State can’t collect tax on sales in N.H.
SJC blocks Mass. in case seen as bid to expand authority
Massachusetts’ highest court has ruled the state cannot collect sales taxes from a New Hampshire retail store that sold tires to Bay State customers, ending a case some tax specialists saw as an effort to dramatically expand the state’s taxing authority.
The unanimous ruling by the Supreme Judicial Court found that the Department of Revenue, which initiated the case in 2003 while Mitt Romney was governor, overreached in its interpretation of state law, and failed to prove it had the right to collect taxes on tires sold by Connecticut-based Town Fair Tire Centers.
The Revenue Department had tried to collect $109,000 from Town Fair after a review found 313 invoices in its three New Hampshire stores listed Massachusetts addresses for buyers. New Hampshire does not have a sales tax, but Massachusetts officials argued they were owed taxes because those customers would have been charged here.
The court focused narrowly on the state’s application of the use tax law, which requires Massachusetts residents to pay taxes on items bought in other states but that are intended for use in the Massachusetts. The court found the Revenue Department failed to introduce evidence proving that the tires purchased in the New Hampshire stores were actually used in Massachusetts.
Instead, the state used the invoices listing the addresses of Massachusetts customers to infer the tires were used in Massachusetts. But the court ruled the state’s use tax law does not grant room for inference and requires the state to show actual proof the “storage, use, or consumption of tangible personal property’’ occurs in Massachusetts.
“Because the statute is unambiguous, we follow the ordinary meaning of the words,’’ the court wrote, quoting a simi lar case from 1990.
Some tax specialists saw the case as a way for Massachusetts to significantly broaden its taxing power, thus increasing costs for consumers and large retailers such as Best Buy and Sears, Roebuck and Co., that sell expensive appliances and other goods in New Hampshire.
"The court drew the line where it should be drawn," said David Nagle, a tax partner for the law firm Sullivan & Worcester, which represented Town Fair. "Had the state won, it would have looked for other opportunities to deputize retailers to collect a use tax in situations where it could find a basis for doing so."
But the Department of Revenue issued a statement yesterday saying it had always viewed the Town Fair case narrowly and does not intend to appeal.
“The SJC decision is the end of the line for this case, since it does not involve constitutional issues that might require the attention of a higher court,’’ the statement said.
“The decision also leaves intact the status quo ante; namely that those Massachusetts residents who purchase items in a no-tax state for use in Massachusetts are as a matter of law supposed to report the use tax, equivalent to the Massachusetts sales tax, on their state income tax form,’’ it added.
A spokesman for the Revenue Department, Robert Bliss, said the department has no plans to step up enforcement of the law. In 2007, the last year for which figures are available, more than 53,000 Massachusetts residents paid about $4.4 million in use taxes.
The purchasing of tax-free goods in New Hampshire is expected to increase this year after Massachusetts raised its sales tax to 6.25 percent from 5 percent. “As a practical matter, there isn’t any way to step up enforcement,’’ Bliss said. “Basically, you would be talking about some kind of border patrol, and that’s just not going to happen.’’
Casey Ross can be reached at cross@globe.com. 
