State Sen. Beau Ballard of Lincoln accused city officials Wednesday of improperly taxing residents outside city limits and pledged to seek legislation to force refunds to taxpayers. Ballard, one of 10 state senators whose districts include part of Lincoln, announced his office had received evidence from constituents that the City of Lincoln has been assessing its 1.75% sales tax on residents outside city limits within the surrounding 3-mile extraterritorial jurisdiction.
Lincoln city officials argue that the allegation has no merit and that it’s the Nebraska Department of Revenue that is in charge of overseeing, collecting and returning sales tax revenue to cities. Ballard is calling on the city to audit its books and refund every dollar he says was improperly collected. He said he’ll push 2027 legislation to force the refunds, plus interest, either way. His idea would also force the city to conduct a 20-year lookback and return any such tax dollars.
“Families in the ETJ don’t get to vote in city elections, but we now have evidence from constituents that the city has been collecting city sales and occupation taxes from residents of the ETJ,” Ballard said in a statement. Ballard’s northwest Lancaster County Legislative District 21 includes part of Lincoln and its ETJ.
City of Lincoln spokesperson Garret Swanson said city officials don’t receive or retain the business tax returns necessary for the audit Ballard proposes, unlike the Revenue Department. “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 said in a statement.
Between January 2006 and July 2026, the Department of Revenue returned $1.72 billion in local sales tax revenue to Lincoln, according to data from the department. In the past year, the city has received $132 million in sales tax revenue, an average of $11 million each month.
Under state law and department regulations, cities can leverage a local sales tax up to 2 cents on top of the statewide 5.5-cent sales tax rate. Anyone who makes a taxable purchase in such a city pays the tax. The state also takes a portion of the local tax for administrative purposes. Retailers must collect sales taxes at the rate at the point of delivery of goods or services, according to a department information guide on state and local sales taxes.
Ballard told the Nebraska Examiner that the evidence he’s seen from constituents is taxes on packages they ordered online or on business services at their home. For example, he cited a constituent ordering a shirt from Old Navy, which might be only a $1.20 tax but is still too much. He said city officials should have looked more at the issue and listened to voters sooner.
“If the city says that they want to point the fingers at the Department of Revenue, that’s fine, I’ll work with the Department of Revenue,” Ballard said. “The real problem is the City of Lincoln has been collecting this tax without any red flags raised.”
