Online sales-tax bills in Kansas, Nebraska head for different outcomes

Midwestern neighboring states approved online sales-tax legislation on consecutive days this month: Kansas on March 14 and Nebraska on March 15. But the Kansas bill, which included other tax changes, is likely to be vetoed by Gov. Laura Kelly.

In Nebraska, which has just one legislative chamber, lawmakers approved a standalone sales-tax measure by a 43-0 vote. Beginning April 1, it will require remote online sellers to collect sales tax once they reach $100,000 in sales or make 200 individual transactions in the state. Gov. Pete Ricketts, “who had expressed misgivings about taxing internet sales prior to the Supreme Court ruling, is expected to sign the bill,” the Omaha World-Herald reported. “He included the expected $30 million to $40 million a year in new revenue in his budget. He said he would use the new money to increase the state property tax credits that are given to farmers, ranchers and homeowners.”

Overcoming a tax disadvantage

The U.S. Supreme Court ruling, issued in June 2018, was South Dakota v. Wayfair. It authorized states to require sales-tax collections from retail businesses that don’t have a physical presence within their jurisdiction. The Home Furnishings Association urged this action to eliminate an unfair tax advantage enjoyed by online sellers over brick-and-mortar retailers.

The Nebraska bill also directs “internet marketplaces” that offer products from various vendors to collect sales taxes on behalf of those vendors and remit the proceeds to the state. This feature targets large online sellers such as Amazon and eBay.

Not so simple in Kansas

Matters are more complicated in Kansas, where deep tax cuts several years ago left a hole in the state budget. Gov. Kelly, a Democrat, has objected to further tax reductions included in the omnibus bill approved by margins of 76-43 in the state House and 24-16 in the Senate. Both chambers are controlled by Republicans.

One break the bill offered for Kansas residents would allow them to claim itemized deductions on their state income-tax returns even if they could not claim them on their federal returns. Another would trim the sales tax on food. Another provision would relieve multinational corporations based in Kansas of state income-tax liability on money earned abroad and moved into the state.

Those portions of the bill would decrease state revenue far more than the estimated $21 million a year that online sales-tax revenues would take in, according to budget analysts.

Try again, Kansas

If wasn’t clear whether legislators could find enough votes to override an expected veto by the governor. If not, remote, online sellers would continue to enjoy the price advantage they get if they don’t collect sales tax from customers in Kansas.

The Home Furnishings Association encourages Kansas legislators to try again to level the playing field for local furniture dealers and other retailers who employ Kansas residents, pay Kansas taxes and support Kansas communities every day.

Doug Clark is content manager and government relations liaison for the Home Furnishings Association. Contact him at 916-757-1167 or dclark@myhfa.org

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