Sales tax is a tax imposed on the retail sale of goods and services in many states across the United States. However, New Hampshire is one of only five states with no statewide general sales tax. This allows consumers to save on the cost of goods and services purchased in New Hampshire. Businesses also benefit from reduced administrative costs and paperwork.
In this comprehensive guide, we will cover everything you need to know about New Hampshire Sale Tax, including:
- Background on New Hampshire’s lack of statewide sales tax
- Sales tax exemptions
- Local option sales taxes
- Sales tax administration and filing
- Sales tax calculator
- Impact on businesses and consumers
- Future considerations
Understanding New Hampshire’s unique sales tax system is important for both individuals and businesses to take full advantage of the tax savings available in the state.
New Hampshire Sales Tax Calculator
Since most everyday purchases are exempt from sales tax in New Hampshire, calculating tax is straightforward on general retail items – no need to add extra sales tax on top of the listed price.
However, for taxable purchases like meals, hotel stays, and gasoline, consumers and businesses can easily estimate the sales tax by using a New Hampshire sales tax calculator.
New Hampshire Sales Tax Calculator
New Hampshire Sales Tax Calculator
To calculate New Hampshire sales tax on taxable goods:
- Meals/Rooms Tax: Multiply the purchase price by 0.09 (9%)
- Prepared Food Local Tax: Multiply the purchase price by 0.01 (1%) if subject to local meals tax
- Tobacco Tax: Multiply quantity purchased by the $1.78 per pack
- Gasoline Tax: Multiply gallons purchased by $0.222 (gasoline) or $0.235 (diesel)
Always check with each specific city/town on whether local meals and accommodations taxes apply to a purchase.
Having a sales tax calculator makes it easy to accurately estimate taxes owed on transactions in New Hampshire when retail sales tax does apply.
Background on New Hampshire Sale Tax
New Hampshire has stood out from most other states by not imposing a broad-based statewide sales tax. The state has held the distinction of being one of only five states with no sales tax since the income tax was introduced in the early 20th century.
Reasons for Lack of State Sales Tax
There are a few key reasons why New Hampshire has stayed sales tax free:
- Tax policy – New Hampshire has traditionally favored property taxes over sales or income taxes as a source of revenue. The lack of a sales tax is popular politically in the “Live Free or Die” state.
- Tourism benefits – No sales tax is seen as beneficial for New Hampshire’s tourism industry, bringing in visitors from neighboring states. Retail stores near the Massachusetts border also benefit.
- State revenue sources – The state has been able to get by without a sales tax due to revenues from property taxes, selective sales taxes, fees, and an income tax on dividends and interest. The state does also receive a significant portion of revenue from the Meals and Rentals Tax.
Attempts to Implement New Hampshire Sale Tax
There have been attempts by both Republican and Democratic governors over the past few decades to implement a statewide sales or income tax in New Hampshire. However, these attempts have consistently been rejected, demonstrating a strong political and public opposition to a broad-based sales tax.
In recent years, Governor Maggie Hassan and Governor Chris Sununu have both expressed opposition to implementing a statewide sales or income tax. Governor Sununu has stated that he would veto any bill that puts in place a sales or income tax.
Sales Tax Exemptions in New Hampshire
While there is no statewide sales tax in New Hampshire, there are still some goods that are subject to specific tax levies. Understanding what purchases are exempt from sales tax in NH can help consumers and businesses maximize their savings.
No Tax on General Retail Purchases
The key advantage of New Hampshire’s tax structure is that retail purchases of general goods are sales tax free. This includes items like clothing, furniture, office supplies, electronics, jewelry, books, drugs, hobby equipment, and more.
Restaurant meals are also exempt from sales tax in New Hampshire. Grocery food purchases are exempt as well, with the exception of prepared meals.
Select Goods Taxed
Some categories of goods are still subject to sales tax or other selective taxes in New Hampshire:
- Hotel rooms – Subject to a Rooms and Meals tax of 9% of the rental charge.
- Restaurant meals – Subject to a Meals and Rentals tax of 9% of the meal price.
- Tobacco products – Subject to a tax of $1.78 per pack of cigarettes. Other tobacco products are taxed at 65.03% of the wholesale price.
- Gasoline – Gasoline is subject to a tax of $0.222 per gallon. Diesel is taxed at $0.235 per gallon.
- Electricity use – Subject to the Electricity Consumption Tax of $0.00554 per kWh.
- Alcohol – Beer is taxed at $0.30 per gallon. Wine is subject to variable rates per gallon depending on alcohol content.
Sales Tax Holidays
New Hampshire offers periodic sales tax holidays for specific goods to promote retail sales:
- Energy Star products – Appliances and other products with the Energy Star certification are exempt from state electricity consumption tax in July.
- School sales tax holiday – In August, school supplies under $100 are tax exempt.
Local Option Sales Taxes
While New Hampshire has no statewide sales tax, some individual cities and towns have implemented local option sales taxes. Here are some key details on New Hampshire local sales taxes:
Local Tax Authorization
New Hampshire state law allows towns/cities to collect a local sales tax if authorized by the state legislature. The local sales tax cap is limited to 1% on meals and rental cars.
Around 10 New Hampshire towns currently collect a meals and accommodations tax, applying to restaurants and hotels.
Current Local Sales Taxes
Some examples of current New Hampshire towns with local option sales taxes include:
- Manchester – Local tax of 1% on restaurant meals and hotel stays.
- Dover – 1% tax on restaurant meals and hotel stays.
- Hampton – 1% tax on meals and room rentals.
- Laconia – 1% tax on restaurant meals and hotel/motel stays.
- North Woodstock – 1% tax on meals and accommodations.
- Littleton – 1% tax on restaurant meals and hotel stays.
Revenue Use
Revenue from local option sales taxes generally goes into the town’s general fund. However, some towns use a portion for specific tourism promotion or economic development purposes.
The local taxes provide cities and towns a way to offset property taxes and fund key services and projects. But rates are capped much lower than general statewide sales tax.
Sales Tax Administration in New Hampshire
Even without a statewide sales tax, businesses in New Hampshire still need to follow rules on taxation of certain goods and collect any applicable local taxes.
Seller’s Permits
The New Hampshire Department of Revenue Administration does not issue seller’s permits, as general retail sales are exempt from state sales tax. However, those making taxable sales still need to register and file returns.
Businesses will need to register for permits for collecting tax on restaurant meals, hotel stays, tobacco, gas, and other taxable sales.
Filing Tax Returns
Businesses responsible for collecting anyselective state taxes or local option taxes need to file periodic sales and use tax returns. This includes returns for Meals and Rentals Tax, Tobacco Tax, and any applicable local meals/accommodations tax.
Returns are filed monthly, quarterly, semiannually, or annually depending on business volume. Returns and payments are due between 10-30 days after the close of each period.
Keeping Tax Exemption Certificates
Since most products are exempt from sales tax, New Hampshire sellers should keep sales tax exemption certificates on file for their transactions. This provides documentation that sales qualify for the tax exemption.
Common types of exemption certificates include blanket resale certificates, manufacturer/wholesaler exemptions, and non-profit organization exemptions.
Tax Audits
Business owners should maintain thorough records in case of a state tax audit. Lacking proper documentation on tax-exempt sales can lead to tax assessments with interest and penalties.
Audits generally go back 3 years, butcan be extended to 6 years in cases of tax fraud or evasion.
Impact on New Hampshire Businesses and Consumers
New Hampshire’s lack of a statewide sales tax has notable benefits for both consumers and businesses located in the state. Understanding the economic impacts can help policymakers evaluate any future proposals.
Benefits for Consumers
- Lower prices – Consumers pay less on retail, services, meals, and rentals without an added sales tax. This puts more money in people’s pockets.
- Tax-free shopping – The absence of sales tax makes New Hampshire stores attractive to shoppers from other states like Massachusetts and Vermont that have higher sales taxes.
- Increased disposable income – Higher disposable income can lead to greater overall spending at New Hampshire businesses.
Benefits for Businesses
- Increased retail sales – The tax free status creates opportunities to pull in more retail sales and shoppers from out of state.
- Lower administrative costs – Businesses spend less time and money on administrative activities related to sales tax collection and filing.
- Competitive advantage – The lack of an extra sales tax can allow New Hampshire businesses to offer more competitive pricing relative to retailers in other states.
- Incentive for new businesses – No requirement to collect sales tax provides an incentive for companies to open operations in New Hampshire.
Future Considerations for New Hampshire Sales Tax
While New Hampshire has gone without a statewide sales tax for decades, there are some factors that could impact this approach in the future:
- Budget deficits – In times of severe budget shortfalls, lawmakers may be more likely to consider a broader-based sales tax as an option. But there is still significant resistance among legislators and residents.
- Changing shopping habits – As more retail spending shifts online, some tax revenue is lost from out-of-state online companies not collecting in-state sales tax. But New Hampshire is also trying to find ways to tax large online retailers.
- Tax reform trends – If federal law were to change to allow states to collect expanded online sales tax everywhere, it could impact New Hampshire’s status. However, policies seem to be moving in the direction of reducing sales taxes.
- Legal challenges – If local option sales taxes expand, it could face opposition and lawsuits from anti-tax groups. But for now these seem limited to smaller levies on prepared meals and rooms.
Barring an unexpected budget crisis, New Hampshire is likely to maintain its no general sales tax status for the foreseeable future based on long-standing political principles and public opinion. But incremental policies related to online sales tax collection and local taxes may continue evolving.
Conclusion
New Hampshire’s lack of a statewide sales tax is a unique distinction among U.S. states. Both individuals and businesses residing in New Hampshire benefit from keeping more money in their pockets and having lower administrative burdens.
While most purchases are tax free, there are still some exceptions for hotel stays, restaurant meals, and select goods like gasoline and tobacco where taxes apply. Consumers and business owners need to be aware when these taxes need to be calculated and paid.
Local cities and towns also have the option of implementing local sales taxes on prepared meals and accommodation rentals if authorized by the legislature. However, the scale of these local taxes remains low compared to a broad statewide sales tax.
Despite periodic attempts to implement a statewide sales or income tax in New Hampshire, there remains strong political support and public opinion favoring the current sales tax free system. Barring an unforeseen budget crisis, New Hampshire is likely to continue enjoying its tax advantaged status for consumers and businesses into the future.
