Nebraska Remote Sales Tax Bill Showing Signs of Life

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By Christopher Brown

Nebraska lawmakers may take a second look during the 2018 session at a remote sales tax bill held over from last year while the U.S. Supreme Court prepares to revisit a decades-old ruling that has prevented states from taxing internet sales.

The bill ( L.B. 44) would create a Colorado-style notify-and-report regime for remote sellers and Nebraska consumers, according to the bill’s sponsor, Sen. Dan Watermeier (R). But it also would allow the state to act immediately to require remote sellers to collect and remit Nebraska sales taxes should the Supreme Court overturn its 1992 ruling in Quill Corp. V. North Dakota.

Watermeier told Bloomberg Tax that he’s confident that he can pull together the votes this time around, especially with the renewed attention to the issue after the U.S. Supreme Court’s decision to revisit the Quill ruling in a South Dakota dispute. The case arises from the South Dakota Supreme Court’s decision invalidating the state’s digital sales tax statute S.B. 106 (S.D. Codified Laws Chapter 10-64) as unconstitutional under Quill.

But Watermeier also acknowledged that the bill must overcome skepticism in the Legislature, including from Sen. Jim Smith (R), chairman of the tax-writing Revenue Committee, as well as from Gov. Pete Ricketts (R).

“We’ve made some tweaks to the bill this year to address some of the concerns people had during last year’s session,” Watermeier said. “And I think there will be interest in having a bill that lets us hit the ground running if the Supreme Court throws out Quill. So I feel pretty good about our chances.”

Notify and Report

The version of L.B. 44 that the Legislature will consider in the 2018 session would require remote sellers with at least $100,000 in sales or 200 transactions in Nebraska to notify buyers that sales or use tax is due on their purchases.

Sellers also would have to to notify the Department of Revenue of the total amount of purchases made during the year by Nebraska consumers. But sellers wouldn’t be required to notify the DOR of the amount of purchases made by individual consumers, a change from the 2017 version that Watermeier said was intended to address privacy concerns expressed by some lawmakers.

Watermeier also made another key change in an amendment introduced Jan. 10, striking from the bill provisions requiring remote sellers to collect and remit the state’s sales tax. Rather than imposing those requirements right away, Watermeier’s amendment would have them take effect when the Supreme Court overturns Quill, or on July 1, he said.

If passed, the bill would allow DOR to act right away after a Supreme Court decision requiring remote sellers to collect and remit the tax, Watermeier said. “And in our budget climate, with us around $200 million short, the appeal of being able to act quickly to bring in this revenue is obvious,” he said.

A fiscal note estimated that the bill would generate between $30 million and $40 million in revenue.

Challenges

Despite this obvious appeal, the path forward for L.B. 44 isn’t without obstacles, Watermeier said. He’s far from certain that he can count on the support of Smith and Ricketts, and also sees a challenge arising from the fact that the legislative session is just 60 days this year.

“We don’t have a lot of time to act,” he said.

The procedural posture of the bill works in its favor, Watermeier said. The bill made it out of committee during 2017 and was held over into the current session, meaning it doesn’t need another hearing this year. But that also limits the extent to which it can be amended, he said.

“If we change it too much, we’ll have to go back for a hearing, and that would pretty much sink it for this year, given the timing,” he said.

His job now is to gather the votes, Watermeier said. “The speaker has made it clear he won’t let a bill get to the floor unless the votes are there, so that’s where we are now, working it hard, educating our members that this is the way to go,” he said.

Smith expressed a guarded openness to a changed version of L.B. 44. “I can’t speak definitively because I haven’t been able to look closely at the bill, but I would say that an amended version that put us in line with a Supreme Court ruling and defines how we would act could make some sense.”

“But it would have to follow the Supreme Court’s action to get my support,” he said.

To contact the reporter on this story: Christopher Brown in St. Louis at ChrisBrown@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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