New bill aims to lower Nebraska sales tax rate by taxing services

Published: Jan. 13, 2020 at 10:26 PM CST
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67 percent of Nebraska's economy is service-based, according to the Platte Institute, but most of those industries aren't taxed. One senator wants to change that.

Right now the state consumes about $77 billion in goods and services each year. Albion Senator Tom Briese says he wants to lower the state sales tax rate to 4 percent or even lower but that would include previously excluded services.

Elisha Andersen and her husband opened The Tattoo Shop on 27th street six years ago. A service-based industry that is currently sales tax exempt in the state of Nebraska.

"That helps us keep our rates low and competitive for other people," said Andersen.

If LB 946 were to pass it would add sales tax to her business along with hundreds of others ranging from HVAC to car repairs to salon visits.

"It would force us to increase our rates because we would have to pay for the taxes somehow and that would be passed along to the consumer," said Andersen.

Right now sales and use taxes make up about 35 percent of the state's budget.

Senator Tom Briese says a changing Nebraska economy means the state's sales tax system needs an update as well.

"Currently our economy is about two-thirds service based and this bill will help reflect that structural change to our economy," said Briese.

If the bill were to pass as is Nebraska would have to second lowest sales tax rate in the country in states that have sales taxes.

"I just feel that there are other items that we could look at to bring into the community to tax to increase revenue other than just going after people who have put labor dollars into this," said Andersen.

This bill unlike other sales tax bills previously introduced in the legislature would not go toward property tax relief.

Senator Briese says that the Revenue Committee is working on a way to address that separately.

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