SPECIAL SESSION – DRAFT
2018 SPECIAL SESSION
SPECIAL SESSION BILL
AN ACT requiring notice and approval of certain actions to commence audits of collection liabilities arising under certain sales and use tax statutes and prohibiting New Hampshire remote sellers from disclosing private customer information to foreign taxing authorities in connection with the collection of certain sales and use taxes.
SPONSORS:
COMMITTEE:
ANALYSIS
This bill prohibits foreign taxing jurisdictions from requesting information from, conducting examinations of, or imposing sales and use tax collection obligations on sellers in New Hampshire , unless the foreign taxing jurisdiction provides notice to the New Hampshire attorney general. This bill also prohibits sellers in New Hampshire from providing private customer information to any foreign taxing authority for purposes of determining liability for collection of certain sales or use taxes unless the seller has provided a written notice of the request for such information to the attorney general. The bill does allow 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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.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 Eighteen
AN ACT prohibiting New Hampshire remote sellers from disclosing private customer information to foreign taxing authorities in connection with the collection of certain sales and use taxes and requiring notice of certain actions to commence audits of collection liabilities arising under certain sales and use tax statutes.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Protection of Private Customer Information and Rights of Remote Sellers in Connection with Certain Foreign Sales and Use Taxes. RSA 78-D is repealed and reenacted to read as follows:
CHAPTER 78-D
Protection of Private Customer Information and Rights of Remote Sellers in Connection with Certain Foreign Sales and Use Taxes
78-D:1 Findings and Purpose. The general court finds that:
I. Numerous states and local governments impose a sales tax on goods and services purchased by customers within their boundaries, and also impose an excise known as a “use tax” on use, storage, or consumption of goods and services purchased by their residents from a business located out of the taxing jurisdiction. Many of these taxing jurisdictions require their residents to report and pay the use tax directly to the state.
II. States and local governments that impose a sales and use tax typically also impose obligations on retail businesses that sell taxable goods or services to collect sales or use tax from their customers and remit tax proceeds to the taxing jurisdiction. These collection and remission obligations include duties to understand the laws and regulations of the various taxing jurisdictions, to maintain records of transactions, to file periodic returns, to serve as custodian of collected tax funds, and to transmit returns and funds to taxing jurisdictions.
III. Over 10,000 state and local jurisdictions within the United States impose sales and use taxes.  Each of these jurisdictions has their own laws, regulations, policies and standards for determining sales and use tax obligations. For example, New Jersey knitters pay sales tax on yarn purchased for art projects, but not on yarn earmarked for sweaters. Texas taxes sales of plain deodorant at 6.25 percent but imposes no tax on deodorant with antiperspirant. Illinois categorizes Twix and Snickers bars – chocolate and caramel confections usually displayed side-by-side in the candy aisle – as food and candy, respectively (Twix has flour; Snickers doesn’t), and taxes them differently.
IV. Complying with the complexities of these multiple and various sales and use tax laws and regulations imposes very costly burdens on all affected retail businesses.  These burdens will be especially difficult to shoulder for smaller businesses that seek to expand their customer base by using old and new technologies such as traditional mail and communications using the Internet.
V. On June 21, 2018, the United States Supreme Court issued its decision in South Dakota v. Wayfair, Inc., et al. By a 5-4 majority, the Court overturned over 50 years of precedent 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 also identifies several important areas where existing sales and use tax laws may violate the constitutional rights of remote retail businesses notwithstanding the demise of the physical presence rule. Nonetheless, this decision exposes remote retail businesses, including those located within New Hampshire, to assertions by thousands of foreign taxing jurisdictions of various collection and remission requirements on remote retail businesses that were previously protected by the longstanding physical presence rule.
VI. 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.  The majority decision states: “The question remains whether some other principle in the Court’s Commerce Clause doctrine might invalidate the [South Dakota] Act.”  The majority opinion identified important issues such as whether the law applies a safe harbor for small businesses, whether the law ensures that no obligation to remit sales tax may be applied retroactively, and whether a state has adopted the Streamlined Sales and Use Tax Agreement.
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.
VIII. New Hampshire’s decision not to enact a traditional sales and use tax law reflects a strong governmental interest to encourage the establishment and expansion of small and “micro-businesses” that represent a particularly valuable segment of New Hampshire’s economy.  The high cost and practical difficulty of compliance with sales and use tax requirements would disproportionately and negatively impact these businesses and discourage other aspiring entrepreneurs from starting new businesses in New Hampshire.
IX. New Hampshire has a strong 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.
X. New Hampshire also has a strong governmental interest in protecting its retail sellers and the private, personal information they possess from consumers from persons who may attempt to steal money or sensitive information from retail sellers by impersonating a foreign taxing jurisdiction or foreign taxing authority.
XI. Any foreign taxing jurisdiction that attempts to require a remote out-of-state business to collect a sales or use tax imposed on residents of such jurisdiction without first seeking actively to enforce its use tax against its own residents is unfairly avoiding taxing its own voters while effectively imposing a direct tax on the remote out-of-state business in a manner that unlawfully discriminates against such out-of-state transactions in violation of the Commerce Clause of the United States Constitution.
78-D:2 Definitions. – Where appearing in this chapter:
I. “Foreign taxing jurisdiction” means a foreign state, commonwealth or local government which assesses retail sales tax or use tax on its residents with respect to the use, storage, and consumption of goods and services.
II. “Foreign taxing authority” means an agency or other instrumentality of a foreign taxing jurisdiction that is authorized to administer, audit and enforce sales or use tax laws of the foreign taxing jurisdiction.
III. “Private customer transaction information” means, with respect to any New Hampshire remote seller, any documents, records, and other information possessed or maintained by a New Hampshire remote 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 customer transaction.
IV. “New Hampshire remote seller” means any individual, trust, estate, fiduciary, partnership, corporation, or other legal entity, organized for gain or profit, carrying on business activity within this state, that does not have a physical presence within a foreign taxing jurisdiction.
V. “Written Notice” means a notice in writing, by physical letter, addressed an physically mailed to the New Hampshire Attorney General’s Office. No other form of notice shall be deemed to meet the requirements of this Chapter.
78-D:3 Prohibitions. –
I.  No foreign taxing authority shall request from a New Hampshire remote seller any private customer transaction information for use in the determination of sales or use tax liability of the customer or for use in the determination, collection, and remittance of sales or use tax by the seller with respect to a customer transaction, nor shall a foreign taxing authority proceed with conducting such an examination or imposing sales and use tax collection obligations, unless the foreign taxing authority has first provided to the attorney general written notice of its intent to request such information or conduct such an examination and 90 days from the date of the written notice have elapsed. The written notice must state that it is a “RSA 78-D Audit Notice,” must provide the full legal name and address of the sellers, must contain the reasons for the request or examination, must cite the legal authorities that authorize imposition of a tax collection obligation on the seller, and must explain why the seller is subject to those laws.
II. No New Hampshire remote seller shall provide to a foreign taxing authority any private customer transaction information for use in the determination of sales or use tax liability of the customer or for use in the determination, collection, and remittance of sales or use tax by the seller with respect to a customer transaction, unless the New Hampshire remote seller has first provided to the attorney general notice of the foreign taxing authority’s request for such information. A New Hampshire remote seller may satisfy the notice requirement under this paragraph through email, phone call, letter, or other method established and specified by the attorney general.
III. The provisions of this chapter notwithstanding, a New Hampshire remote seller may elect to comply with any request or directive of a foreign taxing authority if the New Hampshire remote seller determines that its interests require such compliance. A New Hampshire remote seller who elects such compliance may do so under protest while reserving all rights provided under this Chapter, the United States Constitution, or any other provision of law.
IV. No person shall impersonate or attempt to impersonate a foreign taxing jurisdiction or foreign taxing authority for any reason and, any person who does, or who attempts to do so, shall be deemed to have committed an unfair or deceptive act or practice within the meaning of RSA 358-A:2.
78-D:4 Determination of Minimum Protections. –
I. Upon receiving written notice of a foreign taxing authority’s intent to request private customer information from, conduct an examination of, or impose sales and use tax collection obligations on a New Hampshire remote seller, the attorney general shall determine within 90 days of receipt of such notice whether the laws of the foreign taxing state meet the requirements of the United States Constitution and, if they do, whether they can be applied to the New Hampshire remote seller based on the reasons provided in the required written notice.  In conducting the review required by this paragraph, the attorney general shall consider all laws and regulations existing as of the time of the review, and all applicable principles of the United States Constitution, including but not limited to:  whether the foreign taxing state’s laws provide a satisfactory safe harbor for businesses that conduct only limited business within the state; whether the laws ensure that no obligation to remit sales or use tax may be applied retroactively; whether the foreign taxing state has 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 Streamlined Sales and Use Tax Agreement; whether the laws require substantial compliance and enforcement of the entirety of such laws, including the requirement that residents report and pay use tax liability; and whether the application of such laws in practice are fairly related to the tangible benefits provided by such state to the New Hampshire remote seller.
II. Upon completion of the determination made pursuant to paragraph I of this section, the attorney general send a letter to the New Hampshire remote seller and the foreign taxing authority informing them of what, if any, action the attorney general might take under this chapter.
78-D:5 Administration; Enforcement. –
I. Whenever the attorney general has reason to believe that any provision of RSA 78-D:3 or RSA 78-D:4 has been, is being or is about to be violated by any person, including a foreign taxing authority or foreign taxing jurisdiction, the attorney general may bring an action in the name of the state against such person to restrain by temporary, preliminary or permanent injunction the prohibited conduct and may petition the court for an order of restitution of money or property to any person or class of persons injured thereby.  The attorney general may bring a declaratory judgment action against any foreign taxing authority or jurisdiction to establish that the proposed assertion of an obligation to remit sales tax by  one or more New Hampshire remote sellers violates applicable state or federal law.  The action shall be brought in the superior court of Merrimack county.  The superior court shall act on such actions as expeditiously as possible and such actions shall proceed with priority over any other action presenting the same questions in any other venue.
II. The attorney general shall have the power to subpoena and subpoena duces tecum in the name of the attorney general for the purposes of this chapter. Witnesses summoned by the attorney general shall be paid the same fee and mileage that are paid witnesses in the superior court of the state. A subpoena or subpoena duces tecum of the attorney general may be served by any person designated in the subpoena or subpoena duces tecum to serve it. The attorney general may administer an oath or affirmation to any person and conduct hearings in aid of any investigation. The attorney general may also require any person to make a statement in writing under oath concerning any matter under investigation provided that the due date for receipt of such a statement shall be no sooner than 10 calendar days after receipt of such demand. Any testimony or statement given by any person so sworn shall be subject to the pains and penalties of perjury.
III. Without limiting the authority granted in paragraph IV, whenever the attorney general believes any person to be or to have been in violation of this chapter, the attorney general may examine or cause to be examined for that purpose any books, records, papers, or other documentary materials, or may examine any person under oath and subject to the pains and penalties of perjury that the attorney general thinks may have knowledge of such violation. For such examination, the attorney general may require the person to appear at such person's place of residence, place of business or any place in this state.
IV. The attorney general shall serve notice of the time, place, and cause of said examination at least 10 days prior to the date of the examination. Service of any such notice may be made by:
(a) Delivering a duly executed copy of the notice to the person to be served or an agent authorized by law to receive service of process; or
(b) Delivering a duly executed copy of the notice to the person's principal place of business in this state, if any; or
(c) Registered mail, return receipt requested, to the person to be served, or an agent authorized by law to receive service of process. These limitations do not apply to a written statement required under paragraph I which can be required by a reasonable notice thereof.
(d) Such notice need not be given if the attorney general has reason to believe that any potential recipient of such notice may move, conceal, alter or destroy, or cause to be moved, concealed, altered or destroyed, any documents to which it refers, or move or conceal or cause to be moved or concealed any person whose testimony is sought pursuant thereto. In any of such cases, the notice served by the attorney general pursuant to this paragraph may require the immediate production or examination of any document or person therein referred to.
V. At any time prior to the date specified in the notice, or within 21 days after the notice has been served, whichever period is shorter, the superior court may, upon motion for good cause shown, extend said reporting date, or modify or set aside the demand.
VI. Any information, testimony, or documentary material obtained under the authority of this section shall be used only for one or more of the following purposes:
(a) In connection with investigations instituted under this chapter or for the prosecution of legal proceedings instituted under this chapter or other provisions of the RSA; and
(b) In connection with any formal or informal program of or request for information exchange between the department of justice and any other local, state or federal law enforcement agency. However, no information or material obtained or used pursuant to the authority of this section shall be released publicly by any governmental agency except in connection with the prosecution of legal proceedings instituted under this chapter or other provisions of the RSA. In addition, any information, testimony or documentary material obtained or used pursuant to a protective order shall not be exchanged or released, as provided herein, publicly except in compliance with such protective order.
VII. A New Hampshire remote seller who is subject to collection, audit, or examination by a foreign taxing authority may file an action in Merrimack County Superior Court seeking immediate, emergency relief to enjoin any collection, audit, or examination attempt that is occurring or will occur in violation of RSA 78-D:3 or RSA 78-D:4. Any New Hampshire remote seller who prevails in such an action shall be entitled to recover any reasonable attorney fees and costs incurred in maintaining the action.
78-D:6 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.
2 Effective Date. This act shall take effect upon its passage.