New Hampshire has a unique approach to taxation, particularly regarding consumer purchases, which impacts both individual shopping and business finances. Understanding New Hampshire’s tax system for goods and services is important for residents and businesses alike. This article will explore these effects.
The State’s Framework for Sales Tax
New Hampshire is one of only five U.S. states without a general statewide sales tax on goods and services.1NH Department of Revenue Administration. Does New Hampshire Have a Sales Tax? This means most purchases in New Hampshire do not have an added sales tax. This policy aligns with the state’s “Live Free or Die” motto and a preference for limited taxation.
The New Hampshire Department of Revenue Administration (NHDRA) oversees the state’s tax laws.2New Hampshire General Court. Chapter 21-J: Department of Revenue Administration While there is no general sales tax, this does not mean a complete absence of taxes on all purchases, as the state utilizes other revenue sources. The decision not to implement a general sales tax is a deliberate legislative choice, reflecting a historical preference for alternative revenue streams.
Alternative Levies on Goods and Services
While New Hampshire lacks a general sales tax, specific transaction-based taxes apply to certain goods and services, contributing to state revenue. These include:
- Meals and Rentals Tax (RSA Chapter 78-A): An 8.5 percent tax applies to meals from restaurants and similar establishments, and to charges for rooms in hotels, motels, and other lodging facilities.3New Hampshire General Court. Chapter 78-A: Tax on Meals and Rooms
- Tobacco Tax (RSA Chapter 78): Cigarettes are taxed at $1.78 per 20-pack and $2.23 per 25-pack.4NH Department of Revenue Administration. Tobacco Tax Overview Other tobacco products, including e-cigarettes, are taxed based on wholesale prices or nicotine content. These taxes are usually paid by wholesalers and included in the retail price.
- Road Toll (RSA Chapter 260): A tax of $0.222 per gallon on motor fuels like gasoline, diesel, and aviation fuel, funding the state’s highway system.5NH Department of Safety. Road Toll Bureau This is collected at the distributor level and passed to consumers.
- Communications Services Tax (RSA Chapter 82-A): A 7 percent tax on services like traditional phone lines and VoIP, collected by the provider.6NH Department of Revenue Administration. Communications Services Tax Overview
- Electricity Consumption Tax (RSA Chapter 83-E): A tax of $0.00055 per kilowatt-hour, paid by consumers on their electricity bills.7Justia US Law. New Hampshire Revised Statutes Title V, Chapter 83-E: Electricity Consumption Tax (2018)
Business Obligations
Businesses in New Hampshire have responsibilities related to these specific levies. Companies must identify which taxes apply to their offerings, as obligations vary; for example, a restaurant handles the Meals and Rentals Tax, while a fuel distributor manages the Road Toll.
Registration with the NHDRA is required for many. For instance, businesses providing taxable meals or rentals need a license before operating.8New Hampshire General Court. RSA Section 78-A:4 Meals and Rentals Licenses Required; Penalty Entities involved with tobacco, communications, or electricity also have specific registration and remittance duties.
A key obligation is collecting the tax from consumers and remitting it to the state. For the Meals and Rentals Tax, businesses collect the 8.5 percent tax and remit it monthly to the NHDRA. Communications and electricity providers also collect their taxes from customers.
For the Road Toll and Tobacco Tax, collection often happens higher in the supply chain. Gasoline distributors pay the Road Toll, and tobacco wholesalers handle tax payments before products reach retailers.
Accurate record-keeping is essential. Businesses must keep detailed records of taxable transactions, including sales, tax collected, and returns, for at least three years for NHDRA inspection. Tax returns and payments are filed electronically via the NHDRA’s portal, Granite Tax Connect.
Penalties for Lack of Compliance
Non-compliance with New Hampshire’s specific tax requirements can lead to penalties. The NHDRA enforces these tax laws.
Unpaid taxes accrue interest from their due date, as outlined in RSA 21-J.9New Hampshire General Court. RSA Section 21-J:28 Interest The interest rate on underpayments is determined annually by the Commissioner of Revenue Administration and is compounded daily.
RSA 21-J also details penalties:
- Late filing of a tax return: 5 percent of the tax due per month (capped at 25 percent), with a minimum penalty if a return is over 60 days late.10New Hampshire General Court. RSA Section 21-J:31 Penalty for Failure to File
- Failure to pay tax by the due date: 10 percent of the unpaid tax.
- Non-payment of an NHDRA assessment within 60 days: An additional 10 percent penalty may apply, absent reasonable cause.
- Negligent disregard of tax laws: 25 percent of the underpayment.
- Fraudulent non-compliance, demonstrating an intentional effort to evade taxes: 50 percent of the underpayment due to fraud.
Operating without a required license, like for the Meals and Rentals Tax, can lead to late filing and payment penalties, and possibly license revocation.
Tobacco Tax violations, such as selling unstamped products, can result in product confiscation and monetary penalties. Serious offenses may lead to misdemeanor or felony charges.
Non-compliance with the Road Toll by distributors can lead to interest and penalties. Knowingly making false statements regarding the road toll is a misdemeanor.
Providers of communications services and electricity who fail to collect and remit taxes are subject to general penalty provisions. The NHDRA can audit taxpayers and assess deficiencies, interest, and penalties for underpaid taxes.