Will online sales tax collection aid property tax relief?
Like ants at a picnic, people with ideas are drawn by an estimated $30 million to $40 million per year increase in sales tax.
This comes in the aftermath of a U.S. Supreme Court ruling clearing the path for states to collect sales tax already owed on online purchases. The high court’s 5-4 decision overruled a previous court decision that prohibited collection of state sales taxes from retailers that don’t have a physical presence in the state.
Governor Pete Ricketts says he’d like to see the new state revenue go towards property tax relief instead of using it to fund state services and programs.
Lincoln City Councilwoman Cindy Lamm says she’d like to see the city’s estimated $1 million receipts go toward city street maintenance.
Renee Fry of the OpenSky Policy Institute says the revenue could be used to support schools, health programs and other services essential to a strong economy. The executive director of the think tank says the ruling also paves the way for Nebraska to modernize its tax code to better conform to the economy.
The American Legislative Exchange Council, a nonprofit organization of conservative state legislators and private sector representatives who draft and share model legislation for use by state governments, says the court decision will be detrimental to small businesses and online retailers, stifling economic growth and discouraging entrepreneurship.
Jim Otto, president of the Nebraska Retail Federation disagrees.
He says the decision is great news for the retail core in every Nebraska community. That group has been working to change the law for more than two decades. He says there is still work to be done by Nebraska lawmakers on enacting legislation. That process has begun as the legislature is expected to consider it next session.
A bill that would have allowed the online sales tax collection was considered in the waning days of this year’s legislative session but was blocked by a filibuster. Attempts to free Syracuse Senator Dan Watermeier’s measure (LB 44) fell two votes short of the 33 needed to end the filibuster.
He argued that the state should move ahead to be ready when the court decision was made. Ricketts contended the state should wait for the Supreme Court decision.
Watermeier says collection could have started in July if his bill would have become law. Now the state has to wait until lawmakers convene in January 2019. The wait could cost the state $2.5 million to $3.3 million a month in tax collections, he said.
Speaker of the Legislature Jim Scheer of Norfolk said it would make sense to call a special session of the Legislature to enact the law since the high court says the taxes are already owed to the state.
Some of his colleagues say there is strong support for such a session. But others have said they are awaiting a state Revenue Department legal review of the 40-page ruling handed down in the case involving South Dakota v. Wayfair.
The ruling reversed a 1992 decision that barred states from requiring online merchants to collect sales taxes unless they had a physical presence in the state. While Nebraska taxpayers are required to report online purchases from out-of-state firms—and pay sales taxes on them—that almost never happens. More than 40 states had asked the Supreme Court to review the 1992 decision.
Amazon, one of the giant online retailers, already voluntarily collects the tax on purchases made by Nebraskans. But most online purchases by Nebraskans go unreported with no payment of sales taxes owed.
After a recent lunch with Ricketts, Scheer said the special session and its $100,000 price tag might not be necessary. The governor said the U.S. Supreme Court ruling might be enough to allow the state to compel such tax collections. But, he too, is awaiting the legal review. Scheer thinks sending a letter to internet retailers might be enough.
Wishful thinking. Remember, discussions on tax matters always boil down to whose ox is getting gored. I am sure that internet retailers will resist as long as they can.
As for Lamm’s suggestion, it remains to be seen if the ruling and any state legislation would allow for the segregation of the city’s share of the state’s 5.5 percent sales tax rate. Lincoln also collects an additional 1.75 percent.
As for Ricketts’ insistence that the money must go to property tax relief, I hope senators hold out for a broader discussion on tax policy, which has been debated and avoided for decades.
I like Frey’s suggestion that the money might be used to support schools and health programs. Hey, what about corrections too?
The anticipated windfall could be very beneficial to a state that has heretofore tried to cut its way out of a stalled economy.
Let’s have a robust debate and do something!