Avalara > Blog > Sales and Use Tax > New Hampshire says other states must reimburse remote sales tax collection costs

New Hampshire says other states must reimburse remote sales tax collection costs

  • Jul 26, 2019 | Gail Cole

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New Hampshire threw down the gauntlet when the Supreme Court of the United States ruled states could require out-of-state businesses to collect and remit sales tax (South Dakota v. Wayfair, Inc., June 21, 2018). Governor Chris Sununu promised any state that tries to force New Hampshire businesses to collect their sales taxes would be in for “the fight of their life.” The recent enactment of Senate Bill 242 may indeed prompt another legal battle.

Known as the Wayfair bill, SB 242 requires foreign taxing jurisdictions (i.e., other states) to provide written notice to the New Hampshire Department of Justice at least 45 days before examining a New Hampshire seller, imposing a sales or use tax collection obligation on a New Hampshire seller, or requesting private customer information from a New Hampshire seller. You can learn more about the new law here.

Wayfair recap

Before last year’s Supreme Court decision in South Dakota v. Wayfair, Inc., states were prohibited from imposing a sales tax collection obligation on businesses with no physical presence in the state (i.e., remote sellers). Thus, for example, California could not require a New Hampshire–based retailer with no physical connection to California to collect California use tax on sales delivered into California.

Wayfair overruled the physical presence rule, finding it “unsound and incorrect.” The court determined nexus was established through a remote seller’s “economic and virtual contacts” with the state. As a result of the ruling, a remote seller’s economic activity in a state can establish a sales tax collection obligation (i.e., economic nexus). Of course, having a physical presence in a state still establishes nexus.

New Hampshire takes issue with Wayfair because it enables other states to require New Hampshire businesses to collect and remit sales tax. New Hampshire is one of five states, along with Alaska, Delaware, Montana, and Oregon, that don’t have a general sales tax. And New Hampshire lawmakers want to protect Granite State businesses from sales tax collection obligations in other states. More than 41 states have already adopted economic nexus since the Wayfair decision; others will soon do the same.

What Wayfair did and didn’t do

Although the Wayfair ruling removed the physical presence rule, it didn’t replace it with a similar bright-line test. Thus, there are few clear parameters over what states can and can’t do.

However, the ruling did highlight certain aspects of South Dakota’s tax system that “appeared designed to prevent discrimination against or undue burdens upon interstate commerce.” These are:

  • Safe harbor for small sellers: South Dakota allows an exception for remote sellers with less than $100,000 in sales or fewer than 200 transactions in the state in the current or previous calendar year
  • Prospective enforcement: South Dakota ensured economic nexus will not be applied retroactively
  • Participation in the Streamlined Sales and Use Tax Agreement: South Dakota and 23 other states have simplified and reduced the costs of sales tax compliance for remote sellers

Streamlined Sales Tax (SST) states provide sellers access to sales tax administration software paid for by the state through its Certified Service Provider (CSP) program. These services aren’t free of charge for all businesses in all SST states. However, SST states pay for CSP software and services for remote sellers that qualify as a “voluntary seller.”

To reiterate, the Wayfair decision didn’t mandate the provision of free sales tax software and services for businesses. However, it did point out that free sales tax software helps reduce the burdens of remote sales tax compliance.

Some non-SST states are taking that into consideration. Pennsylvania already has its own CSP program up and running, and Connecticut, Illinois, and New Mexico are tasked with establishing CSP programs akin to the SST CSP program. 

New Hampshire builds foundation for legal challenge

SB 242 authorizes the New Hampshire Department of Justice to determine “whether the laws of the foreign taxing jurisdiction meet the requirements of the United States and New Hampshire Constitutions.” To do so, it will consider numerous aspects of the other state’s laws, including but not limited to the following:

  • Does the state provide safe harbor for New Hampshire businesses that conduct limited business in the state?
  • Does the state prohibit retroactive application of economic nexus?
  • Does the state provide for a deduction, reimbursement, or exemption for the cost of remote sales tax compliance?
  • Has the state adopted the Streamlined Sales and Use Tax Agreement “or otherwise adopted laws that are substantially compliant with each of the requirements set forth” in the agreement?

New Hampshire may not have the authority to require other states to cover the cost of compliance for New Hampshire’s remote sellers. But according to Scott Peterson, VP of Government Relations at Avalara, SB 242 very smartly uses the Supreme Court’s own words to set up a potential challenge to the constitutionality of a state sales tax that doesn’t include the payment of costs. 

It will be interesting to see how remote sellers based in New Hampshire respond to sales tax collection requests from other states now that SB 242 has been enacted. And it will be interesting to see how other states respond to the Granite State’s new law. The gauntlet is on the ground. Will it be picked up?

Check out our seller’s guide to nexus laws and sales tax collection requirements to learn which states require out-of-state sellers to collect and remit sales tax.


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals — or anyone interested in learning about tax compliance.