Sales Tax-free Zone by Border? Not so Fast, Legislators Say
BOSTON -- For the fourth time in the last three legislative sessions, Lawrence Reps. Juana Matias and Frank Moran have filed a bill to exempt retailers within 10 miles of the New Hampshire border from the sales tax.
The bill is a response to the cross-border economic relationship the commonwealth and New Hampshire have historically shared -- northern Massachusetts residents drive to New Hampshire for tax-free shopping. This relationship is not unique to Massachusetts. Many leave Illinois to shop in Indiana or leave New Jersey to fill up their cars in Delaware.
New Hampshire is one of just five states without a sales tax. Other states are Alaska, Delaware, Montana and Oregon.
The bill, which has been filed once already this legislative session and twice over the last two sessions, will help small business owners compete with business in New Hampshire, Moran said, adding that although the bill would exempt “border businesses” of sales tax, they would still contribute money back to the state in ways New Hampshire does not.
The bill was sent for study by the Legislature’s Revenue Committee, which means it will likely not go anywhere during this session, which ends in July.
Although the bill’s fate is bleak, Moran said that he will file the bill next session if it doesn’t get passed.
“I first filed this bill when I was elected four years ago,” he said, “I made that promise and I will continue to fight for small businesses in my communities.”
Matias could not be reached for comment.
Some representatives support the general idea but said the proposal raises numerous issues.
Rep. Tom Golden said that while boosting local business is fundamentally good, the bill would just “artificially push out the border.”
“It would be helpful to towns like Lowell and Chelmsford, but it would just push out that border to another town, which is where the pushback would start,” the Lowell Democrat said.
Also representing Lowell and Tewksbury is Rep. David Nangle. He said a sales-tax exemption in his area would create jobs, open stores and foster a larger hospitality business. That all being true, lawmakers must be “realistic,” he said.
“Let’s say there’s 200 legislators and about 20 reps. and senators who fall into that New Hampshire border area,” the Lowell Democrat said. “We would love it, but think about the other 80? It wouldn’t be fair to them. I’m being realistic when I say I don’t see this going anywhere.”
The Retailers Association of Massachusetts, the group behind a proposed ballot question to lower the sales tax across the commonwealth, said this bill reveals a larger problem.
Jon Hurst, the group’s president, said the problem is not exclusive to Massachusetts residents shopping in New Hampshire, but also Massachusetts residents shopping online.
“We have two strikes against us,” Hurst said. “It’s true for sellers near the New Hampshire border but also those who are not. They have the problem of the growing mobile commerce reality.”
Hurst said the group is sympathetic to the legislation because it points out a need to discuss Massachusetts’ sales tax problem. Sales tax is a “20th century model” that does not work well in the present day, he said.
“Good public policy should (encourage) consumers to spend in our economy, not someone else’s,” he said. “Those dollars should stay with our local businesses, not businesses north of the border or online.”
Rep. Ken Gordon, who represents Billerica, Burlington and Bedford, said his communities -- right on the 10-mile line -- would be harmed by the bill.
“A bill like this would just be shifting the problem, not solving a problem,” the Bedford Democrat said, “It pits two groups against each other.”
Andover Republican Rep. James Lyons said he supports the concept, but suggests the bill extend farther than 10 miles to include more communities along the border. He also said a more permanent fix would be lowering sales tax from 6.25 to 5 percent, an effort he’s fought for every legislative session.
“The towns I represent are also suffering from the proximity to New Hampshire,” he said. “A way to alleviate the impact on retail business would be to have an across-the-board reduction of the sales and meals tax.”
Supportive but skeptical of its fate, Rep. James Miceli said he’d vote for the bill if it ever made it past the study.
“Anything we can do to make it easier for business, I’m in favor of that,” the Wilmington Democrat said. “I don’t think a bill like that is going to make it, but it would have my vote. The local businesses would gain and do well.”