Nebraska — Sales & Use Tax

Nebraska imposes a state sales tax on the gross receipts from all retail sales of tangible personal property sold in Nebraska, as well as on certain services including utility services, community antenna television and satellite services, admissions, warranties and service agreements covering taxable property, and certain enumerated services. The tax applies to the transaction itself — the sale, lease, or rental — rather than to the article being sold. "Sale" is defined broadly to include installment sales, conditional sales, credit sales, transfers of title or possession, exchanges, barters, leases, and rentals, whether for cash or other consideration.

The statewide sales tax rate is 5.5 percent as of July 1, 2024, with a reduced rate of 2.75 percent applying to transactions within designated good life districts located in incorporated municipalities. Local jurisdictions may impose additional sales taxes on top of the state rate.

The sales tax is collected by the retailer from the consumer and constitutes a debt owed by the retailer to the state. All gross receipts are presumed subject to tax unless the contrary is established.

Source: Neb. Rev. Stat. § 77-2703; Neb. Rev. Stat. § 77-2701.02; 316 Neb. Admin. Code ch. 1, § 001

Remote sellers without physical presence in Nebraska must register and collect sales tax if they exceed either $100,000 in gross Nebraska retail sales (including sales made through marketplace facilitators) or 200 or more separate retail sales transactions in the previous calendar year or current calendar year. When a remote seller exceeds a threshold for the first time, the seller must obtain a sales tax permit and begin collecting sales tax on or before the first day of the second calendar month after the threshold is exceeded.

Source: Neb. Rev. Stat. § 77-2701.13; Remote Seller and Marketplace Facilitator FAQs, Nebraska Department of Revenue

A multivendor marketplace platform (marketplace facilitator) must register, collect, and remit Nebraska sales tax if it exceeds either $100,000 in total gross revenue from all Nebraska sales made or facilitated or 200 or more separate Nebraska sales transactions in the previous or current calendar year. The marketplace facilitator collects and remits tax on each Nebraska sale it makes directly and on each sale it facilitates for marketplace sellers. Marketplace sellers are relieved of the duty to collect or remit tax on sales facilitated by a registered marketplace facilitator.

Source: Neb. Rev. Stat. § 77-2701.13(3); Notice for Remote Sellers and Marketplace Facilitators, Nebraska Department of Revenue

Nebraska imposes a use tax on the storage, use, or other consumption of tangible personal property and certain services in Nebraska. The use tax applies when the purchaser has not paid Nebraska sales tax on the transaction. The use tax rate matches the sales tax rate—5.5 percent statewide as of July 1, 2024, with a reduced rate of 2.75 percent for transactions in designated good life districts within incorporated municipalities. If a taxpayer pays sales tax on a transaction, the liability for use tax is extinguished. Property sold for delivery in Nebraska is presumed to be for taxable storage, use, or consumption unless the purchaser proves otherwise.

Source: Neb. Rev. Stat. § 77-2703; Neb. Rev. Stat. § 77-2701.02

A purchaser who intends to resell, lease, or rent property in the regular course of business may provide a resale certificate to the seller in lieu of paying sales tax at the time of purchase. Nebraska law shifts the burden of proving that a sale is not a retail sale to the seller unless the seller obtains from the purchaser (i) a resale certificate, (ii) an exemption certificate, or (iii) a direct payment permit. Receipt of a properly completed resale certificate is conclusive proof for the seller that the sale was made for resale and relieves the seller from liability for tax, penalty, and interest.

Form and content

The resale certificate must be on the form and contain the information the Tax Commissioner requires by rule and regulation. Nebraska uses Form 13, titled "Nebraska Resale or Exempt Sale Certificate," for both resale certificates (Section A) and exempt sale certificates (Section B). A properly completed resale certificate must include: (1) identification of the purchaser and seller and the type of business engaged in by the purchaser; (2) the purchaser's sales tax permit number (wholesalers and manufacturers are not required to provide an ID number; out-of-state purchasers may provide their home state sales tax number); (3) signature of an authorized person; and (4) the date.

Blanket certificates

A seller making repeated sales of the same type to the same purchaser is not required to take a separate resale certificate for each individual sale but may, at the seller's own risk, take a blanket certificate covering all such sales made to the same purchaser. A blanket certificate is valid until revoked in writing by the purchaser.

Timing requirements

A retailer is relieved from liability for the tax if a properly completed resale certificate is received prior to, in conjunction with, or within 90 days after the date of the sale. A retailer is also relieved from liability if a properly completed resale certificate is accepted in good faith within 120 days after a request for substantiation made by the Department of Revenue, but only if the retailer has a good faith belief that the purchase is a valid sale for resale.

Withdrawal from resale

If a purchaser who gives a resale certificate makes any use of the property other than retention, demonstration, or display while holding it for sale, lease, or rental in the regular course of business, the use is taxable to the purchaser as of the time when the property is first so used, and the sales price of the property to the purchaser is the measure of the tax.

Penalties for misuse

Any person who gives a resale certificate to the seller for property that the person knows, at the time of purchase, is purchased for the purpose of use rather than for the purpose of resale, lease, or rental in the regular course of business, and each officer of any corporation that so gives a resale certificate, is guilty of a misdemeanor. The Tax Commissioner may also impose a penalty of $100 or ten times the tax, whichever amount is larger, for each instance of presentation and misuse of a resale certificate. For blanket certificates, this penalty applies to each purchase made during the period the blanket certificate is in effect.

Source: Neb. Rev. Stat. § 77-2703(1)(f); Neb. Rev. Stat. § 77-2706; 316 Neb. Admin. Code ch. 1, § 013 (REG-1-013)

Nebraska exempts from sales and use tax the sale, lease, or rental of manufacturing machinery and equipment purchased by a manufacturer for use in manufacturing. The exemption extends to the storage, use, or other consumption of such equipment in Nebraska. This is one of Nebraska's most significant industrial exemptions and requires careful attention to both taxpayer qualification and equipment eligibility.

Manufacturer qualification

A "manufacturer" is a person who is primarily engaged in the business of manufacturing. "Primarily engaged" means that more of the person's total annual revenues are derived from the sales of products they manufacture and sell as tangible personal property (or from production labor performed on products sold as tangible personal property by other manufacturers) than from any other commercial activity. Total annual revenues include revenues from all activities, locations, divisions, departments, or operations of the person, both within and outside Nebraska, including sales of annexed property, tangible personal property, services, or intangibles.

A manufacturer does not include any person who derives more of its total annual revenues from selling annexed property, selling services, selling intangible property, making retail sales, generating electricity, producing or transmitting information, programming or data, providing food or drink service, purifying or transporting water, mining, quarrying, or engaging in any other business than from the business of manufacturing.

Manufacturing defined

"Manufacturing" means an action, or series of actions, performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing. Manufacturing requires a physical change to the tangible personal property; merely increasing the value of a product without a physical change does not constitute manufacturing.

Eligible equipment and property

Manufacturing machinery and equipment includes, but is not limited to:

• Machinery or equipment for use in manufacturing to produce, fabricate, assemble, process, finish, refine, or package tangible personal property
• Machinery or equipment for transporting, conveying, handling, or storing by the manufacturer the raw materials or components to be used in manufacturing or the products produced by the manufacturer
• Molds and dies and the materials necessary to create molds and dies for use in manufacturing that determine the physical characteristics of the finished product or its packaging material, whether permanent or temporary, including any chemicals, solutions, or catalysts utilized in the mold or die process even if consumed during the process
• Repair or replacement parts or accessories purchased for use in maintaining, repairing, or refurbishing machinery and equipment used in manufacturing

Machinery or equipment does not need to come into direct physical contact with any of the raw materials, components, or products that are part of the manufacturing process to be considered manufacturing machinery or equipment.

Statutory exclusions

Manufacturing machinery and equipment does not include:

• Vehicles required to be registered for operation on the roads and highways of Nebraska
• Hand tools (tools held in the hand and powered solely by human effort)
• Office equipment
• Computers, software, and related peripheral equipment not used in guiding, controlling, operating, or measuring the manufacturing process

The 50-percent-use test

When machinery and equipment is used for both manufacturing and for other purposes, the manufacturing use must be more than 50 percent of the total use to qualify for the exemption. A manufacturer claiming an exemption for manufacturing machinery and equipment must maintain records clearly showing that it used the machinery and equipment more than 50 percent of the time in its manufacturing process.

Notably, however, the Nebraska Supreme Court has held that "any amount of use in manufacturing is sufficient to bring machinery or equipment purchased by a 'person' engaged in the business of manufacturing within the definition of manufacturing machinery and equipment" under Neb. Rev. Stat. § 77-2701.47. The regulation imposes the 50-percent test, while case law under the statute itself suggests a lower threshold. Practitioners should note this tension; the Department of Revenue administers the 50-percent standard in REG-1-107.

Ancillary exemptions

Purchases by a manufacturer of installation, repair, or maintenance services performed on exempt manufacturing machinery and equipment are exempt from tax. Purchases by a manufacturer of warranties, guarantees, or maintenance agreements covering exempt manufacturing machinery and equipment are also exempt from tax.

Loss of manufacturer status

Persons who do not qualify as a manufacturer in any year must pay tax on all purchases of manufacturing machinery and equipment, even if the manufacturing machinery and equipment was exempt when it was purchased.

Claiming the exemption

A retailer may make a tax-free sale of manufacturing machinery and equipment when the manufacturer issues the retailer either a properly completed Nebraska exemption certificate (Form 13, Section B, exemption category 5) or another exemption form approved by the Department of Revenue.

Source: Neb. Rev. Stat. § 77-2704.22; Neb. Rev. Stat. § 77-2701.47; 316 Neb. Admin. Code ch. 1, § 107 (REG-1-107)