Sales tax exemption for certain public power equipment advanced

Power poles and power lines owned by a city or public power entity would be exempt from state sales and use tax under a bill advanced from general file March 25.

As introduced by Omaha Sen. Brett Lindstrom, LB218 would exclude electric generation, transmission, distribution and street lighting structures or facilities owned by a political subdivision from the definition of tangible personal property, thereby making those items exempt from state sales and use tax.

A Revenue Committee amendment, adopted 40-1, instead would add such structures or facilities that are owned by a political subdivision or the public power industry to the definition of real property to achieve the same end.

The amendment would retain a provision in the original bill that would exclude from the definition of “gross receipts” charges from the lease or use of those structures or facilities, making those charges exempt from state sales and use tax.

The state Department of Revenue has imposed sales and use tax on power poles and power lines in recent years after determining that they are tangible personal property rather than real property, Lindstrom said, changing an interpretation of state law it has used for the past several decades.

Currently, public power entities must pass that additional tax on to consumers through increased rates, he said, and LB218 is needed to clarify that such items are not subject to state sales and use tax.

Elkhorn Sen. Lou Ann Linehan supported the bill as amended, saying the Legislature alone should decide what is or is not taxed.

“I don’t think we want to get in the business of letting the departments change the rules in the middle of the game without any input from the Legislature,” she said.

Sen. Mike Groene of North Platte opposed the amendment and the bill. Although public power entities pay a portion of their gross revenue to the state in lieu of taxes, he said, they also should pay the sales tax imposed under the department’s current interpretation of the law in order to further support public schools, infrastructure and safety.

Senators voted 38-1 to advance LB218 to select file.