LINCOLN, Neb. – Brick-and-mortar business owners spoke out Friday in favor of two similar bills meant to force online retailers to collect Nebraska state sales tax.
Continue Reading Below
Dozens of retailers and advocates spoke at a legislative committee hearing on the measures, which would require retailers to collect the sales tax or send detailed records to customers and the state to ensure customers pay the tax.
"Our current law places Main Street businesses at a huge disadvantage," said Sen. Dan Watermeier, of Syracuse, who sponsored one of the bills.
His legislation is nearly identical to a bill proposed by Sen. John McCollister, of Omaha, but Watermeier's measure would apply to online retailers whose Nebraska transactions total at least $100,000. McCollister's would apply to businesses with at least $25,000 in sales.
Thomas Wright, who with his wife has owned a Lincoln jewelry store for nearly 40 years, said online retailers that don't charge a sales tax have an advantage over his store even when they charge the same prices.
"I see the internet problem for local retailers every day," he said. "Every day, I have people coming into my store telling me 'I can get this on the internet.'"
Continue Reading Below
Online retailers turn brick-and-mortar stores into little more than showrooms where would-be customers come to try on materials before ordering them online, said Alan Hirschfeld, who owns a clothing store in North Platte. He said it's the biggest problem his store's dealt with in its 100 years in business.
"You're putting a double burden on us," he said. "The state of Nebraska isn't collecting sales tax in that scenario, and I'm losing business and profits."
McCollister's wife owned two toy stores and was frustrated by people who would come in, look at items and then buy them elsewhere, he said.
"Internet sales that don't charge sales tax have an automatic advantage on price," McCollister said. "This situation is not fair, and it should not be allowed to continue."
The legislation should make reporting requirements so onerous for online retailers that they'll choose to just collect the sales tax themselves, Watermeier said.
Customers already are required to pay sales tax on online purchases through their annual income tax returns or a separate tax form, but few do. State officials said this costs Nebraska millions of dollars each year, and the state Department of Revenue estimates that either bill could generate an additional $30 million or $40 million in revenue. That comes as Nebraska faces a projected budget shortfall of about $900 million during the next two years and it doesn't include sales by Amazon, which makes up about 20 percent of online sales in Nebraska and which said last month that it will start collecting sales tax on purchases there.
Federal legislation allowing states to collect sales tax from online retailers without brick-and-mortar presences has stalled for years, in large part because of a 1992 Supreme Court ruling that said state and local tax codes were too diverse. Twenty-four states, including Nebraska, responded by agreeing to simplify and streamline their tax codes, and a handful of states already have legislation requiring online retailers to report or collect sales tax.
Follow Julia Shumway on Twitter at https://twitter.com/JMShumway