Nebraska could start collecting online sales taxes without special legislative session

Nebraska could start collecting online sales taxes without special legislative session
Jim Scheer, speaker of the Nebraska Legislature.

LINCOLN — The speaker of the Nebraska Legislature said Tuesday that he supports calling a special session, if it is necessary, to allow the state to begin collecting sales taxes from Internet retailers.

But State Sen. Jim Scheer of Norfolk joined Gov. Pete Ricketts in saying that such an extra session — which could cost about $100,000 — may not be necessary.

Last week’s ruling by the U.S. Supreme Court may be enough to allow Nebraska to begin compelling such tax collections, Ricketts said Monday, but lawyers with the state are still reviewing the ramifications of the court’s decision.

“At this point, I don’t see a need for it,” the governor said of a special session.

Scheer, who had lunch with Ricketts on Tuesday, said he’s also awaiting that legal review, which may be coming soon.

“Maybe all we have to do is send a letter out to (Internet retailers) to start collecting,” the senator said.

It’s an issue of money, perhaps up to $3.3 million a month in extra tax revenue for the state, which has been forced to trim budgets in recent years because of dismal tax collections. So additional tax revenue — which Ricketts has already said should be directed toward property tax relief — would be welcomed.

On Thursday, the Supreme Court opened the door to that when it ruled that online retailers must collect such taxes, even for states in which they have no physical location or presence.

The ruling reversed a 1992 decision that barred states from requiring online merchants to collect sales taxes unless they had a “physical nexus” with a 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, which has elicited cries of “not fair” from brick-and-mortar stores in the state that must collect taxes on local sales.

This spring, the Nebraska Legislature debated, but declined to pass, a bill that would have allowed the state to immediately begin collecting sales taxes on online purchases. The goal of Legislative Bill 44 was to get the state ready if, as expected, the Supreme Court struck down the physical nexus requirement, instead of waiting until the 2019 session to enact enabling legislation.

Waiting until next year would cost an estimated $2.5 million to $3.3 million a month in tax collections, or about $15 million to $20 million in revenue.

Scheer said those are taxes that are already owed to the state, so it would make sense to call a special session, if the legal review says it is necessary.

“If we need some kind of enacting legislation, why would you let another five or six months go by?” he asked.

Omaha Sen. John McCollister, who supported this spring’s legislation, said he’s already found strong support from colleagues for calling a special session. But he said he is also awaiting the state’s legal review.

Such a review should be completed soon, according to State Tax Commissioner Tony Fulton.

Fulton said that all states are in the process of reviewing the 40-page ruling in South Dakota v. Wayfair Inc. and that none has yet concluded exactly what it means in terms of starting the collection of taxes on online purchases.

“It shouldn’t take that long,” he said of the review. “But we need to do it responsibly and take a little time to do it.”

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