LINCOLN — The Legislature began to set the stage Tuesday for what has all the earmarks of its first veto showdown with Gov. Pete Ricketts this session.
Senators gave 28-13 first-stage approval to a bill (LB44) that provides for collection of state sales taxes already required on internet purchases by Nebraskans, opening the path to a revenue stream that could reach an estimated $30 million to $40 million a year.
Thirty votes would be required to override a gubernatorial veto.
"This is not a new tax," Sen. Dan Watermeier of Syracuse stressed.
"It has always been owed" under provisions of current law that requires Nebraskans to self-report and pay the Nebraska sales tax on Internet and mail-order purchases.
Ricketts has announced his opposition to the bill.
Sen. John Kuehn of Heartwell argued the bill, in effect, would apply new regulations on small businesses and would not have any impact in helping relieve the state's current shortfall in anticipated revenue since it assuredly would lead to a court challenge.
Sen. Mike Hilgers of Lincoln said he believes the proposal is unconstitutional since Congress clearly is "the appropriate body to regulate interstate commerce."
Watermeier's bill provides that online retailers would either be required to collect and remit sales taxes on purchases made by Nebraskans or notify Nebraska purchasers of their tax obligations.
The legislation would apply to out-of-state retailers whose gross income in Nebraska exceeds $100,000, exempting the smallest operations.
Amazon already has decided to collect sales taxes from Nebraska purchasers and that, Watermeier said, could result in an estimated $20 million in additional state revenue.
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One of the strongest arguments voiced by supporters of the bill was the issue of fairness for Main Street retailers in Nebraska who are required to apply the sales tax to purchases made in stores across the state.
LB44 would "level the playing field," Sen. Tom Briese of Albion said.
"It clearly is not a new tax," Sen. Matt Williams of Gothenburg said.
"People in Nebraska already owe this tax," Sen. John McCollister of Omaha noted.
Sen. Curt Friesen of Henderson said "local stores are closing" in Nebraska because of Internet sales and the tax advantage they now enjoy due to lack of collection.
Sen. Jim Smith of Papillion said LB44 "creates a false hope" of new revenue at a time when the state is struggling with a shortfall.
Twenty-eight states have enacted or are considering similar legislation, Watermeier said.
His bill combines provisions of a Colorado bill that has been upheld in a federal appeals court and a South Dakota law that failed its court test, he said.
Ricketts has argued that "enforcement of online state sales tax is an issue that must be addressed, but it can only be handled properly by Congress at the federal level or (by) a change in direction from the Supreme Court.
"Until then, the state of Nebraska will continue to work to bring online businesses into voluntary compliance," the governor said in a statement last month.