New Hampshire Bar Association
About the Bar
For Members
For the Public
Legal Links
Online Store
Vendor Directory
NH Bar Foundation
Judicial Branch

Clio is the most widely-used, cloud-based practice management system in the world.

Trust your transactions to the only payment solution recommended by over 50 bar associations.
New Hampshire Bar Association
Lawyer Referral Service Law Related Education NHBA CLE NHBA Insurance Agency
Member Login
Member Portal

Bar News - February 17, 2016

Tax Law: Bill Would Increase State Revenue Without Increasing Taxes


Editor’s Note: Justin Finn wrote in Bar News last February about his research that he says showed New Hampshire could increase revenue from the gasoline tax each year with a minor change to its gas tax law. He is a strong supporter of SB 494-FN-A, which would make that change. This article updates the description of current law that appeared in the Feb. 17, 2016, print edition of Bar News.

New Hampshire Senate Bill 494-FN-A has the potential to increase New Hampshire Road Toll collections by more than $335,000 per year, without increasing taxes or costs on consumers or businesses.

As I wrote in the tax law section of New Hampshire Bar News last February, there are simple legislative changes that states can make to collect, retain and use motor fuel taxes on purchases of fuel by the federal government. A state wishing to do so must satisfy two elements: (1) the state’s motor fuel tax must not run afoul of the US Constitution’s Supremacy Clause; and (2) the state’s motor fuel tax statute(s) must not contain an express exemption for the federal government.

Since that article was published, Democratic NH Sen. Dan Feltes has taken this idea on, and along with Republican Sen. Regina Birdsell, has submitted legislation to implement this change in New Hampshire. I recently testified at a NH Senate Ways and Means Committee hearing in support of the legislation, after which the committee voted that it “ought to pass.”

To satisfy the first element, the direct incidence of a state’s motor fuel tax law must not fall directly on the purchaser. For example, Washington State’s statute says its tax is “levied and imposed upon motor vehicle fuel licensees.” As a result, when the federal government purchases fuel in Washington, the tax is actually on the fuel licensee, but is of course bundled into the sale price and is thus permissibly and indirectly passed on to the federal government. By comparison, Maine’s statute says that the “tax imposed by this section is declared to be a levy and assessment on the ultimate consumer.” In Maine, because the tax falls on the consumer, whenever the federal government is the purchaser, it is exempt from the fuel tax by virtue of the supremacy clause.

Here in New Hampshire, RSA 260:32 likely satisfies the first element. It says that the road toll is imposed “upon the sale of each gallon of motor fuel sold by distributors.” This suggests that the direct incidence of the toll is on the sale/distributor. Further supporting that conclusion, the language about exemptions refers to exempting from the road toll “sales to” certain entities, rather than “purchases by” such entities. However, it should also be noted that there is some ambiguity as it also says the “road toll shall be collected by the distributor from the purchaser,” which allows for the argument that the direct incidence is on the purchaser, and that the distributor merely acts as an agent of the state for collection. Ideally, the statute would clearly state where the incidence of the tax falls.

However, prior to the passage of SB494, New Hampshire does not satisfy the second element, as our statute contains an express exemption for sales to the United States. SB494 would repeal that exemption and allow New Hampshire to join the approximately 12 other states that already collect, retain and use motor fuel taxes on sales of fuel to the federal government.

The New Hampshire Department of Safety’s research shows that purchases of more than 1.5 million gallons of fuel annually use the current exemption, and that SB494 could therefore result in increased road toll revenues of more than $335,000 per year on an annual basis.

Some states, such as Nevada and Mississippi, have maintained an exemption for the US Armed Forces while otherwise applying this strategy to sales of fuel to the civilian agencies of the federal government. It appears that the final version of SB494 is likely to maintain an exemption for the US Armed Forces. If so, significant additional revenues would still result, due to the significant quantities of fuel used by the United States Postal Service and other federal civilian agencies, though it would be less than the full amount currently noted by the NH Department of Safety.

Overwhelmingly, the federal government makes centralized purchases of fuel (such as through DLA-Energy), and then resells that fuel to individual federal locations at a “standard price.” As a result, the increased costs to the federal government of this change will be largely invisible to the specific federal entities present in New Hampshire. Furthermore, this change will not result in any added cost, increased tax, nor other burdens to ordinary consumers, businesses, and fuel vendors.

States that use this approach are essentially receiving an infrastructure subsidy from those that do not. SB494 would allow New Hampshire to join the states that are already successfully using this approach.

SB494 was introduced in the NH Senate and referred to the Ways and Means Committee on Jan. 6 and a hearing before the Ways and Means Committee was held Jan. 26. Scott Bryer, chief of road toll operations for the New Hampshire Department of Safety, noted that the Department of Safety has not taken a position on the bill, and provided testimony as to the amount of revenue that could result and how the Department of Safety would implement the changes.

On Feb. 3, the Ways and Means Committee voted 4-1 that SB494 “ought to pass” as amended. The amended language maintains the exemption for the US Armed Forces. SB494 was scheduled for a vote of the full Senate on Feb. 11.

Justin Finn

Justin Finn is general counsel at Boyle Energy Services & Technology Inc. in Merrimack. He previously served as an assistant general counsel with the US Department of Defense and is licensed to practice in New Hampshire and Ohio.

NHLAP: A confidential Independent Resource

Home | About the Bar | For Members | For the Public | Legal Links | Publications | Online Store
Lawyer Referral Service | Law-Related Education | NHBA•CLE | NHBA Insurance Agency | NHMCLE
Search | Calendar

New Hampshire Bar Association
2 Pillsbury Street, Suite 300, Concord NH 03301
phone: (603) 224-6942 fax: (603) 224-2910
© NH Bar Association Disclaimer