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A new law in New Hampshire may thwart attempts by other states to impose their sales taxes on their residents purchasing tires and other products in the Granite State, which has no sales tax.

N.H. Gov. John Lynch signed into law July 9 a bill that quickly traveled through the state legislature in response to a legal battle in neighboring Massachusetts between Town Fair Tire Centers Inc. and the Massachusetts Department of Revenue (DOR). The DOR claims Town Fair’s stores in New Hampshire should be collecting the Massachusetts 5-percent sales tax—known as a use tax—from customers identified as Massachusetts residents.

The new law prevents retailers from providing private consumer information to another state seeking to impose a use tax. The bill also puts the burden of proof on Massachusetts or other states on whether a good or service purchased in New Hampshire is to be used, stored or consumed in another state.

Town Fair has 74 locations in New England, including 25 stores in Massachusetts and seven in New Hampshire. Massachusetts had conducted an audit of the dealership’s records and discovered numerous purchases by Massachusetts residents at the New Hampshire stores between 2001 and 2003.

Town Fair is fighting the state’s assessment against the dealership for $229,311 in uncollected use tax, penalties and interest. The case has been argued before the Massachusetts Supreme Judicial Court and is awaiting a decision.

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