Revision: Jan. 17, 2019, 2:45 p.m.
HB 698-FN - AS INTRODUCED
HOUSE BILL 698-FN
SPONSORS: Rep. Gay, Rock. 8; Rep. Edwards, Rock. 4; Rep. McGuire, Merr. 29; Rep. Weyler, Rock. 13; Rep. T. Lekas, Hills. 37; Rep. A. Lekas, Hills. 37; Rep. Pratt, Rock. 3; Rep. Potucek, Rock. 6; Rep. Baldasaro, Rock. 5; Rep. Hinch, Hills. 21
COMMITTEE: Ways and Means
This bill prohibits foreign taxing jurisdictions from imposing sales and use tax collection obligations on certain sellers in New Hampshire. This bill allows New Hampshire sellers to comply with any directive of a foreign taxing authority, while preserving the seller’s rights under the statute, if the seller determines that such compliance is in the seller’s best interest.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Nineteen
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Chapter; Protection of Private Customer Information and Rights of New Hampshire Sellers in Connection With Certain Sales and Use Taxes. Amend RSA by inserting after chapter 78-D the following new chapter:
PROTECTION OF PRIVATE CUSTOMER INFORMATION AND
RIGHTS OF NEW HAMPSHIRE SELLERS IN CONNECTION WITH
CERTAIN SALES AND USE TAXES
78-E:1 Findings and Purpose. The general court finds that:
I. Under Article 7 of the New Hampshire Constitution: “The people of this State have the sole and exclusive right of governing themselves as a free, sovereign, and independent State; and do, and forever hereafter shall, exercise and enjoy every power, jurisdiction, and right, pertaining thereto, which is not, or may not hereafter be, by them expressly delegated to the United States of America in Congress assembled.” The state of New Hampshire did not delegate any power, jurisdiction, and right to a foreign taxing authority to impose an information reporting or tax collection requirement on a New Hampshire seller as defined in this chapter. Any attempt by a foreign taxing authority to impose such requirements that are not specifically authorized by a law passed by the United States of America in Congress assembled is a violation of our state sovereignty.
II. Under Article 12 of the New Hampshire Constitution: “Every member of the community has a right to be protected by it, in the enjoyment of his life, liberty, and property; he is therefore bound to contribute his share in the expense of such protection, and to yield his personal service when necessary. But no part of a man’s property shall be taken from him, or applied to public uses, without his own consent, or that of the representative body of the people. Nor are the inhabitants of this State controllable by any other laws than those to which they, or their representative body, have given their consent.” Any attempt by a foreign taxing jurisdiction to impose information reporting or tax collection requirements that are not specifically authorized by a law passed by the United States of America in Congress assembled is considered an infringement of liberty and a taking of property and the representative body of the state of New Hampshire does not consent.
III. Under Article 5 of the New Hampshire Constitution: “And farther, full power and authority are hereby given and granted to the said general court, from time to time, to make, ordain, and establish, all manner of wholesome and reasonable orders, laws, statutes, ordinances, directions, and instructions, either with penalties, or without, so as the same be not repugnant or contrary to this constitution, as they may judge for the benefit and welfare of this state…”. The general court will not make, ordain, and establish any mechanism for the collection of taxes for a foreign taxing jurisdiction because such action would not benefit or improve the welfare of this state.
IV. The powers delegated to the federal government are few and defined. Those which are to remain in the state governments are numerous and indefinite. Among those powers delegated to the federal government are: Article 1, Section 8, Clause 3, of the Constitution to empower Congress "…to regulate Commerce with foreign Nations, and among several States, and with the Indian Tribes..."; and Article 1, Section 10, Clause 2, “No State shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws: and the net produce of all duties and imposts, laid by any state on imports and exports shall be for the use of the treasury of the United States; and all such laws shall be subject to the revision and the control of the Congress.” Other states or other foreign taxing authorities do not have the authority to compel the state of New Hampshire, or a person residing solely in New Hampshire to collect its taxes.
V. Technology continually challenges our government systems to adapt and change to accommodate emerging new realities while holding sacred the principles of the Constitution. It is the position of the government of New Hampshire to treat the ability of its people to easily access networks as a freedom of movement that shall not be denied or disparaged consistent with the privileges and immunities clause of the United States Constitution which states, "The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States." Specifically, this chapter declares that remote buyers purchasing goods or services from a person residing solely in New Hampshire will be deemed to have voluntarily traveled to New Hampshire to purchase those goods or services.
VI. Businesses with a physical presence solely in New Hampshire will be considered to be operating solely in New Hampshire when managing a sales technology platform enabling individuals to initiate a transaction with their business regardless of the physical location of the individual purchasing a good or service from the New Hampshire business.
VII. 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. New Hampshire law and policy does not require New Hampshire businesses to suffer the cost and burdens of establishing administrative systems to comply with the collection and remission provisions of a traditional sales and use tax law. The state of New Hampshire relies heavily on the collection of a business profits tax (BPT) to fund its necessary functions to promote the general welfare of its citizens. The imposition of the cost and burdens of establishing administrative systems necessary to comply with the collection and remission provisions of the sales and use taxes of foreign taxing authorities will reduce New Hampshire business profits and will therefore reduce business profits tax revenue to the state of New Hampshire. The state of New Hampshire therefore has a compelling interest in preventing the collection of sales and use taxes by New Hampshire businesses that do not benefit the state of New Hampshire.
VIII. On June 21, 2018, the United States Supreme Court issued its decision in South Dakota v. Wayfair, Inc. By a 5-4 majority, the court overturned over 50 years of precedent which established that a retail seller must be physically present in a state before the state could impose its sales and use tax collection requirements. This decision exposes New Hampshire retail businesses to assertions by thousands of foreign taxing jurisdictions of various collection and remission requirements on New Hampshire retail businesses that were previously protected by the longstanding physical presence rule. The majority decision in Wayfair did not finally adjudicate that the assertion of sales tax collection liability against all remote retail businesses was constitutional and valid, but rather remanded the case for further proceedings. For example, the majority decision states: “The question remains whether some other principle in the Court’s Commerce Clause doctrine might invalidate the [South Dakota] Act.”
IX. The state of New Hampshire agrees with the dissenting opinion in Wayfair that "…the Internet's prevalence and power have changed the dynamics of the national economy…" is not a rationale for discarding the physical-presence rule, but for upholding it. In the dissent's view, "…any alteration to those rules with the potential to disrupt such a critical segment of the economy should be undertaken by Congress..." Only Congress can act to regulate interstate commerce and only Congress can impose new duties on New Hampshire residents without the consent of the people of New Hampshire.
X. New Hampshire’s decision not to enact a traditional broad-based sales and use tax law reflects a compelling governmental interest to encourage the establishment and expansion of small and “micro-businesses” that represent a particularly valuable segment of New Hampshire’s economy and comprise a majority of employers in the state. The high cost and practical difficulty of compliance with sales and use tax requirements of foreign taxing authorities would disproportionately and negatively impact these businesses and discourage other aspiring entrepreneurs from starting new businesses in New Hampshire.
XI. New Hampshire has a compelling interest to assert its right as a sovereign state to preserve the business environment we have created in New Hampshire for our businesses in accordance with our own statutes and policy.
XII. New Hampshire has a compelling governmental interest in protecting the privacy of an individual’s personal information that may be used to facilitate the sale of goods and services within this state.
XIII. New Hampshire also has a strong governmental interest in protecting its sellers and the private, personal information they receive from consumers from persons who may attempt to steal money or sensitive information from sellers by impersonating a foreign taxing jurisdiction or foreign taxing authority.
XIV. Any foreign taxing jurisdiction that attempts to require a New Hampshire business to collect a sales or use tax is unfairly avoiding taxing its own persons as remote buyers while effectively imposing a sales tax on the New Hampshire business in a manner that unlawfully discriminates against such out-of-state transactions in violation of the Commerce Clause of the United States Constitution.
XV. The purpose of this chapter is to: (a) ensure that no foreign taxing jurisdiction or authority imposes or attempts to impose sales and use tax collection obligations on a New Hampshire seller since that violates the United States and New Hampshire Constitutions; and (b) protect New Hampshire sellers and the private, personal information they receive from consumers from persons who may attempt to steal money or sensitive information from New Hampshire sellers by impersonating a foreign taxing jurisdiction or foreign taxing authority; and (c) declare as New Hampshire public policy that no foreign taxing jurisdiction has taxing authority over New Hampshire persons.
78-E:2 Definitions. In this chapter:
I. “Foreign taxing authority” means any agency or other instrumentality outside of the state of New Hampshire, or a person acting on behalf of, a foreign taxing jurisdiction that is authorized to administer, audit, and enforce sales or use tax laws of the foreign taxing jurisdiction.
II. “Foreign taxing jurisdiction” means a state, territory, the District of Columbia, a local government, political subdivision, or any other entity outside of the state of New Hampshire which assesses retail sales taxes or use taxes on its persons with respect to the use, storage, and consumption of goods and services.
III. “New Hampshire remote purchase transaction” means the online sale of any services or goods, or both, by a New Hampshire person or business residing solely in New Hampshire for any purpose other than resale in the regular course of business where the customer takes possession of the services or goods in a foreign taxing jurisdiction.
IV.(a) “New Hampshire seller” means any individual, trust, estate, fiduciary,
partnership, corporation, or other legal entity, including a retailer, as defined in RSA 78-D:2, I, located within the state of New Hampshire, that engages in New Hampshire purchase transactions, and that does not have a physical presence within the foreign taxing jurisdiction where the remote buyer resides.
(b) For purposes of this paragraph, a New Hampshire seller has a physical presence in a foreign taxing jurisdiction only if such New Hampshire seller’s business activities within the jurisdiction include any of the following:
(1) Maintaining a commercial or legal residence in the foreign taxing jurisdiction.
(2) Owning or holding a leasehold interest in, or maintaining real property for business purposes, such as a retail store, warehouse, distribution center, manufacturing operation, assembly facility, or any other facility in the foreign taxing jurisdiction.
(3) Leasing or owning tangible personal property for business purposes, other than computer software, of more than de minimis value in the foreign taxing jurisdiction.
(4) Having one or more employees based in the foreign taxing jurisdiction or having independent sales persons in the foreign taxing jurisdiction actively soliciting sales.
(c) For purposes of this paragraph, the term “physical presence” shall not include:
(1) Entering into an agreement under which a person, for a commission or other consideration, directly or indirectly refers potential purchasers to a New Hampshire seller outside the foreign taxing jurisdiction, whether by an Internet-based link or platform, Internet website, or otherwise.
(2) Any presence in a foreign taxing jurisdiction, as described in this paragraph, for less than 15 days in a taxable year, or a greater number of days if provided by foreign taxing jurisdiction law.
(3) Product placement, setup, or other services offered in connection with delivery of products by an interstate or in-state carrier or other service provider.
(4) Internet advertising services provided by in-state residents which are not exclusively directed towards, or do not solicit exclusively, in-state customers.
(5) Ownership by a person outside the foreign taxing jurisdiction of an interest in a limited liability company or similar entity organized or with a physical presence in the foreign taxing jurisdiction.
(6) The furnishing of information to customers or affiliates in such foreign taxing jurisdiction, or the coverage of events or other gathering of information in such foreign taxing jurisdiction by such person, or his or her representative, which information is used or disseminated from a point outside the foreign taxing jurisdiction.
(7) Business activities directly relating to a remote buyer’s potential or actual purchase of goods or services within the foreign taxing jurisdiction if the final decision to purchase is made outside the foreign taxing jurisdiction.
(8) The placement of an order by a remote buyer from a foreign taxing jurisdiction by any means.
V. “Person” means any individual, trust, estate, fiduciary, partnership, corporation, or any state, territory, the District of Columbia, a local government or political subdivision, or any other legal entity.
VI. “Private customer transaction information” means, with respect to any New Hampshire seller, any documents, records, and other information possessed or maintained by a New Hampshire seller in any form which contain information concerning the name, address, or telephone number of any customer, or any other information related to a customer such as credit card, debit card, or checks used to complete a customer transaction, a description of the goods or service purchased, the identity of any person for whom the goods or services were purchased, and the identification of the point of transfer of any goods or services that comprise a transaction of sales used for the calculation of any out of state sales or use tax liability.
VII. “Remote buyer” shall mean a person initiating and completing a purchase from outside the physical boundaries of New Hampshire through traditional and emerging methods ranging from mail-order, telephonic, or Internet-based. The only distinction between a “buyer” and a “remote buyer” is that a buyer may physically enter a New Hampshire business to initiate a sales transaction while a remote buyer chooses to initiate that purchase without entering the physical facilities of the New Hampshire seller.
78-E:3 Prohibitions; Notice.
I. No foreign taxing authority shall request from a New Hampshire seller any private customer transaction information for use in the determination of sales or use tax liability of the remote buyer or for use in the determination, collection, and remittance of sales or use tax by the New Hampshire seller with respect to a customer transaction.
II.(a) A New Hampshire seller may provide to the department of justice within 7 business days of receipt, a notice of a foreign taxing authority’s first request for any private customer transaction information for any reason so that New Hampshire, if it deems necessary, can take action to protect its compelling or strong interests.
(b) A New Hampshire seller may provide to the department of justice within 7 business days of receipt, a copy of the written notice of a foreign taxing authority’s intention to file suit either in a New Hampshire court or in a foreign taxing jurisdiction's first request for any private customer transaction information for any reason so that New Hampshire, if it deems necessary, can take action to protect its compelling or strong interests.
(c) Notwithstanding the provisions of subparagraph (a), a New Hampshire seller may elect immediate compliance with a request or directive of a foreign taxing authority if the seller determines that such compliance is in its best interests. If a New Hampshire seller elects immediate compliance, that seller may remit notice of that decision to the department of justice so that New Hampshire, if it deems necessary, can take action to protect its compelling or strong interests.
(d) A New Hampshire seller may satisfy the notice requirement under this paragraph through email, phone call, letter, or other method established and specified by the department of justice.
III. A New Hampshire seller who elects immediate compliance under paragraph II of this section may do so under protest while reserving all rights provided under this chapter, the United States or New Hampshire Constitutions, or any other provision of law.
IV. No person shall impersonate or attempt to impersonate a foreign taxing jurisdiction, foreign taxing authority, or any other government agency for any reason, and any person who does shall be deemed to have committed an unfair or deceptive act or practice within the meaning of RSA 358-A:2. Any right, remedy, or power set forth in RSA 358-A, including those set forth in RSA 358-A:4, may be used to enforce the provisions of this section. The exemptions provided for in RSA 358-A:3, I shall not apply to this paragraph.
78-E:4 Jurisdiction; Enforcement.
I. No remote purchase transaction by a New Hampshire seller shall be deemed to create an economic nexus in a foreign taxing jurisdiction. A New Hampshire seller accepting a retail transaction of a remote buyer is doing business in New Hampshire at the location of the seller's place of business.
II. Summary or default judgments regarding any type of foreign jurisdiction's sales tax collection or enforcement, or any related enforcement of franchise fee, corporate income tax, or personal income tax liability, that are rendered by a court in a foreign taxing jurisdiction against a New Hampshire seller doing business in New Hampshire shall not be recognized nor enforceable in the state of New Hampshire because the foreign taxing jurisdiction has no jurisdiction associated with that sale and New Hampshire's applicable law constitutes a public policy exception regarding the enforcement of collection of sales taxes in this state.
78-E:5 Severability. If any provision of this chapter or the application thereof to any agency, person, or circumstances is held invalid, the invalidity does not affect other provisions or applications of the chapter which can be given effect without the invalid provisions or applications, and to this end the provisions of this chapter are severable.
HB 698-FN- FISCAL NOTE
FISCAL IMPACT: [ X ] State [ ] County [ ] Local [ ] None
Estimated Increase / (Decrease)
[ X ] General [ ] Education [ ] Highway [ ] Other
The Department of Justice states this bill provides that a New Hampshire seller may provide notice to the Department within seven business days of receipt notice of a foreign taxing authority’s first request for any private customer transaction information for any reason, or the foreign taxing authority’s intention to file suit so that New Hampshire, if it deems necessary, can take action to protect its compelling or strong interests. The Department assumes it would need to hire a full time attorney to handle the review and litigation of the cases. It is estimated that salary, benefits and other expenses, that would need to be supported by general funds, will be $127,000 in FY 2020, $131,000 in FY 2021, $132,000 in FY 2022 and $134,000 in FY 2023.
The Judicial Branch states the potential fiscal impact of the proposed bill on the Branch is in actions under the consumer protection act (RSA 358-A), and in numerous provisions that allow actions in the superior court for injunctive relief, for restitution, or for declaratory judgment. The Branch has no information to estimate the potential volume of cases that could arise under the consumer protection act or the number of superior court actions to determine the fiscal impact. The Branch does know that consumer protection cases are hard fought and carry the potential for enforcement actions by the Attorney General, criminal prosecution, and private actions with the potential of up to treble in damages. The Branch states that the superior court actions would be classified as complex equity cases and does have information on the cost of processing these types of cases. However it should be noted that average case cost estimates for FY 2020 and FY 2021 are based on data that is more than ten years old and does not reflect changes to the courts over that same period of time or the impact these changes may have on processing the various case types. The average complex equity case in the superior court will be $783 in FY 2020 and $788 in FY 2021. Appeals would increase the fiscal impact.
Department of Justice and Judicial Branch