- Associated Press - Tuesday, April 11, 2017

LINCOLN, Neb. (AP) - Shopping online may cost Nebraska residents a bit more under a bill lawmakers advanced Tuesday to level the playing field between internet and brick-and-mortar retailers.

The proposal would require online retailers to remit sales taxes if their gross revenue in Nebraska exceeds $100,000 or they conduct 200 or more transactions in the state. Those that refuse would have to notify both buyers and the state that the tax is due.

Sellers who refuse to collect state sales taxes would have to notify purchasers that the tax is due or face a $5 penalty for each failure to do so. They also would have to send yearly notifications to buyers by Jan. 31 and the state by March 1, disclosing the total amounts paid in the previous year. Failing to report would carry a $10 penalty.

The online sales tax measure won first-round approval in the Legislature, 28-13, despite opposition from Gov. Pete Ricketts and pending federal court cases that could undermine the state’s ability to collect the tax.

Nebraska already requires online buyers to pay sales taxes when they file their income tax returns, but few residents comply and the state loses out on an estimated $30 million to $40 million each year. In December, online retailer Amazon announced it would start collecting sales taxes.

“The longer we wait for passing this legislation, the harder it will be for the public to understand that this is not a new tax,” said Sen. Dan Watermeier of Syracuse, the bill’s sponsor.

Sen. John McCollister of Omaha said the current system puts brick-and-mortar businesses such as his wife’s toy store at a disadvantage because customers can try out items in a physical store and then buy them online to avoid the tax.

“This (sales tax) money is low-hanging fruit, and the folks of Nebraska deserve to have this instituted,” he said.

Opponents said the state should wait until federal courts resolve the issue. Sen. John Kuehn of Heartwell said imposing the requirement after 200 transactions would hurt residents who sell items on sites such as eBay to make extra money.

“We’re not just talking about large business,” he said.

Sen. Mike Hilgers of Lincoln said he believes the bill runs afoul of the U.S. Constitution’s commerce clause, which implies that states can’t regulate interstate commerce.

“This bill will almost certainly be challenged,” Hilgers said.

Sen. Jim Smith of Papillion, chairman of the tax-focused Revenue Committee, said the bill creates a “false hope” of new state revenue that could evaporate if the law is struck down.

Ricketts has noted that courts have recently found other states’ online sales tax laws unconstitutional. Ricketts said Congress needs to address the issue while the state encourages voluntary compliance.

A similar law in South Dakota faces a federal court challenge that could resonate around the nation if the U.S. Supreme Court agrees to hear the case. The law challenges a 1992 Supreme Court ruling that said states can only tax businesses with a physical presence within their boundaries. In December, the court let stand a Colorado law that pressures online retailers to collect sales taxes by increasing the amount of red tape for those that refuse.

Watermeier said his bill was designed to survive a court challenge because it gives sellers the choice of collecting sales taxes or reporting the tax due to the state and buyers.

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Follow Grant Schulte on Twitter at https://twitter.com/GrantSchulte

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