Online retailers doing significant business in Nebraska will be required to collect sales tax starting next year.
The Nebraska Department of Revenue made the announcement Friday, about a month after the U.S. Supreme Court ruled that states can force online shoppers to pay sales tax.
The court’s June ruling, in South Dakota v. Wayfair, reversed a 26-year-old decision that prevented states from requiring online retailers to collect sales tax unless they had a physical presence in a state.
Some businesses, like Amazon, already voluntarily collect sales tax on purchases by Nebraskans.
The department said Friday that it will allow an exception for sellers with sales of $100,000 or less, or with fewer than 200 transactions annually in the state. Some other retailers also could be exempt, if they don’t fit Nebraska’s definition of being engaged in business in the state.
Tax collection in Nebraska is being delayed until Jan. 1 to allow online retailers to adjust to the change and to get a sales tax permit from the state, the department said.
“The Wayfair decision presents a new climate for remote sellers, and we want to be mindful of that fact,” said Tax Commissioner Tony Fulton.
At one point the state estimated that $30 million to $40 million per year could be added to the state’s coffers. The extra revenue will likely be welcomed after the state had to make budget cuts in recent years because of disappointing tax collections.
Gov. Pete Ricketts has said any increased sales tax revenue from online sales should be put toward property tax relief.
During the 2018 legislative session, State Sen. Dan Watermeier of Syracuse introduced a bill that would have allowed tax collection to begin almost immediately after the court’s decision, but the bill was filibustered.
Watermeier said Friday that he would have preferred to have the bill in place to allow collection to begin this year instead of in 2019.
Sen. Burke Harr of Omaha argued that legislation is needed to authorize state officials to begin collecting taxes from out-of-state retailers. He said current law does not provide exemptions for small online sellers or allow the state to waive retroactive collection of sales taxes.
“Where does Nebraska get the authority to say that? They’re making it up out of thin air,” he said of the Revenue Department’s announcement.
However, a letter from Attorney General Doug Peterson said that state revenue officials have discretion in how they enforce the law. The exemptions and the waiver of retroactivity would match the South Dakota law considered by the Supreme Court.
Watermeier’s legislation included an exemption for small sellers. It also would have expanded the definition of sellers “engaged in business in Nebraska.” The current legal definition may not cover all online retailers, Fulton said.
After the court’s ruling, some senators expressed interest in a special session if the ruling by the Supreme Court wasn’t enough to allow the state to begin tax collections.
Watermeier said he will be ready to introduce legislation as needed in the 2019 session, in particular to address smaller retailers that remain exempt from collecting sales taxes.
The department will not pursue retroactive sales tax collection for online sales made before Jan. 1, 2019, the department said.
Nebraska taxpayers are already 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.
World-Herald staff writer Martha Stoddard contributed to this report.