Understanding Nebraska Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Nebraska.
The Nebraska sales and use tax rate is 5.5 percent. In addition, make sure you contact your local governments in Nebraska because they are allowed to assess an extra local sales and use tax of 0.5, 1, or 1.5 percent.
This tax is imposed on gross receipts from the following activities:
- retail sales of property
- furnishing, installing, or connecting utilities or community antenna television service
- retailers of intellectual or entertainment properties
- admission tickets
- warranties or maintenance agreements when the items covered are subject to sales tax
The tax also applies to the renting or furnishing, for periods of less than 30 days, of rooms or accommodations in hotels, motels, etc.
Leases on Tangible Personal Property Are Taxed as Sales
The lease or rental of tangible personal property at retail in Nebraska is subject to sales and use tax. Tax on a conditional sale is due on the full contract price at the time the contract is entered into. An agreement is considered a conditional sale if one or more of the following conditions are present:
- the lease is required to be classified as a capital lease rather than an operating lease under generally accepted accounting principles
- portions of the payments are made specifically applicable to an equity to be acquired by the lessee
- the lease binds the lessee for a fixed term and the lessee is to obtain title at the end of the term upon completion of the payments or has the option to purchase the property for the lesser of $100 or 1 percent of the total contract price
- the total amount that the lessee is required to pay for a relatively short period of use constitutes an inordinately large proportion of the total sum required to be paid to secure the transfer of title
- the agreed periodic payments materially exceed the current fair rental value
- some portion of the payments is specifically designated as interest or is otherwise readily recognizable as the equivalent of interest
Tax Imposed on Buyer, Collected and Paid by Seller
In Nebraska the sales tax is imposed on the consumer although the retailer is required to collect the tax. The sales tax required to be collected is a debt owed by the retailer to the state.
Absorbing the tax is prohibited. It is against the law in Nebraska to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Tax Permit Is Required
In Nebraska any person conducting business as a seller must apply for a permit for each place of business. An application for a permit is made on the form prescribed by the Nebraska Commissioner, and there is a $10 fee. A permit is not assignable and is valid only for the person in whose name it is issued and only for transacting business at the designated place.
Many Sales May Not Be Taxable
Nebraska has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Nebraska sales tax. You'll want to check and see if you are exempt from the sales tax.
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Sale of Property For Resale Is Not Taxed
In Nebraska the sale of tangible personal property for the purpose of resale is not subject to tax. Sales are considered made for resale when you give the seller a resale certificate.
Requirements for resale exemption certificates. The Department of Revenue recognizes only the Nebraska resale certificate, Form 13, or a previously approved substitute, such as the multijurisdictional Uniform Sales and Use Tax Certificate of the Multistate Tax Commission. The exemption certificate must be presented in good faith and include the following information:
- the identity of the purchaser and seller;
- a statement of the basis for exemption;
- a statement showing whether the certificate is for a single purchase or is a blanket certificate for future sales;
- an authorized signature on behalf of the purchaser; and
- the date of issuance.
Blanket resale certificates
Sellers may accept blanket certificates from a purchasers who repeatedly purchase the same type of property for resale. However, sellers take at their own risk a blanket certificate. The blanket certificate covers future sales for no longer than three years from the date of issuance.
Physical Presence Triggers Tax Liability
Nebraska has a statute that specifically taxes out-of-state mail order and catalog sellers. However, you will be responsible for paying this tax only if you have physical presence within Nebraska. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Nebraska? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Nebraska for purposes of taking and transmitting orders from Nebraska? If your employee or independent contractor goes into Nebraska to take or transmit orders, your business may have physical presence in Nebraska. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Nebraska for purposes of delivering property? Frequent deliveries in Nebraska by your trucks will give you physical presence in Nebraska.
Nebraska Provides for a Sales Tax Bracket System
The bracket system may be followed by sellers in computing the sales tax. Assuming a combined state and local rate of 5.5 percent, the tax is computed on each dollar and/or fraction of a dollar according to the following table:
|Amount of Sale ||Tax |
|$0.00 to $0.09 ||no tax |
|0.10 to 0.27 ||$0.01 |
|0.28 to 0.45 ||0.02 |
|0.46 to 0.63 ||0.03 |
|0.64 to 0.81 ||0.04 |
|0.82 to 0.99 ||0.05 |
|1.00 to 1.18 ||0.06 |
|and so forth |
Excess Payments Can Be Claimed as Deduction orRefunded
The sales price of property returned by your customers may be deducted from gross receipts if the full sales price is refunded. You take the deduction on the return for the period in which the refund was made. A refund claim must be filed on a form prescribed by the Commissioner within three years from which the overpayment was made.
Nebraska Imposes Use Tax on Out-of-State Purchases
The use tax complements the sales tax and is imposed on the storage, use, or other consumption in Nebraska of tangible personal property. The use tax is imposed when the property is purchased, leased, or rented from any retailer and on any transaction subject to sales tax when the sales tax has not been paid. In Nebraska property brought into the state on which a sales or use tax has been paid in another state equal to or in excess of the Nebraska tax is not subject to tax in Nebraska.