LINCOLN — Online shoppers won’t be forced to pay Nebraska sales taxes this year after the Legislature killed an Internet tax proposal on Thursday.
State lawmakers fell two votes short of cutting off extended debate on Legislative Bill 44, introduced by State Sen. Dan Watermeier of Syracuse.
The bill would have required state revenue officials to start collecting sales taxes from online retailers if the U.S. Supreme Court or Congress act to allow such collections.
The high court has agreed to hear a South Dakota case that centers on whether retailers can be required to collect sales taxes in states where they lack a physical presence.
Attorneys general from 40 states, including Nebraska and Iowa, have signed on in support of South Dakota’s position.
A ruling is expected by late June.
Current state law requires Nebraskans to report online purchases on their state income tax returns and to pay sales taxes on those purchases, but few do. Some retailers, including Internet giant Amazon, voluntarily collect Nebraska sales taxes from customers.
Bricks-and-mortar retailers in Nebraska and across the country have been seeking action for several years, complaining that the situation gives online competitors from other states an unfair advantage.
Watermeier estimated that the unpaid sales taxes for online purchases would amount to $30 million to $40 million this year. Nationwide, the U.S. Government Accountability Office has estimated that $8 billion to $13 billion in state sales taxes go uncollected each year.
He expressed disappointment at Thursday’s vote, which meant LB 44 is dead for this year.
Some opponents argued that Nebraska would do better to wait and see how the Supreme Court rules and how Congress reacts.
Sen. Paul Schumacher of Columbus said the ruling could be complex, with states being allowed to collect sales taxes from outside retailers only in certain situations. He also said Congress may step in after the ruling.
“I’m beginning to think this is a premature idea,” he said.
Just before the vote, lawmakers had been discussing a compromise amendment negotiated with Gov. Pete Ricketts and Sen. Jim Smith of Papillion, the Revenue Committee chairman.
The amendment would have removed provisions requiring online retailers to provide Nebraska consumers with a year-end summary of their purchases. The idea was that consumers then would have an easier time paying the sales taxes owed.
The bill also would have required retailers to report their total Nebraska sales to state officials.
Ricketts and Smith had opposed the reporting provisions. Smith said Thursday that he supported the compromise but warned that collecting sales taxes from online retailers may not help local stores as much as they hope.
Also Thursday, lawmakers passed nine bills. Among them:
» Convictions. People who were sentenced to jail or prison could petition the court to have that conviction set aside upon completion of the sentence under LB 350, introduced by Sen. John McCollister of Omaha. The law already allows people to petition the court after the completion of probation. This bill would expand that right, but restrictions still apply, including for those who have pending criminal charges or who are on the sex offender registry.
» Vacant property. Cities other than Omaha and Lincoln could create a citywide vacant property program under LB 256, introduced by Sen. Tom Briese of Albion. The programs could include registration of vacant properties, plans for rehabilitation and occupancy of properties, plus inspections and fees to cover the public costs of the properties.
» Game and Parks. The Nebraska Game and Parks Commission could use alternative methods of contracting for building projects in the state park system under LB 775, introduced by Sen. John Stinner of Gering. Public schools, cities, villages, and community and state colleges already have the ability to use these methods, which include design-build and construction manager/general contractor methods.