Bill would change sales and use tax collection fees

The Revenue Committee heard testimony Feb. 23 on a bill that would raise the amount businesses receive for collecting and remitting sales tax.

The current collection fee for merchants — the amount that they are allowed to retain when remitting the taxes — is equal to 2.5 percent of the sales or use tax collected each month, up to $3,000 per month. LB984, introduced by Columbus Sen. Mike Moser, would increase the fee to 2.5 percent of the first $6,000 remitted each month beginning Oct. 1, 2022.

Moser said the change most would benefit businesses that have between $400,000 and $800,000 in annual sales. When combined with fees charged by banks to swipe cards, the remittance fee eats away at profits, he said.

“Merchants in our state, particularly smaller merchants, shouldn’t have to pay the cost of collecting a tax,” Moser said.

Rich Otto, testifying on behalf of the Nebraska Retail Federation, the Nebraska Hospitality Association and the Nebraska New Car and Truck Dealers Association, spoke in favor of the bill. He said the measure would correct an “injustice” in sales tax collection.

Otto said LB984 would double the current monthly cap on remittance fees from $75 per month to $150 per month, helping to offset the cost small businesses incur when filing sales taxes.

In addition, he said, some small retailers are paying between 3.5 and 4 percent on each transaction for card-swipe and processing fees. The result is that some merchants are remitting more in sales tax to the state than they are collecting, he said.

“This is a fairness issue,” Otto said. “The state needs some skin in the game.”

Ansley Fellers also testified in support of the bill on behalf of the Nebraska Grocery Industry Association, the Nebraska Petroleum Marketers and Convenience Store Association, the Lincoln Independent Business Association, the Nebraska State Chamber of Commerce and Industry and the Columbus Area Chamber of Commerce.

The current fee has not kept pace with the cost of collecting sales tax, she said, especially as it relates to credit card fees.

“We have created a situation where credit card companies can make more money on a transaction than the retailer,” Fellers said. “And it now actually costs retailers — in some cases, significant amounts — to collect the tax.”

Testifying against the bill was Christy Abraham, speaking on behalf of the League of Nebraska Municipalities. She said LB984 would have a negative fiscal impact on municipalities due to the loss of sales and use taxes.

Abraham said Omaha estimates a loss of between $800,000 and $1 million under the bill. About 300 municipalities have sales and use tax rates, she said, and also would be impacted by the proposed change.

The league could move to a neutral position on the bill, she said, if businesses were allowed to retain 2.5 percent of state and local taxes on the first $3,000 collected each month but were limited to only the state’s portion of the sales tax on the second $3,000 collected each month.

The committee took no immediate action on LB984.