Several testifiers expressed concern about a bill in the Nebraska Legislature that proposed to set a 7.5% sales tax on labor for general automotive and collision repair.
“I was in an accident on a rainy highway in Oklahoma, and completely totaled my car. Thankfully, my brother and I are fine,” Nebraska resident Rachel Gibson said during a July 30 hearing of the legislature’s Revenue Committee on broad tax legislation being considered during a special session of the legislature. “I realized with this bill, just the repairs on our car would be $600. It’s a lot.”
It appears the testimony of Gibson and others may have worked.
The office of Committee Chairwoman Sen. Lou Ann Linehan told Autobody News in an email Aug. 8 that legislators adopted an amendment that would protect the current Nebraska sales tax exemption for collision repair labor. The last publicly posted version of the legislation, introduced July 25, would have removed a current carveout of collision repair labor from the state’s sales tax.
Automotive parts, painting, washing and installation of accessories or equipment were already taxable in Nebraska.
During the hearing, Linehan asked Gibson whether she was aware the tax package would roughly halve the property taxes on her used Subaru. Gibson acknowledged this, and noted her insurance would pay “some” of the repair total. Yet she added that taxes on collision repair come more unexpectedly than property taxes, which are paid on a yearly basis.
With property taxes, “we could’ve budgeted,” Gibson said. “I can think back to when [my spouse and I] were newly married, and one of us worked to make $30,000, and had a kid. We wouldn’t be able to adjust to $600 in car repairs when we were paying rent and not owning a home.”
In a letter to the committee, Lincoln attorney Korby Gilbertson reportedly pointed to an October 2023 S&P Global Market Intelligence analysis that indicated significant recent net underwriting losses for U.S. auto insurers, partly due to inflation and a return to more normal levels of driving in the post-COVID years.
Linehan and Revenue Committee Vice Chair Sen. Brad von Gillern read aloud the letter from Gilbertson, who was not present, as an Americans with Disabilities Act accommodation.
“Consumers are already facing increased rates for a myriad of reasons, including higher risk of natural catastrophes, economic inflation, climate change, legal system abuse and coverage mandates,” von Gillern quoted from the letter. The legislation “stands to exacerbate the problem by increasing the cost of claims through the application of a sales tax on real property and motor vehicle repairs.”
Nebraska Broadcasters Association President and Executive Director Jim Timm testified that the bill would even spike routine business expenses for advertisers, including vehicle maintenance and repairs.
Ryan Clark, vice chair of the Nebraska Auto Body Association and vice president of Lincoln-based Eustis Body Shop, told Autobody News on Aug. 6 that his organization was confident the language would be left out of the bill’s final version, which has not been publicly posted as of publication time.
An unofficial summary of the upcoming legislation shared with Autobody News showed more than 60 rows of current tax exemptions that would be lifted. None of those rows included auto repair labor.
