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Monday, June 8, 2009

Masschusetts goes after shoppers instead of lowering taxes

This weekend, we chronicled the efforts of the Vermont legislature to boost the New Hampshire economy. Now, Michael McCord writes in the Portsmouth Herald about efforts in the Bay State to collect "Use Taxes" from New Hampshire retailers:

In theory, Massachusetts shoppers are supposed to keep track of their out-of-state purchases during the year and pay a 5 percent "use tax" (as in buy something in one state and use it in their home state) when they file their state income tax returns each April. In practice, an overwhelming majority don't.

"The compliance rate is fairly small," said Robert Bliss, a spokesman for the Massachusetts Department of Revenue. He said that overall Massachusetts gets about $3 million to $4 million annually from those who volunteer to pay. Bliss said his department has no estimates on how many people might be in noncompliance or how much tax revenue the state loses and that it would be impossible to find out.

But hypothetically, if those who have complied represent as much as 5 percent of the total, then New Hampshire retailers could benefit by around $1.5 billion to $2 billion in sales — and Massachusetts loses between $75 and $100 million annually. Both of those numbers are expected to rise as the Massachusetts Legislature will likely increase the state sales tax to 6.25 percent.

I have no idea how the Massachusetts "Use Tax" has stood up for this long. It clearly interferes with interstate commerce, and amounts to an import tariff on out-of-state goods. I suppose that it's far easier to ignore the tax, as most Massachusetts shoppers do, than challenge it. That could change if Massachusetts authorities start trying to enforce the tax at the New Hampshire border.

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