LINCOLN, Neb. — A bill intended to help Nebraska collect more online sales tax revenue cleared a key hurdle in the Legislature on Tuesday and appeared to have enough support to survive Gov. Pete Ricketts’ expected veto.
The measure would require online retailers to send customers a notice of their total taxable purchases unless the businesses collect the sales tax themselves. Retailers would also have to send an annual report to the Department of Revenue showing the total amount paid by its Nebraska customers.
Supporters painted the legislation as a way to level the playing field between online retailers and brick-and-mortar businesses, which have to collect and remit the tax. Nebraska already requires residents to report how much they spend online each year when they file their income tax returns, but few people comply, costing the state an estimated $30 million to $40 million annually.
“The longer we wait to pass legislation like this, the harder it will be for the general public to understand that this is not a new tax,” said Sen. Dan Watermeier of Syracuse, the bill’s sponsor.
Nebraska imposes a 5.5 percent sales tax on eligible purchases, and local governments can levy an additional tax of up to 2 percent. The proposal has won endorsements from leading business and farm groups and a coalition of cities.
The newly revised bill advanced to a third and final vote Tuesday with more support than it received when it was first debated in last year’s session. Senators voted 34-7 in favor of the proposal after overcoming a filibuster, compared to the 28-13 vote the previous year. Supporters need to win just one more vote before it goes to the governor’s desk. At least 30 votes are needed to override a gubernatorial veto.
Under the bill, online retailers would automatically have to collect a sales tax if allowed by Congress or the U.S. Supreme Court. The Supreme Court ruled in 1992 that states can only tax businesses with a physical presence within their borders, but the court is revisiting the issue with a case involving a South Dakota internet sales tax law. A ruling is expected by June.
In a statement, Ricketts said the bill remains flawed and imposes “unnecessary red tape on companies doing business in Nebraska.”
Opponents criticized the measure as toothless because it currently lacks a collection requirement and said it would impose burdensome reporting requirements on smaller businesses. The bill would apply to companies with more than $100,000 in sales or more than 200 separate transactions in a year. Online retail giant Amazon started collecting Nebraska sales taxes voluntarily last year.
“This bill gives false hope to retailers that this is somehow going to correct the imbalance” between online operations and brick-and-mortar businesses, said Sen. Jim Smith of Papillion.
Sen. Mike Hilgers of Lincoln said lawmakers should wait until the high court rules before proceeding. Ricketts argued last year that the bill was unconstitutional.
Sen. Theresa Thibodeau said lawmakers shouldn’t pass legislation that could restrict e-commerce.
“Too often, innovations like online retail are seen as threats by policymakers even long after consumers have embraced them,” said Thibodeau, a day care and preschool owner from Omaha.
The bill that advanced Tuesday was watered down from an earlier version, which would have required businesses to collect the sales tax or send detailed transaction records to customers and the state to ensure the tax gets paid.
Watermeier said he made changes to address concerns about disclosing the online purchases of customers to the state. The bill was shelved last year because several supportive senators were absent the day of a key vote.
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