Why the online sales tax was a good move for Nebraska

Why the online sales tax was a good move for Nebraska

In 2019, Nebraskans started paying sales tax on most of their online purchases. Little did we know back then that this policy would help the state weather the COVID-19 pandemic.

According to the St. Louis Federal Reserve Bank, “e-commerce retail sales totaled $211.5 billion in Q2, an increase of $51.1 billion or 31.8% from the prior quarter.”

Neighboring South Dakota is a perfect case study on this issue. The state has relatively low property taxes and no income tax. The main revenue source for South Dakota is the sales tax (which is probably one reason why they are the ones that brought the remote sales tax issue, South Dakota v. Wayfair, to the U.S. Supreme Court).

South Dakota’s Department of Revenue reported their net sales and use taxes were up $8.6 million between actual collections and what the forecast anticipated.

And they aren’t the only state experiencing this with remote sales tax during the pandemic. Reports have come out from many states such as Alabama and Colorado showing that they are taking in more sales tax than ever before thanks to online sales. In fact, Wisconsin saw a 133% increase in online and out-of-state sales tax revenues in April 2020.

This supports what the Tax Foundation has found, with sales and use taxes declining the least of the major state taxes during the pandemic.

It is good that Nebraska adopted the remote seller sales tax provision. It is also why so many policy groups in the state think an expansion of the sales tax base is the solution to fundamental property tax reform – but that is another discussion for another day.

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