Tax fairness is the best argument for more effectively collecting Nebraska sales taxes on Internet purchases.
State law sets a 5.5 percent state sales tax on goods bought at brick-and-mortar stores as well as those bought online. But while those brick-and-mortar stores are required to collect the tax, online sales tax collection is left to an honor system in which taxpayers are expected to report and pay when they file their state income taxes.
Not surprisingly, fewer than 1 percent of taxpayers self-report.
The state, by looking the other way, gives online retailers a price advantage over local stores, which employ more than 100,000 people statewide. This failing honor system is unfair to retail employers and employees who live and invest in our communities.
State senators can consider one of two bills before them that would require online businesses of varying sizes to collect the sales tax. This is already being done by states such as South Dakota and Colorado. The Colorado law passed muster in federal court.
The fiscal stakes are large for the state. Amazon, the nation’s largest online retailer, has voluntarily started collecting Nebraska’s sales tax. The Nebraska Department of Revenue estimates the state will collect about $28 million in sales taxes on those purchases in 2017-18. That’s from one, albeit large, online retailer.
But setting aside revenue considerations, this is a matter of principle. Lawmakers should focus on fixing a flawed process by fairly applying an existing tax. It’s time to level this playing field.