Senator Beau Ballard, District 21. January 3, 2023. Photo by Craig Chandler / University Communication.
Nebraska State Sen. Beau Ballard says some residents outside Lincoln’s city limits have been charged city sales tax on purchases delivered to their homes, and he plans to introduce legislation requiring a review of collections and refunds for improperly paid taxes.
In an October 7 news release, Ballard said his office had received evidence from constituents in Lincoln’s extraterritorial jurisdiction, or ETJ. The area is outside city limits but subject to certain city planning and zoning authority.
Ballard said in an interview that his office examined receipts after hearing arguments during an earlier legislative debate that ETJ residents were not taxed the same way as people living inside Lincoln.
He said the concern involves items received by mail or shipped, with Lincoln’s 1.75% city sales tax added to the purchase price. The supplied release and interview did not include copies of the receipts or identify individual transactions.
“We don’t yet know how long this has been going on or how much has been collected, but we believe the amount likely is substantial,” Ballard said in the release. “And if the City had no legal authority to take it, even one dollar is too much.”
In the interview, Ballard said the amount “could be in the millions of dollars.” He did not provide a calculation supporting that estimate.
The allegation of improper collections and the potential total have not been independently verified for this report. A city response is not included in the materials reviewed, and KLIN News has reached out to the City and has not heard back as of this posting.
Ballard said he is drafting a bill for the 2027 legislative session that would require at least a 20-year review of collections and full refunds to ETJ taxpayers for improperly collected taxes. His proposal would also require interest on refunds, quarterly reconciliation to identify future errors, and enforcement authority for the Nebraska attorney general.
He is also considering a penalty payable to the state’s General Fund if the city delays establishing a compliant system. The requirements have been announced as a proposal; they are not enacted law.
“The City should open its books, do a full and fast accounting, and send refunds to everyone in the ETJ who paid a tax they never owed,” Ballard said in the release.
Nebraska Department of Revenue guidance says the point of delivery determines the location of a sale and the tax rate that applies. State law generally sources a purchase picked up at a retailer’s business to that location. When a purchase is delivered elsewhere, it is generally sourced to the location where the purchaser receives it.
That distinction means living outside Lincoln does not, by itself, exempt a shopper from Lincoln sales tax on purchases received at a business inside the city. Ballard’s interview focused on deliveries to addresses outside city limits.
Determining whether a particular purchase was wrongly taxed requires checking the transaction, the delivery location and the applicable tax boundary. The materials supplied do not establish who applied any incorrect tax or how much of that money reached the city.
Ballard said he had spoken briefly with the city’s liaison, but had not discussed the issue with the mayor or City Council at the time of the interview. He said he was willing to work with council members, the mayor’s office and other interested parties to correct the issue.
KLIN News reached out to the City for a response and received this statement from Chief Communications Officer Garret Swanson. “Sales taxes are collected and administered by the Nebraska Department of Revenue, not the City of Lincoln,” Swanson says.
“The City does not receive or retain the business tax returns that would be necessary to conduct the audit described by Senator Ballard today. If a business believes sales tax was collected in error, the Nebraska Department of Revenue has an established process to review the matter and issue a refund when appropriate,” Swanson says.
Ballard represents Legislative District 21, which includes northwest Lincoln and parts of Lancaster County.