New Hampshire Does Not Tax Internet Access

Reaffirming its state’s anti-tax DNA, the New Hampshire legislature confirmed what some state tax practitioners have been arguing all along: the New Hampshire communications services tax does not apply to Internet access charges. (New Hampshire does not have a sales tax.) On June 21, 2012, the Legislature enacted a statute, 2011 NH 1418, that bars imposition of the communications services tax on “Internet access” charges. The statute also prohibits the New Hampshire Department of Revenue from enforcing any existing assessments of communications services tax on charges for Internet access and requires the prompt withdrawal of any pending assessments. Even though the effective date of the legislation is the date of its enactment, June 21, 2012, the law prohibits the Department from issuing any “additional” assessments with respect to Internet access charges. The statute does not limit the prohibition to Internet access services provided after June 21, 2012, so a fair reading of the statute is that any future assessments for Internet access charges, regardless of when the services were provided, are precluded.

The new law defines the term Internet access in the same way as that term is defined in Section 1105(5) of the Internet Tax Freedom Act (“ITFA”), codified as a note to 47 U.S.C. § 151. The law should apply not only to services provided by Internet Service Providers (“ISPs”) but to services purchased by such ISPs in order to provide Internet access.

Prior to the June 21, 2012 legislation, the New Hampshire Department of Revenue had taken the position that the Communications Services Tax applied to Internet access charges, and that such tax was not prohibited by the ITFA. See New Hampshire Department Technical Information Release, TIR 2008-006, September 15, 2008. In that TIR, the Department took the position that it is grandfathered under the ITFA.