Sales tax on array of services considered
An expanded sales tax base would help balance the state budget under a measure heard Feb. 4 by the Revenue Committee.
Glenvil Sen. Dave Murman, who sponsored LB1244 at the request of Gov. Jim Pillen, said the bill would tax discretionary services in an effort to modernize the state’s tax system and reduce its reliance on property taxes.
“Nebraska has a tax code where some businesses are taxed [and] others are not,” he said, “and sometimes there doesn’t seem to be much of a rhyme or reason why.”
The bill would eliminate state sales and use tax exemptions on motor vehicle repair, dry cleaning and pet-related services, among others.
It also would impose taxes on the gross income received from dozens of currently untaxed services, including:
• providing chartered flights;
• financial reporting services;
• fishing and hunting guide services;
• interior design and decorating services;
• investment advising services;
• mainframe computer access and processing services;
• personal instruction services for dance, golf or tennis;
• public relations and management consulting services;
• real estate management fees; and
• wedding planning services.
Nail care, skin care, tattoo and body modification and weight loss services also would be taxed unless they are part of a course of medical treatment and provided by a licensed health care practitioner.
LB1244 also would eliminate tax exemptions on sales of currency and bullion, net wrap used in commercial agriculture, molds and dies used in manufacturing and zoo admissions.
Additionally, the bill would impose state sales and use tax on the gross receipts from the operation of mechanical amusement devices and authorize local option sales and use taxes on those devices.
Under the proposal, no new applications could be filed under the Nebraska Job Creation and Mainstreet Revitalization Act after June 30. The act provides tax credits for expenses incurred for improvements to qualifying historically significant real property.
The state Department of Revenue estimates that LB1244 would increase state general fund revenue by $86 million in fiscal year 2026-27 and $132 million in FY2027-28.
State budget administrator Neil Sullivan testified in support of the bill, saying it is part of the governor’s strategy to balance the state budget. Pillen believes lawmakers should use any remaining revenue to provide additional property tax relief to Nebraskans, Sullivan added.
Testifying in opposition to the bill was Kelli Bello of Joslyn Castle and Gardens in Omaha. She said nonprofits use the Nebraska Job Creation and Mainstreet Revitalization Act to bridge funding gaps when restoring and maintaining historic buildings around the state.
“Beyond saving structures,” Bello said, “these preservation projects create skilled local jobs, support small contractors and tradespeople and stimulate our neighborhoods.”
Tara Holterhaus testified in opposition to LB1244 on behalf of the Apartment Association of Nebraska and the Nebraska Association of Commercial Property Owners. By taxing real estate management fees, she said, LB1244 would result in higher rents for Nebraska tenants.
“For one-third of Nebraska households,” Holterhaus said, “this bill increases the cost of housing in an already tough market for low- to middle-income households.”
Kelsie Shriver, a Lincoln tattoo artist, also testified in opposition. She said LB1244 would harm small businesses and penalize Nebraskans who seek out body art to help them recover from surgery or cope with mental health challenges.
“Tattoos, whether they’re performed in a licensed health care facility or licensed body art facility, are helping people every day to erase both visible and emotional scars,” Shriver said. “The setting in which we work does not determine the benefits.”
The committee took no immediate action on the bill.
