Battle lines have been drawn between tax-free New Hampshire and "Taxachusetts" — and the line is at the states' border.
Bay State officials said New Hampshire businesses should be collecting Massachusetts' 5 percent sales tax from residents who cross the border to shop — and save money.
Massachusetts is suing Connecticut-based Town Fair Tire for allowing its residents to purchase tires at New Hampshire stores and not charging them the 5 percent Massachusetts sales tax. The lawsuit is based on the state's use tax, which is applied to items bought outside Massachusetts that are intended to be used in the state.
The case now before the Supreme Judicial Court applies only to Town Fair Tire, but some experts think the results could be much more far-reaching.
The case doesn't mean Massachusetts has new collection initiatives or will have any impact on New Hampshire's retailers, according to a statement from Richard Bliss, spokesman for the Massachusetts Department of Revenue.
But two law professors who 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."
The professors also warned that if Massachusetts forces out-of-state retailers to collect its 5 percent tax, neighbors with higher tax rates like Rhode Island (7 percent) and Connecticut (6 percent) could demand Massachusetts stores collect and give them the extra tax their own residents would have paid if they shopped at home.
Customers, business owners vocal about objections
New Hampshire business owners and customers said they won't be happy if Massachusetts chases them across the border in pursuit of tax dollars.
Nancy Kyle, president of the New Hampshire Retail Merchants Association, said she's outraged by the case because New Hampshire has worked hard to fend off a sales tax. New Hampshire is the only New England state that doesn't have a sales tax.