New Hampshire Adjusts Rates, Possibly Adopts Singles Sales Factor Apportionment

New Hampshire enacted legislation:

  • changing the rates of the business profits and the business enterprise taxes; and
  • possibly adopting singles sales factor apportionment for the business profits tax.

Tax Rate Changes

After 2021, New Hampshire is changing the business profits and business enterprise rates.

Business Profits Tax Rate

The business profits tax rate is now:

  • 7.7% after December 31, 2019; and
  • 7.5%, 7.7%, or 7.9% after December 31, 2021, depending on revenue collections.

The rate after 2021 is dependent on revenue collected for the fiscal year ending June 30, 2020. If the amount collected is:

  • 6% over projected revenue, the tax rate will be 7.5%;
  • 6% or more below projected revenue, the tax rate will be 7.9%; or
  • if between 106% and 94% of projected revenue, the tax rate will remain 7.7%.

New Hampshire had existing rate changes set to take effect. The law repealed the future changes. The rate, for tax periods ending on or after:

  • December 31, 2018 is 7.9%;
  • December 31, 2019, the rate was going to be 7.7%; and
  • December 31, 2021, the rate was going to be 7.5%. 

Business Enterprise Tax Rate

The business enterprise tax rate is now:

  • 0.6% after December 31, 2019; and
  • 0.675%, 0.5%, or 0.6% after December 31, 2021, depending on revenue collections.

The business enterprise rate after 2021 also depends on revenue collected. If the amount collected is:

  • 6% or more above projected revenue, the tax rate will be 0.5%;
  • 6% or more below projected revenue, the tax rate will be 0.675%; or
  • if between 106% and 94% of projected revenue, the tax rate will remain 0.6%.

The law also repealed existing future rate changes for the business enterprise tax. The rate for tax periods ending on or after:

  • December 31, 2018 is 0.675%;
  • December 31, 2019 was going to be 0.6%; and
  • December 31, 2021 was going to be 0.5%.

Single Sales Factor Apportionment

Singles sales factor apportionment will apply for the business profits tax to tax periods ending on or after December 31, 2022. Currently, New Hampshire uses a three-factor formula with a double-weighted sales factor.

However, the legislation also creates the Legislative Committee on Apportionment. If a majority of the committee votes to rescind single sales factor apportionment, the changes will not take effect.

The committee will study:

  • apportionment of gross business profits under the business profits tax; and
  • whether to authorize single sales factor apportionment for the business profits tax and business enterprise tax.

The committee must provide a report by December 1, 2020.

By Andrew Soubel, J.D.

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CCHTaxGroup

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