POLITICS

Eating and sleeping in "Tax Free New Hampshire"

Guidebooks and business publications often indicate that New Hampshire is a no-tax state. They note the Legislature has consistently opposed income and sales taxes, and that the climate those decisions has created is good for small and large firms seeking a place that offers a unique and advantageous business climate.

However, most of those who come to this state quickly find out that there is a broad-based tax active in good old "Tax Free New Hampshire." That tax is called the Rooms and Meals Tax, and it imposes an additional 8 percent charge on the cost of pre-prepared foods and beverages, as well as rooms in hotels, motels and other short-term residences.

This tax generates approximately $200 million a year for the state's coffers, making it New Hampshire's second-largest revenue source and, as federal funds dry up and social service expenses increase, legislators are constantly seeking to increase the amount of money this tax generates.

During the last legislative session, for example, Manchester Libertarian-turned-Republican state Rep. Steve Vaillancourt submitted legislation that would have ended the commission the state gives to those small businesses that collect this tax. Under current law, the state allows those businesses to keep 3 percent of what they collect to offset the record-keeping and monthly filing costs associated reporting and sending rooms and meal tax revenues to the state.

According to Vaillancourt, this commission for reporting is unique to the rooms and meals tax. He called that situation "unfair" because distributors of other products that are taxed, such as tobacco products whose wholesalers must affix tax stamps to those products, get no such commission for that work. He also noted that approximately the same amount of work is involved in reporting $100 in rooms and meals tax revenues as in reporting tens of thousands of dollars in revenues, while the commissions available increase with the amount collected.

Vaillancourt said that while passage of an amended version of his bill would result in more than half of the $6 million currently kept by rooms and meals tax collectors in commissions being retained by the state, equity was the real reason he drafted the legislation.

The state Department of Revenue Administration estimated the increase in state revenues that would result from the repeal of the 3 percent commission at more than $5.6 million a year.

Thankfully, the House Ways and Means Committee early in March voted 15-6 to recommend that the entire House kill Vaillancourt's bill and the House voted 231-53 to heed that recommendation.

In an interesting turn of events, the all-Democratic Portsmouth delegation split on this issue.

Voting to kill the bill were Jackie Cali-Pitts, Christopher Serlin and Jim Splaine. Voting for the legislation were Laura Pantelakos and James Powers, while no votes were recorded for Terie Norelli or MaryAnn Blanchard.

Another bill that attempted to change the way the rooms and meals tax is administered also went down to defeat last session. That bill would have removed hotels, inns, cabins, rooming houses, etc., that charge less than $140 a day for a room from the requirement to collect the tax.

In mid-February, the House Ways and Means Committee voted 12-5 to recommend this bill be killed and on Feb. 22, the full House agreed in a voice vote.

Recognizing the huge amount of money the rooms and meals tax generates, and the increasing cost of operating state government, retail businesses that sell prepared foods and all members of the state's hospitality sector need to keep a close eye on legislative attempts to either increase this tax, change the way it's administered or cut the payback to collectors.

There are sure to be more coming through the legislative pipeline in the near future.

Shir Haberman is the managing editor for news at the Portsmouth Herald.