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No more free ride?(Sun, The (Lowell, MA) Via Acquire Media NewsEdge) Feb. 4--A legal dispute between Massachusetts and a cross-border tire vendor had shoppers in New Hampshire fuming yesterday over the prospect of having to pay a sales tax on purchases in the Granite State, while Bay State officials argued they were just trying to follow the letter of the law and collect what is owed. The state's Supreme Judicial Court will hear a case next month regarding whether the state has the right to force Town Fair Tire Centers, which operates in both Massachusetts and New Hampshire, to charge Massachusetts residents a 5 percent sales tax on purchases made in New Hampshire. Though the case pertains only to Town Fair Tire, the lawsuit could have broader implications for Massachusetts consumers and out-of-state retailers who could be forced to verify where their products are going and tax everything from televisions purchased at Best Buy to refrigerators sold at Sears. State law currently requires Massachusetts residents to pay a 5 percent use tax on items for home use purchased out-of-state where there is no sales tax. Those taxes are supposed to be reported when consumers file their annual income taxes, though officials admit the taxes are rarely paid and the law is virtually unenforceable. Residents do pay the tax on items purchased from out-of-state retailers when they are delivered to Massachusetts. At Town Fair Tire in Nashua yesterday, 53-year-old Robert Freeman of Westford was unaware of the legal battle or the 5 percent "use tax" demanded by the Bay State, but he was angered by the unprecedented move. "My family has been here since the '60s, and we've saved a lot of money on taxes (by coming to New Hampshire)," he said yesterday. "I can understand the implications here. You don't have to be very intelligent to figure that out." Freeman, who has a son living in Nashua, frequently makes the 7-mile trip north in an effort to save money. "I feel awful about it," he said. "The economy is bad enough as it is. It's no good. There are no jobs around." The case dates back to 2003, when an auditor from the Department of Revenue found 313 examples of Town Fair Tire making sales to customers with Massachusetts addresses, telephone numbers and, in some cases, licenses for tires that were frequently installed on their vehicle on-site. Because there appeared to be little question about where the tires were to be used -- unlike a television -- the DOR ordered Town Fair Tire to start charging customers the 5 percent sales tax to be sent back to Massachusetts. The Appellate Tax Board upheld the ruling, but Town Fair Tire has appealed to the SJC. "This case, which started in 2003 under the administration of former Gov. Mitt Romney, does not represent a new effort to enhance revenue collections," DOR spokesman Robert Bliss said. "With the exception of tire retailers like Town Fair Tire, it has no impact on other New Hampshire retailers, nor does it signal the start of a new sales-tax collection initiative on the border." Employees at Town Fair Tire in Nashua referred all inquiries to Senior Vice President Mike Barbaro, who would not comment, citing the ongoing legal dispute. Nancy Kyle, president of the Retail Merchants Association of New Hampshire, said New Hampshire has worked hard to keep its state free of a sales tax. "It's not the job of a New Hampshire retailer to (enforce) Massachusetts tax laws that they can't enforce on their own," she said. "Just because a car has a Massachusetts license plate doesn't mean that the person in the car is a resident of Massachusetts, and why should we be collecting their sales tax? It's ridiculous." Kyle also feels the state is going after a small- to medium-sized retailer -- instead of a nationwide chain -- because its legal resources might not be as great as a larger company's. Massachusetts revenue officials said yesterday the purchase of tires is a unique situation because it's easier to determine where those tires will be used. They said they do not view the enforcement order as something that has widespread applicability. Two law professors who have studied the case disagree. "Taken to its logical extreme, that rule would require a nationwide retailer to determine the residence of all its customers," professors John Swain and Walter Hellerstein wrote in the trade publication State Tax Notes. Should Massachusetts win its case, the state will have succeeded in setting a precedent that it is the responsibility of the retailer to police the destination of its products rather than the consumer to report the purchase. Border states, like Rhode Island and Connecticut, that charge higher sales taxes might also look to Massachusetts businesses for help recovering their own money. "I'm of two minds," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "On the one hand, DOR is following the law on the books -- the use tax -- though almost no one voluntarily pays it. On the other hand, I'm also troubled about trying to track Massachusetts residents out of state and forcing these companies to go through administrative gymnastics to collect the money." Breanna Lucci, 18, of Andover, who was buying new tires yesterday at Town Fair Tire, said she is well aware of the lure the Granite State has on Massachusetts shoppers. Lucci's family owns East Gate Liquors in Wilmington, a business that continuously feels the financial pinch when residents drive north to purchase cigarettes. Lucci, though, said Massachusetts should back away from the lawsuit. "If you're near a place that gives you a benefit, then why not?" she said. "There's outlets everywhere where you can get discounts. It doesn't hurt. "Our economy is too bad," she added. "I don't think people should have to tax us" on New Hampshire purchases. Sun correspondent Kirk Boutselis contributed to this report, which includes material from the Associated Press. To see more of The Sun, or to subscribe to the newspaper, go to http://www.lowellsun.com. Copyright (c) 2009, The Sun, Lowell, Mass. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |