Tax Free or…Never Mind - Tire Review Magazine

Tax Free or…Never Mind

The next great legislative and judicial battle is taking shape in the birthplace of our democracy – New England.

And you can thank the tire industry for this one.

That border skirmish you have read about where Massachusetts wants to slap its state sales tax on tires bought by its residents at Town Fair Tire Centers located across the line in New Hampshire, has heated up. Now the Live Free or Die state is trying to foil Taxachusetts’ move with a bill that would allow its businesses to keep private any consumer information – including purchases – from other states for the purposes of collecting a sales tax.

Taxachusetts claims that residents who are Town Fair customers should be subject to that state’s 5% sales tax. Such so-called “use taxes” are not that uncommon, but nearly all are strictly voluntary and require the customer to fess up. For example, Ohio collects a use tax on out-of-state purchases, and tries to do so on its state income tax returns by asking residents if they made any out-of-state purchases and the amount of such purchases. Naturally, most Ohioans deny ever getting their Amazon.com on (not this writer, to be sure).

Based on its audit of Town Fair Tire sales between 2001 and 2003, Taxachusetts claims Town Fair owes the state a whopping $230,000 in back sales tax, interest and penalties. Taxachusetts claims such jurisdiction on the tax dollars because Town Fair operates more than two dozen stores in its state, even though the claim is for sales made in New Hampshire to Massachusetts residents.

And why would a Massachusetts resident travel north to buy tires and service? Cause New Hampshire has no state sales tax. Nor, for that matter, does it have a state income tax. Talk about living free!

Any way, this case is already headed to the Taxachusetts Supreme Court, where surely a fair hearing will be held and a fair decision will be rendered. Then it will be off to the U.S. Supreme Court, with brief stops at various U.S. district and appeals courts.

Why will this end up before the U.S. Supremes? Quite simply because the entire sales tax issue between states – especially in this age of Internet retailing – has never been fully resolved. This case has enough legs and press to get there.

If you have comments to share, send to me at [email protected].

– Jim Smith

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