Sales tax on tech gets unenthusiastic response in NH House hearing

Proposal would earmark revenue to fund education

How would you like to pay a 4.3% sales tax on your cell phone, the laptop you buy for work or your tax software?

You would in the unlikely event that House Bill 1492 becomes law.

Rep Skip Cleaver, D-Nashua, is proposing the tax on electronic devices in an attempt to raise $200 million in revenue for education, although it is unclear how much it would actually raise. The state Department of Revenue Administration wouldn’t even say if Cleaver was in the ballpark, since no state has ever singled technology for a separate tax.

Cleaver, in testimony in front of the House Ways and Means Committee on Wednesday, originally wanted to target video games, but broadened that because it wouldn’t be enough to raise what he was seeking.

“Our schools are struggling,” he said. “It is not enough for an adequate education and we should be shooting for a superior education.”

He singled out electronic devices because nobody would notice it.

“There is so much price variability, with all the new iPhones, the fluctuation would hide or mask or cushion the 4.3% levy,” he said.

In addition, such devices “are the opposite of education and the opposite of education should fund it, in my view,” he said.

As for singling out one group of products, prepared foods are already taxed separately at supermarkets and convenience stores under the rooms and meals tax, so to have retailers do it “is not unduly burdensome,” Cleaver said.

Cleaver chose the 4.3% rate “because it is not 4 and not 5,” though he added that it is lower than the sales tax in surrounding states. Thus when asked by Rep. Edith Tucker, D-Randolph, whether the tax would discourage those coming up from Massachusetts to avoid a sales tax, Cleaver said that the Bay State has a 6% sales tax, so the differential “will not be a disincentive.”

Bill details

Cleaver said that law is aimed at “anything with a screen,” but the bill indicates it would be a lot more than that.

In the definition section, “taxable electronics” include television, video games, smart watches and computers, but also includes the “related equipment” of all of these.

Under “computers,” that equipment includes “all related hardware and software,” including desktop computers, tablet, laptops, printers scanners and faxes.

And, despite Cleaver’s intention about devices with screens, the bill does not list computer monitors. It also does mention personal assistants like Alexa or home robots.

When asked by lawmakers whether it included computers embedded in other products, such as cars, refrigerator or even doorbells, Cleaver said it was meant to only include stand-alone products, though those words are not included in the bill. It does exempt the state and federal government from paying the tax, as well as nonprofit organizations.

The bill would take effect 60 days after passage, but the DRA said it would take a year and cost $1.3 million to $2.3 million to prepare and about $250,000 annually to fund three staffers to administer it. It would specially take a while to draw up the rules, the agency said, since the state doesn’t currently have a system in place for a sales tax. Among the questions raised was how the tax would affect mail order sales or software downloads.

“Always a problem with a sales tax,” said Rep. Susan Almy, D-Lebanon, who chairs the committee.

“Why bother to ask when this thing will go down faster than your head could spin?” murmured one business lobbyist.

Indeed, while a long list of lobbyists registered their opposition to the bill, few made the effort to testify against it in person

Curtis Barry, a lobbyist for the New Hampshire Retail Association was one exception.

“We oppose the passage of any sales tax, no matter how narrow, because once you can no longer say ‘tax-free shopping,’ the New Hampshire advantage is over. We build our economy on tax-free shopping. People shop here because there is no sales tax,” Barry said.

Barry also disputed that electronic devices are somehow anti-education. Noting that most kids now do much of their homework on computers and computer science is taught in schools, “you are taxing the tools that help us learn.”

Greg Moore, state director for the conservative Americans for Prosperity organization, echoed that point.

“If you want less of something, you tax it. This is a tax on technology. We should not discourage technology in New Hampshire. We should encourage it “

No one spoke for the bill, aside from its sponsor.