Lindsey M. Stepp, Commissioner Carollynn J. Lear, Assistant - - PowerPoint PPT Presentation

Sales Tax Basics & the Wayfair Decision

Joint Task Force on the Wayfair Decision July 17, 2018

Lindsey M. Stepp, Commissioner Carollynn J. Lear, Assistant Commissioner

109 Pleasant Street, Concord, NH 03301 603-230-5000

Sales Tax Basics & the Wayfair Decision

This presentation is intended for informational purposes only, and is not a substitute for seeking professional advice or for reviewing the applicable laws and rules. This presentation represents some positions of the Department on the limited issues discussed herein, based on the law in effect at the time

• f the presentation and Department interpretation thereof, as

well as the opinions and conclusions of its presenter. For the current status of any tax law, practitioners and taxpayers should consult the source documents (i.e., Revised Statutes Annotated, Rules, Case Law, Session Laws, etc.) for independent verification.

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Sales Tax

• A tax applied to the sale of goods or services to the ultimate
• consumer. Typically, the consumer is obligated to pay the

tax and the vendor or seller is obligated to collect the tax from the consumer and remit the tax to the state.

• Most states exclude sales for resale.
• Most states exclude the sale of components or ingredients

used to manufacture.

• Most states have an occasional sales exemption.
• Many states tax only the sale of tangible goods (not

intangible goods or services).

• Many states exempt the sale of grocery items and other

essentials from taxation.

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Levied upon the use, storage, or consumption in the state of taxable goods that have not been subjected to the state’s sales tax. The use tax imposes an exaction equal in amount to the sales tax that would have been imposed on the sale in question if the sale had occurred within the state’s taxing jurisdiction. Example 1: If a Massachusetts resident drives to Nashua to purchase a television which they then drive back to Massachusetts and install in their Massachusetts home, the Massachusetts use tax is owed. Example 2: If a Massachusetts resident drives to Nashua to purchase a television which they install in their New Hampshire vacation home, Massachusetts use tax is not owed. With the use tax, it is the location where the item is to be used that determines if and how much use tax is owed.

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Use Tax

• The consumer is always the party legally obligated to pay the

sales tax and/or remit the use tax.

• For traditional sales, meaning those transacted in-person, the

vendor or seller has always been obligated to collect the sales tax from the purchaser and remit the tax to the state where the sale occurred.

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Collection Obligation: Traditional Sellers

• Sales completed utilizing the mail, internet, or telephone.
• The consumer is still always the party legally obligated to pay the sales tax and/or

remit the use tax. Pre-Wayfair

• A remote seller was not obligated to collect a state sales tax from the purchaser

unless the seller had a physical presence in the state where the title passes to the purchaser (typically the purchaser’s state of residence). Post-Wayfair

• A remote seller may be obligated to collect a state sales tax from the purchaser even

if the seller does not have a physical presence in the state where the title passes to the purchaser (typically the purchaser’s state of residence).

• To determine whether a seller now has an obligation to collect a state sales tax, the

seller must evaluate whether they have “substantial nexus” with the taxing state. The Supreme Court did not rule on what will qualify as “substantial nexus;” meaning, that issue is likely to get litigated over the coming years.

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Collection Obligation: Remote Sellers

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Meals and Rentals Tax Comparison

Imposition of Tax

Traditional Sales Tax NH M&R Tax

A sales tax is imposed on the sale or rental of tangible personal property and certain services in the taxing jurisdiction. The M&R Tax is imposed specifically on the sale of meals and the rental of hotel rooms and motor vehicles in New Hampshire.

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Meals and Rentals Tax Comparison

Collection Obligations

Traditional Sales Tax NH M&R Tax

A seller having a place of business in the taxing jurisdiction must collect and remit the sales tax to the taxing jurisdiction. The operator is required collect and remit the M&R Tax to New Hampshire. A seller not having a place of business in the taxing jurisdiction must still comply with collection

• bligations, provided that it has
• ther physical presence in the

taxing jurisdiction. The operator has a place of business within New Hampshire, including through agency.

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Meals and Rentals Tax Comparison

Use Tax

Traditional Sales Tax NH M&R Tax

A sales tax has a complementary use tax, which is imposed on the storage, use, or other consumption

• f tangible personal property and

certain services in the taxing jurisdiction. There is no complementary tax, because the operator sells taxable meals, operates a hotel, or rents motor vehicles in New Hampshire. A remote seller may need to collect and remit the use tax to the taxing jurisdiction (as a result of Wayfair). The operator and the purchaser,

• ccupant, or renter are in New
• Hampshire. The sale or rental is

in person.