Online sales tax bill escapes filibuster in Nebraska Legislature

March 7, 2018

Legislation designed to collect state sales taxes already owed on Internet purchases cleared a legislative filibuster Tuesday and headed toward a final vote and an almost certain gubernatorial veto.

Following a full morning of debate, the bill (LB44) was freed from the grip of a filibuster on a 35-8 vote, clearing the 33-vote threshold required to invoke cloture and end debate.

That was followed by a 34-7 vote sending the measure to its final round of floor consideration.

Ricketts administration officials were actively engaged in the Capitol Rotunda during Tuesday’s debate, talking with senators. Thirty votes ultimately would be required to enact the bill over the governor’s objections.

Responding to advancement of the bill, Ricketts appeared to preview a veto message: “LB44 as advanced by the Legislature remains flawed and contains burdensome regulation and unnecessary red tape on companies doing business in Nebraska.”

The bill, sponsored by Sen. Dan Watermeier of Syracuse, would raise an estimated $30 million to $40 million in annual revenue by collecting state sales taxes already owed.

That figure would be in addition to the estimated $30 million already being voluntarily collected by Amazon on purchases by Nebraskans and submitted to the state.

Gov. Pete Ricketts actively opposed the bill, arguing the state should wait for a U.S. Supreme Court decision later this year that may reverse its earlier position that states could not impose taxes on sales made by businesses with no physical presence in that state.

Watermeier’s bill is patterned after a Colorado law that already has been affirmed by a more recent U.S. Circuit Court of Appeals decision.

Supporters of the measure argued that collection of Nebraska sales taxes already owed on Internet purchases would level the playing field with Main Street businesses in Nebraska that already must collect the state tax on top of their retail purchase prices.

A few senators also noted the state needs the revenue at a time when its budget is being stressed by a revenue shortfall that has led to a continuing round of budget cuts.

“Nebraska needs the revenue,” Sen. John McCollister of Omaha said, and the measure provides “fairness for Main Street businesses.”

“This is not a new tax,” Watermeier stressed, but rather a tax already owed.

“It makes sure taxes that are owed are taxes that are paid,” Sen. Laura Ebke of Crete said.

Internet sellers would be required to collect the tax or inform purchasers of the amount of state tax that is due.

The amended proposal includes a trigger mechanism that does not allow it to go into effect unless the Supreme Court reverses its earlier decision.

Sen. Jim Smith of Papillion argued against the bill, suggesting it creates a new reporting burden for businesses and raises “a false hope of collection.”

Sen. Mike Hilgers of Lincoln said the earlier Supreme Court decision has “tied our hands” and the state should wait for the upcoming court decision before determining how to proceed.

“We are going to get clarity,” he said.

Sen. Bob Krist of Omaha said the Legislature should act now instead of waiting until 2019 when the next legislative session convenes.

The bill was stuck at second-stage consideration when the Legislature adjourned last year. Watermeier offered amendments on Tuesday to ease or eliminate some of the concerns or objections that had been raised in its first go-around, and they were adopted before the bill was advanced.