New Hampshire Does Not Tax Internet Access

Reaffirming its state’s anti-tax DNA, the New Hampshire legislature confirmed what some state tax practitioners have been arguing all along: the New Hampshire communications services tax does not apply to Internet access charges. (New Hampshire does not have a sales tax.) On June 21, 2012, the Legislature enacted a statute, 2011 NH 1418, that bars imposition of the communications services tax on “Internet access” charges. The statute also prohibits the New Hampshire Department of Revenue from enforcing any existing assessments of communications services tax on charges for Internet access and requires the prompt withdrawal of any pending assessments. Even though the effective date of the legislation is the date of its enactment, June 21, 2012, the law prohibits the Department from issuing any “additional” assessments with respect to Internet access charges. The statute does not limit the prohibition to Internet access services provided after June 21, 2012, so a fair reading of the statute is that any future assessments for Internet access charges, regardless of when the services were provided, are precluded.

The new law defines the term Internet access in the same way as that term is defined in Section 1105(5) of the Internet Tax Freedom Act (“ITFA”), codified as a note to 47 U.S.C. § 151. The law should apply not only to services provided by Internet Service Providers (“ISPs”) but to services purchased by such ISPs in order to provide Internet access.

Prior to the June 21, 2012 legislation, the New Hampshire Department of Revenue had taken the position that the Communications Services Tax applied to Internet access charges, and that such tax was not prohibited by the ITFA. See New Hampshire Department Technical Information Release, TIR 2008-006, September 15, 2008. In that TIR, the Department took the position that it is grandfathered under the ITFA.

The Department’s argument was a weak one at best. For a state to be grandfathered under the ITFA, in addition to having a statute that taxes Internet access charges, the state must prove that, prior to October 1, 1998, either (i) the state revenue department had issued a rule or other publication that the department had interpreted and applied the relevant tax (e.g., the communications services tax in the case of New Hampshire) to Internet access services (“Agency Notice”), or (ii) the state had generally collected such tax on charges for Internet access services (“General Collection”). In litigation, the New Hampshire DOR has been unable to point to any publication prior to October 1, 1998 that satisfies the Agency Notice prong. Nor are we aware of any ISP paying a sales tax prior to October 1, 1998 on its charges for Internet access services, let alone of a general practice of collection by the Department of the communications services tax on Internet access services prior to October 1, 1998.

In short, the statute recently adopted by the New Hampshire Legislature is good news for ISPs and their customers, as well as network service providers. The law not only codifies an exemption for Internet access charges but also confirms what we have been asserting on behalf of clients previously: Internet access charges are not subject to the New Hampshire communications services tax.

Why would you ever assign a book that cost students money if it is available for free?

eLangdell is offering free Bankruptcy and Securities Law statutory supplement e-books for law school courses; call for textbook proposals

Just finishing up today at the CALI Conference in lovely San Diego at the Thomas Jefferson School of Law.  The new building is super nice if you've not seen it!

The cost of books for our law students is immense.   In case you have not already heard about this from other sources:

CALI publishes free, open books for legal education in electronic and print formats through eLangdell® Press http://elangdell.cali.org/ These e-books are viewable on computers, iPad, iPhone, Nook, and Kindle, or a student can order at cost a hard copy printed and mailed from Lulu.

CALI has partnered with Cornell’s LII to produce free, open statutory e-book supplements for Bankruptcy and Securities law courses:

Securities Law: Selected Statutes and Regulations

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U.S. Bankruptcy Code and Federal Rules of Bankruptcy Procedure
      

eLangdell is also publishing open access textbooks distributed under a Creative Commons license, although there are none yet in the Commercial Law field (yet, of course). There are statutory supplements for subjects (evidence, civil procedure, bankruptcy, etc).  If you are looking for a Contracts text for Fall, J.H. Verkerke, University of Virginia, has a new eLangdell book out for Fall 2012 adoption.  If you would like to preview it, contact me at jmartin@stu.edu or Deb Quentel of CALI at dquentel@cali.org.

In case you are interested in writing a text for Commercial Law or another subject . . . There is a call for proposals (deadlines October 1, 2012 and April 1, 2013) for textbooks or individual chapters here: http://elangdell.cali.org/content/write-elangdell-casebook-or-chapter

- jsm