New Hampshire vs. Taxachusetts: How the story ends

In what could be my last post in a long line of posts covering the Town Fair Tire Centers v. Commissioner of Revenue, Massachusetts case – the seminal Interstate Commerce case regarding sales/use tax in these times – the Massachusetts Supreme Judicial Court ruled yesterday, August 25^th, that Town Fair Tire Centers is not required to collect use tax on behalf of Massachusetts, reversing the Appellate Tax Board’s finding.

In cheers that could be heard not only throughout the glorious sales tax-free state of New Hampshire but throughout the U.S., the Court there made clear that the corporation need not stand in the shoes of the Massachusetts DOR. 

It ruled, in fact, that there was no evidence that the tires sold in the tire company’s New Hampshire stores to Massachusetts residents were, in fact, driven upon or otherwise used within Massachusetts borders (This reasoning makes me think back to one of the earliest cases, a U.S. Supreme Court case, to define the very nature of use tax, the 1944 McLeod case, “A sales tax is a tax on the freedom to purchase . . . a use tax is a tax on the enjoyment of that which was purchased.” And there’s no evidence in the Town Fair Tire Centers case that the tires were, in fact, enjoyed in Massachusetts.).

What a fight it’s been, right from the start. Sales tax-free New Hampshire’s Attorney General, Governor, and others led the fight to keep its state tax-free and to not have merchants gain the added burden of tracking customer purchases over state lines. The Appellate Tax Board, however, read an assumption into the tax statute that sellers should know that customers will put into use their out-of-state purchases based on data obtained from credit cards, addresses, phone numbers, drivers’ licenses, and license plates. Massachusetts’ Supreme Judicial Court disagreed, however, ruling that the statute’s plain language does not lead to this presumption and, in fact, it creates no kind of obligation for companies to collect use tax unless and until the storage, use, or consumption of tangible personal property occurs in Massachusetts.

Going one step further, the Court ruled that there is no statutory presumption of use in Massachusetts when property is sold to a resident outside of the state, even if the goods are affixed to property registered within Massachusetts. It left open the chance for the Massachusetts legislature to specifically enact this sort of presumption, “The absence of a statutory presumption that a vendor’s knowledge that a purchaser is a resident of Massachusetts will permit a finding that the goods purchased out of State were purchased “for” use in Massachusetts and actually used in the Commonwealth is particularly significant because Legislatures in other States have enacted just such a presumption. The Legislature may, of course, enact such a presumption.”

For the full timeline of this multi-faceted story, read each Sales Tax Buzz post, including interviews with Nancy Kyle, president of the Retail Merchants Association of New Hampshire, and David J. Nagle, a tax partner in the Boston office of Sullivan & Worcester, which has represented Town Fair Tire Centers in this matter, please review here, here, here, here, and here, chronologically.

Want to read the case? You can find Town Fair Tire Centers, Inc. v. Commissioner of Revenue, Massachusetts Supreme Judicial Court, No. SJC-10360, August 25, 2009 here, for your reading pleasure . . . and this case actually is a pleasure to read, I promise! 

Advertisement