Local option sales tax on mechanical amusement devices advanced

Cities and villages could levy an occupation tax on businesses operating mechanical amusement devices under a bill advanced from general file Feb. 10.

LB70, introduced by Columbus Sen. Paul Schumacher, would authorize cities and villages to levy the tax on any business operating such a device within city or village boundaries. Schumacher said the state has seen a rapid proliferation of machines that could be considered illegal gaming machines under the Nebraska constitution.

“Within the last year, out-of-state manufacturers have pushed the limit knowing that it is very expensive and difficult [for the state] to prove that a machine is more chance than skill,” he said. “[LB70] is an effort to basically enforce the law through tax mechanisms and through the extent that it cannot be enforced, to receive some tax proceeds.”

A county also could levy the tax if a business operates a device outside of the boundaries of any city or village.

A mechanical amusement device, as defined in state statute, includes any machine that a person inserts a form of currency into to play, pays out a prize and is determined by chance. It also includes game and draw lotteries and coin-operated automatic musical devices. It does not include vending machines or pickle card dispensing machines.

Under LB70, the amount of the occupation tax would equal 10 percent of the gross revenue derived from operation of the device. The state tax commissioner would be responsible for collecting the tax, remitting 20 percent of the proceeds to the state General Fund and the remaining amount to the appropriate political subdivision.

A Revenue Committee amendment, adopted 29-6, changed the proposed tax from a city or county tax to a state tax.

“This shifts the burden from the state to the operator of the device to establish that the machine is not subject to the additional occupation tax,” said committee chairperson Sen. Mike Gloor of Grand Island.

Omaha Sen. Beau McCoy opposed the bill, saying that a new tax is not the appropriate method to address the potential for expanded gambling in the state.

“We need to make sure that the things we do on this floor don’t have unintended consequences,” McCoy said. “While I understand that this is a problem, it is never my opinion or position that the way to fix a problem is to raise taxes.”

Saying that there is precedent for such tax policy, Omaha Sen. Ernie Chambers supported the measure.

“It is not unusual for a tax to be levied. A system is made available for the taxpayer to challenge the validity of the tax on his or her property,” he said. “The tax system throughout history has been used to express a moral judgment of society—cigarettes and alcohol would probably fall within that category.”

Senators also adopted an amendment introduced by Omaha Sen. Bob Krist, adopted 31-0, which would dedicate 3 percent of all tax proceeds raised under the bill to the state’s Gamblers Assistance Program. As gambling addiction grows, Krist said, the program must be adequately funded.

“We are growing the [gambling] addiction and we need to keep up with the funding. It’s a serious matter that affects not only the individuals, but families and employers as well,” he said.

Senators advanced the bill to select file on a 29-11 vote.