5 Weird Nebraska Sales Tax Exemptions

Nebraskans pay the country’s seventh highest average property tax rate and the thirteenth most per person in state income taxes. And, with local taxes, the tax rates on the purchases Nebraskans make seem to be increasing quite often, too.

One reason the state relies so heavily on taxing property and income is the wide range of exemptions in the state’s sales tax law.

This means many sales in Nebraska are currently sales tax-free.

While tax experts say that some sales tax exemptions do make economic sense, like not taxing business inputs, many of these exceptions in the law have no real economic rationale, and can seem arbitrary, or even a little silly.

Most sales tax exemptions only exist because the sales tax system we have today predates the advent of the current service-based economy, while others have been added to the law over the years as a result of industry lobbying.

In our recent report on property tax reform, Nebraskans we surveyed expressed some general interest in eliminating sales tax exemptions to deliver property tax reductions. But as the survey asked for specifics, many respondents appeared to have difficulty settling on which exemptions they could live without.

Ending sales tax exemptions will be no easy task, but it may be one of the few ways Nebraska can address tax reform without increasing its already high tax rates.