To the Members of the Nebraska Legislature,
On behalf of National Taxpayers Union’s (NTU) members in the Cornhusker State, I strongly encourage you to reject LB 1087, which would impose new collection and reporting requirements on remote sellers, invite other states to concoct their own taxing schemes aimed at Nebraska businesses, and ultimately force hardworking Nebraskans to suffer economic harm.
In 1992, the United States Supreme Court issued its decision in Quill Corp. v. North Dakota, which held that states cannot require remote sellers to collect sales taxes unless the seller has some sort of physical presence in the state. In legal parlance, this physical presence requirement is known as “nexus.” The Supreme Court noted that Congress could change this requirement at any time. To date, however, Congress has refused to allow states to tax remote sellers of items.
LB 1087 attempts an end run around the Supreme Court’s Quill decision by expanding the number of activities that create “nexus” in Nebraska. Make no mistake, passage of the bill will trigger a constitutional challenge as the statute stands in direct contravention to the Supreme Court’s holding in Quill. The ensuing litigation will certainly be a costly endeavor for Nebraskan taxpayers.
Supporters of the LB 1087 rest their case on two faulty premises. First, proponents suggest that the status quo is unfair to brick and mortar retailers in Nebraska, which are required to charge, collect, and remit state and local sales taxes. That is debatable, but it obscures the reality of the LB 1087. To put local and remote sellers on an equal footing would require Congressional action permitting states to tax all online retail sales, not just a small subset of online transactions.
Next, proponents argue that LB 1087 will be a cash cow for state government. This is inaccurate. After various states passed legislation similar to LB 1087, companies like Amazon terminated their affiliate programs in certain states. In 2011, for instance, Illinois passed a similar law to the one under consideration in Nebraska. As a result, it was estimated that 6,000 affiliates – two-thirds of Illinois’ affiliates – went out of business or moved to another state. This meant fewer jobs and less income in Illinois. Nebraska would experience a similar flight of jobs and income if LB 1087 becomes law.
Given the limited scope of LB 1087, it is not a panacea for tax parity between remote sellers and brick and mortar retailers, nor will it generate significant revenue. It will result in more audits and compliance burdens for businesses all across the country, the cost of which will be shifted back onto consumers in Nebraska. For these reasons, NTU urges you to oppose LB 1087.
Sincerely,
Clark PackardPolicy and Government Affairs Manager