The Nebraska Department of Revenue has amended, issued, and revoked several sales and use tax regulations in order to conform to the Streamlined Sales and Use Tax Agreement and to reflect changes in recently enacted legislation.
Retailers and Sellers
The regulation on retailers and sellers has been amended to reflect that a distributor may enter into an agreement with the department to collect sales tax for its representatives. The distributor will collect and remit tax at the rate imposed at the delivery location of a sale. Under such an agreement, individual representatives need not hold their own sales tax permits.
The definition of “retailer” has been amended to include those providing certain specified services and digital audio works, digital audiovisual works, digital books, and digital codes.
The regulation on the taxability of contractors has been amended to reflect that contractors are required to select a taxability option via an application on the Department of Labor website. Previously, contractors made this election by completing and returning a Form 16 to the Department of Revenue. The Department of Labor website must also be used to change the contractor option. Prior to engaging in work in Nebraska, a contractor must be registered with the Contractor Registration Database.
Option 1, Option 2, and Option 3 contractors that fabricate or repair building materials that they subsequently annex to real property will not collect sales tax on labor charges so long as the charges are stated separately. Option 1 contractors may purchase for resale fabrication or repair labor performed by another person on building materials that the Option 1 contractor will annex to real estate. When another person performs fabrication or repair labor on building materials, the Option 1 contractor will collect tax on the total charged to the customer for building materials, including labor charges, annexed to real property by the Option 1 contractor.
Option 2 contractors must pay sales or use tax on fabrication or repair labor performed by another person on building materials the Option 2 contractor annexes to real estate. Option 3 contractors must pay use tax directly to the department on fabrication or repair labor performed by another person on building materials annexed by the Option 3 contractor.
Option 3 contractors are not required to remit use tax on building materials withdrawn from inventory to be annexed to real estate in another state if the seller of the materials is not licensed for sales tax collection in Nebraska or is not “engaged in business” in the state. Option 2 contractors may obtain a refund or credit for use tax paid on building materials withdrawn from inventory to be annexed to property in another state so long as the seller is not licensed to collect Nebraska sales tax or is not “engaged in business” in Nebraska.
Regulations relating to nonresident contractors have been repealed. Nonresident contractors are no longer required to file a bond with the Department of Revenue.
Manufacturing Machinery and Equipment
The definition of “manufacturer” is amended to include persons who derive more of their total annual revenues from 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. A manufacturer is not one who derives more of its total annual revenues from sales of annexed property, sales of services, intangible property, retail sales, generating electricity, producing or transmitting information, programming, or data, providing food or drink, purifying or transporting water, mining or quarrying, or engaging in any other business, than from manufacturing.
Manufacturing machinery and equipment qualifying for exemption include the following:
— chemicals, solutions, or catalysts when utilized in a mold or die process;
— computers, software, and related equipment used to guide, control, operate, or measure the manufacturing process;
— machinery and equipment used to maintain the integrity of the product or to maintain the unique environmental conditions necessary for the product or the equipment;
— machinery and equipment used to produce steam, electricity, or chemical catalysts and solutions that are essential to the manufacturing process even if the produced items are consumed during the process, but does not include the chemical catalysts and solutions themselves;
— machinery and equipment used to produce, fabricate, assemble, process, finish, refine, or package tangible personal property for sale;
— machinery and equipment used to transport, handle, or store raw materials or components used in manufacturing, or the products produced for sale (not including containers used to transport products to customers);
— materials and parts purchased by the manufacturer to construct its own machinery and equipment or its own molds and dies;
— molds and dies used to determine the physical characteristics of the finished product or packaging material;
— testing equipment to measure the quality of the finished product; and
— tools powered by sources other than human effort.
A person who does not qualify as a manufacturer in any year is required to pay tax on purchases of repair parts and labor for manufacturing machinery and equipment made during that year. This remains the case even if the machinery and equipment was exempt at the time of its purchase. An Option 2 or Option 3 contractor is required to pay tax on purchases of repair or replacement parts for the repair of annexed manufacturing machinery and equipment.
A new regulation has been issued regarding the exemption for certain qualified materials used in the manufacture, installation, construction, or repair of qualified community-based energy development (C-BED) projects. A “C-BED” project is defined as a new wind energy project that:
— meets the eligible ownership structure;
— is supported by a resolution adopted by the county in which the project is located or by the tribal council for an Indian Reservation in which the project is to be located; and
— directs at least 33% of the gross power purchase agreement payments to the qualified owners or local community.
A project developer must submit an application along with supporting documentation to the department. If the application is approved, an exemption certificate will be issued.
Motion Picture Film, Videotape, and Programming
The regulation on motion picture film, videotape, and programming is amended to clarify that sales tax applies to digital goods, as well as to the sale or lease of other entertainment properties. Also, sales and use tax does not apply to the sale of digital goods containing copyrighted material for rebroadcast to the general public if the purchaser has a FCC certificate.
Animal Specialty Services
Animal grooming performed by a licensed veterinarian or veterinarian technician in conjunction with medical treatment is not taxable.
Sales of game birds subject to permit and regulation under the Game and Parks Commission are exempt from sales and use tax.
Legal, Medical, and Commercial Documents
Charges for originals or copies of depositions, bills of exceptions, and transcripts prepared and sold by a court reporter are exempt. Sales of copies of medical records to patients or the person named as a patient’s power of attorney for health care are also exempt.
Sales Tax Regulations 1-005, 1-017, 1-045, 1-062, 1-080, 1-102, 1-107, and 1-109, effective June 6, 2011; Regulations 8-001 through 8-006, repeal effective June 6, 2011