New Hampshire wants to be a DTC alcohol shipper – Wacky Tax Wednesday

New Hampshire is famously opposed to sales tax, and the fact that retail sales of alcohol in the state aren’t subject to any taxes is a particular source of pride. But it turns out not all alcohol sales are taxed (or not taxed) equally in the Live Free or Die state: New Hampshire imposes a “fee” on direct-to-consumer alcohol shipments. It’s also looking to get in the business of direct shipping itself, both in New Hampshire and other parts of the country.

Although alcohol purchased at a New Hampshire State Liquor Store or other in-state retailer is tax free, direct-to-consumer (DTC) alcohol shipments into New Hampshire are subject to an 8% fee.

I discovered this after sending some wine to my brother, who lives there. The California retailer had listed a “sales tax” on the receipt, and knowing New Hampshire to have no sales tax on alcohol, I asked about it. The friendly sales associate didn’t quite know what to call it, but knew they had to collect it from me.

This surprised me because New Hampshire has been so vocal in its opposition to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (June 2018), and subsequent remote sales tax laws in other states.

Prior to the Wayfair decision, states couldn’t require a business to register then collect and remit sales tax unless it had a physical presence in the state. Wayfair overruled the physical presence rule, effectively authorizing states to base a sales tax collection obligation on economic activity alone, or economic nexus. (Physical presence still establishes nexus, but it’s no longer the sole requisite.)

Plenty of people are unhappy about the Wayfair decision and the flood of economic nexus laws it unleashed. In fact, business owners and lawmakers in some states are pushing for Congress to limit state taxing authority. New Hampshire has fought against remote sales tax laws harder and longer than other states.

The New Hampshire Department of Revenue Administration advises New Hampshire businesses to alert the state Department of Justice (DOJ) if they’re “contacted by another state or locality regarding the collection of sales or use tax,” so the DOJ can determine the legitimacy of the request. And state and local tax authorities must provide written notice to the DOJ before taking any action to require a New Hampshire business to collect and remit their sales tax.

So, you can understand my surprise upon learning that New Hampshire requires direct shippers from other states to pay an 8% fee on the retail price of alcohol shipped to New Hampshire consumers, like my brother. 

I was even more surprised to learn about New Hampshire Senate Bill 14, which would authorize the New Hampshire Liquor Commission to make DTC shipments of beer, wine, and liquor in New Hampshire and into other states.

Shipping directly to consumers would be “the next evolution”— “a natural progression” for the New Hampshire Liquor Commission, according to Commission spokesman E.J. Powers. State liquor and wine stores began processing online sales for curbside pickup during the pandemic, and it has proven “extremely popular.” DTC sales are an obvious next step, apparently.

In a hearing for SB 14 last month, State Liquor Commission Chairman Joseph Mollica said direct shipments would allow the Commission “to remain competitive in an ever-changing marketplace.” The Commission would start by selling liquor online and shipping to customers in New Hampshire. If all goes as planned, it would be allowed to expand into other markets, also known as other states.

Approximately half of the Commission’s liquor sales are to out-of-state customers, perhaps because state liquor stores are conveniently located at rest stops along interstate highways. But no matter the cause, Powers expressed that the state “hopes to build on their strong brand and ultimately generate more revenue for the state.”

If making DTC shipments in New Hampshire proves successful, the Commission would “begin applying for licenses to ship to other states.”

During the hearing, State Senator Harold French asked if the state would be responsible for paying taxes on alcohol sent across state lines. Mollica said the entities created by the Commission, whether LLCs or businesses, would collect and remit taxes in other states.

I’d like to know if the 8% fee will apply to the Commission’s DTC shipments to residents of New Hampshire.

If you make DTC shipments in New Hampshire or other states, Avalara for Beverage Alcohol can help you manage the complexities of tax and regulatory compliance.