Start of online sales tax collections still uncertain

July 24, 2018

LINCOLN — Nebraska officials don’t know yet when the state will start requiring online retailers to collect sales taxes from Nebraska customers.

State Tax Commissioner Tony Fulton said Monday that it could be some months before the legal picture becomes clear in the wake of a June ruling by the U.S. Supreme Court.

“We’re still reviewing what’s decided,” he said. “A lot of shoes are yet to drop.”

The court ruled that states can force online retailers to collect sales taxes whether they have a physical presence in a state or not. The ruling overturned a 25-year-old Supreme Court decision that states argued was costing them billions of dollars.

The ruling is expected to add $30 million to $40 million to Nebraska’s tax coffers per year. Fulton said officials are still trying to figure out the best way to proceed.

Questions to be answered include whether legislation is needed to authorize the collection of online sales taxes or whether existing laws simply need to be enforced on a broader scale.

Also unclear is whether the state should apply the requirement to any out-of-state retailer with Nebraska sales, no matter how small, or to set a minimum threshold for taxing.

The Supreme Court ruling concerned a law passed by South Dakota in 2016. That law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state.

Fulton noted that the ruling decided only one question — whether states could collect from out-of-state retailers. He expects that answers to other questions may emerge after the South Dakota case returns to the lower courts.

Those courts could make additional rulings about implementing the tax collections, but probably will not until August or September.

Some state senators and others have called for a special legislative session to approve online sales tax collection, because such taxes could mean another $3.3 million a month for the state. But Fulton said it doesn’t make sense to bring lawmakers back until officials have a better idea what legislation would be useful.

Gov. Pete Ricketts has said he doesn’t believe legislation is needed to start collecting online sales taxes. He said he wants any increased tax revenue from online sales to be dedicated to property tax relief.

Fulton told a group of legislative leaders that it would be difficult to identify which taxes are being collected because of the court ruling. Some online retailers, such as Amazon, have started collecting sales taxes voluntarily. Amazon, however, does not collect sales taxes for the smaller retailers that use its marketplace platform.

Nebraska taxpayers are required to pay sales taxes on purchases from out-of-state firms — there is even a line on the state income tax form for such taxes — but the vast majority do not do so.

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