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. freed states to base sales tax nexus on a remote seller's economic activity in the state. This is known as economic nexus.

Economic nexus challenges

The Supreme Court decided in favor of South Dakota in part because "South Dakota's tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce."

1. South Dakota applies safe harbor for those conducting limited business in the state.
2. South Dakota ensures no obligation to remit sales tax may be applied retroactively.
3. South Dakota has adopted the SSUTA, which standardizes sales taxes to reduce administrative costs and provides remote sellers access to sales tax administration software paid for by the state.

Every state with a general sales tax enacted an economic nexus law for remote sales tax after the Wayfair decision. No two economic nexus laws are alike, but all provide safe harbor for certain businesses and prohibit retroactive enforcement. However, only 24 states, including South Dakota, are members of SST.

Thousands of businesses, including some New Hampshire businesses, now have an obligation to collect and remit remote sales tax for one or more states. New Hampshire wants to ensure the remote sales tax obligations imposed on New Hampshire sellers are legitimate. It's also trying to limit the taxing authority of other states.

New Hampshire's fight against the Wayfair decision

New Hampshire pitched a fit after the Wayfair decision. Vowing to fight any state that attempted to force Granite State businesses to collect their sales taxes, then Governor Sununu passed a law requiring states to provide written notice to the New Hampshire Department of Justice (DOJ) at least 45 days before requesting information from or imposing a sales tax obligation on a New Hampshire seller.

The law also required other states to reimburse or provide for a deduction for New Hampshire remote sellers to cover their remote seller compliance costs.

It's hard to find information about sales tax or the written notice requirement for foreign taxing authorities on the New Hampshire DOJ website, but it's still a thing. The New Hampshire Department of Revenue Administration website references it. And in November 2024, the Office of the Attorney General of New Hampshire sent an astounding memorandum about the notice requirements to the Multistate Tax Commission Nexus Committee.

The memorandum outlines the written notice requirements, what factors the DOJ considers when determining the validity of a request under the United States and New Hampshire constitutions, and whether the request poses an undue burden on interstate commerce. Determining factors include:

• Whether the foreign taxing jurisdiction's laws provide a satisfactory safe harbor for New Hampshire remote sellers that conduct only limited business with the jurisdiction
• Whether the laws ensure that no obligation to remit sales or use tax may be applied retroactivity
• Whether the taxing state has adopted the Streamlined Sales and Use Tax Agreement
• Whether the taxing state's law provide for deduction, reimbursement, or exemption for the New Hampshire seller's cost of remote sales tax compliance

Additionally, the Multistate Tax Commission memorandum details what sorts of activities would give a New Hampshire business a physical presence nexus in a foreign taxing jurisdiction, even though that's the sort of thing states generally decide for themselves.

Does New Hampshire have the authority to say being in another state for less than 15 days does not constitute physical presence in that jurisdiction? It seems to think it does (see § 78-E:2), though at least a few states might disagree. Under Michigan law, for example, an out-of-state seller could create nexus by participating in a trade show for 10 or more days annually. While this provision was included in New Hampshire's response to the Wayfair decision, Scott Peterson wonders if the Supreme Court would have agreed with New Hampshire's take on physical presence nexus before Wayfair.

And does New Hampshire get to determine whether a remote seller in the state that collects another state's sales or use tax is entitled to deduct "any reasonable costs ... incurred in the collection and remission of sales and use taxes"? According to § 78-E:7, it does. Peterson wonders if New Hampshire gives a credit to out-of-state businesses that pay taxes to the Granite State.

Remote sales tax compliance can be extremely burdensome for businesses, especially for small businesses. Whether another state's remote sales tax laws are too burdensome is up to the courts - Illinois is currently facing several legal challenges over how it taxes various transactions - or Congress.

Congress and remote sales tax debates

Congress has the right to regulate interstate commerce. Yet it had lots of time to weigh in on remote sales tax before the Supreme Court agreed to hear the Wayfair case, and it punted. Subsequent efforts to limit states' remote sales tax authority also failed to gain traction.

Nevertheless, remote sales tax is a focal point for U.S. Senator Maggie Hassan, who has a plan to address "the burdens that Wayfair has placed on small businesses."

Some of Senator Hassan's sales tax proposals would greatly limit state taxing authority if adopted. For instance, she would exempt remote sellers with less than $10 million in total remote U.S. sales.

Hassan has also put forward five minimum simplification requirements for SSUTA states:

• A minimum economic nexus threshold of $100,000 (no transaction threshold)
• One tax rate per ZIP code
• Registration and filing rules (monthly for returns submitted by an SST Certified Service Provider; quarterly for returns submitted by a remote seller)
• Audit limitation and coordination
• Uniform intrastate tax base and interstate uniformity rules

For non-SSUTA states, Hassan would require:

• A minimum nexus threshold of $1 million in retail sales into the state in the current or preceding calendar year
• One remote sales tax rate per state
• Centralized and simplified registration and filing rules
• Audit centralization
• Uniform intrastate tax base and interstate uniformity rules

Some of these policies could be hard to implement. "Texas and Alabama are the only two states with a single rate for remote sellers," says Peterson. "I don't hear much from Texas about the rate but the cities in Alabama complain about their single rate. Choosing a fair rate is hard."

As an added protection for all remote sellers, Hassan would require states and localities to provide free compliance services. This is something SST member states already do. For qualifying remote sellers that contract with an SST Certified Service Provider like Avalara, the state will offset the cost of sales tax solutions.

While Hassan and her peers in the U.S. Senate Committee on Finance plan their next move, New Hampshire lawmakers have HB 135 to consider; it's due out of the Ways and Means Committee on March 20, 2025. If it ever makes it to the governor's desk, it will be interesting to see whether Governor Kelly Ayotte is as staunchly anti-remote sales tax as her predecessor, Chris Sununu.

In the meantime, if you're not sure where your business has an obligation to collect and remit sales tax, taking the Avalara free sales tax risk assessment can help.