The author is president of the Nebraska Retail Federation.

Nebraska merchants find themselves in a no-win situation.

It is a little-known fact that Nebraska retailers and restaurants, the primary collectors of sales tax, are forced to remit to the state over $8 million more in sales taxes annually than they collect on a net basis.

How can this be?

It is the result of the fees charged by credit-card companies when tax is added to a credit-card sale. The credit-card fee is charged on the total amount including tax, not just the sale itself.

Here’s how it works:

If I buy something in Omaha or Lincoln for $100, there will be $7 in sales tax. Depending on the contract with the credit-card processor that the business has negotiated, there will be a cost of between 9 and 21 cents to process the $7 tax. Using a moderate fee of 14 cents, the merchant will actually receive $6.86 in sales tax after paying the fee. The business then eats the 14-cent charge and remits $7 in sales taxes to the state.

The 14 cents on that single sale equates to at least $8.4 million each year statewide. That figure was not determined by the retail and restaurant industry but by the Legislative Fiscal Office.

This issue has not always been the case.

Prior to 2002, the State of Nebraska allowed those collecting sales taxes to retain an extremely small percentage of all of the tax collected to compensate for the cost of collection. Blaming tight budget times, most of that was taken away in 2002 with the idea that it could be restored when times were better.

State Sen. Paul Schumacher of Columbus has proposed a plan (Legislative Bill 333) that would substantially rectify the situation by reinstating the sales tax collection allowance at the level it was prior to 2002.

This glaring injustice could also be addressed by legislation forcing credit-card companies to process sales taxes with no fee. Although such legislation would face court challenges from the credit-card industry, it would recognize this issue and be a step in the right direction.

A national tax expert said recently in his testimony to the Legislature’s Revenue Committee that “the objective of tax policy is to behave like a pickpocket and not a mugger.”

Nebraska’s retailers and restaurants are getting mugged to the tune of $8.4 million each year. Some blame the credit-card companies, and some say it is the state’s responsibility to at least attempt to cover the cost of collecting the taxes.

Nebraska merchants just want the mugging to stop.

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