Tax on Internet sales? Why not?

North Platte Senator Mike Groene perfectly framed the argument for the state collecting sales tax on internet purchases during floor debate on a bill to allow it.
“I’m paying it, but maybe my neighbor isn’t,” he said. “Yet we both drive on the same streets and use the same government services.”
The public wants something done.
Senator Matt Williams of Gothenburg said it’s a matter of fairness. Main Street businesses have to remit the sales tax paid by customers. The same should be true for those located in other states but selling to Nebraskans on-line, he said.
The Government Accounting Office said Nebraska is missing out on something between $67 million and $95 million in sales tax revenue every year. That, says Senator Dan Watermeier of Syracuse, is why he introduced the bill last session given the current shortfall in state revenue.
But Governor Pete Ricketts and Attorney General Doug Peterson are against the measure because of a legal question pending before the United States Supreme Court in a South Dakota lawsuit against online retail giant Wayfair. At issue in that case is a previous decision in Quill Corporation v. North Dakota, which prohibits states from collecting tax from those internet companies.
Revenue Committee Chairman Senator Jim Smith of Papillion argued against the bill and said he will “fight it to the end because we are holding out hope that this will do things that can’t be accomplished.”
Senator Mike Hilgers of Lincoln, an attorney, and Ernie Chambers of Omaha, a law school graduate, both argued against the measure from a legal and technical standpoint. But Watermeier and others cited a recent Nebraska Law Review article on the subject, which, they say, answers the legal questions that have been raised.
As introduced, the Watermeier bill (LB 44) raised several potential concerns: privacy issues raised by an information reporting system; whether the state can condition the effectiveness of a state law on an act of the Supreme Court or Congress; and why would the state enact a statute before such action allows it to do so.
University of Nebraska-Lincoln law professor Adam Thimmesch wrote, “The State should be following Wayfair very closely, and the legislature should carefully consider enacting LB 44 so that it is poised to act if the Court removes the physical presence limitation (a company must have operations in Nebraska) on its inherent power to tax.”
He said the privacy concern is addressed by requiring internet sellers to report on aggregate, not individual, consumer activity. The State Constitution allows the Legislature to make laws conditioned on outside events. Finally, the current legislative session ends April 18 and that means lawmakers will not be in session when the high court hands down its opinion.
Without LB 44 on the books, Thimmesch wrote, the Legislature would have to wait until next session to introduce a bill and any revenue collection could be delayed up to nine months.
“The Court’s current position has severely limited Nebraska’s ability to conform its tax system to the modern economy,” he wrote.
Watermeier explained that his amendment to the bill, which was approved before the measure advanced to a final reading, would require sellers to provide detailed notifications to purchasers about the state sales tax that is due for their purchases.
The requirement that businesses remit sales tax would go into effect should the U.S. Supreme Court rule to overturn Quill v. North Dakota, which prevents states from collecting sales taxes owed from online purchases.
It would also: require the aggregate report mentioned earlier; exempt all Nebraska businesses and small businesses from the bill’s requirements; and leave the state in position to collect revenue immediately should the court ruling overturn Quill.
Omaha Senator Tony Vargas spoke in favor of the measure and called it a responsible way to move forward to balance the three-legged tax stool, which relies on income, property and sales tax to fund government.
Balance is good. Let’s hope that this is the session to achieve it.