Nebraska Sales and Use Tax Guide for Retailers, Marketplaces & Digital Sellers

Sales and Use Tax Basics in Nebraska

Sales Tax

Sales tax applies to all sales, leases, rentals, installations, applications, repairs, or maintenance of tangible personal property, that is, tangible goods. Additionally, transactions relating to the provision or installation of utility services, intellectual or entertainment properties, the sale of admissions, renting or furnishing accommodations or lodging for periods of less than 30 days, and the sale or provision of certain enumerated services are all subject to sales tax.

Use Tax

When a retailer fails to collect and remit the statewide or local sales tax, the use tax applies as a complementary tax. Under Nebraska sales and use tax legislation, the buyer is liable to remit use tax directly to the state if the seller fails to collect and remit the sales tax.

Use tax applies to transactions involving goods purchased by mail order, telephone, over the Internet, or otherwise in Nebraska without payment of Nebraska or local sales tax, as well as goods bought from an out-of-state seller and delivered directly to the consumer's address in Nebraska without having previously paid sales tax.

Additional cases where use tax applies include transactions involving products purchased tax-free for resale that are later used for personal or business purposes.

Nebraska Sales and Use Tax Rates

Nebraska has a statewide sales and use tax rate of 5.5%, and local sales and use tax rates range from 0.5% to 2%. Local sales and use tax rates commonly refer to city or village tax rates. However, Nebraska's legislation also allows counties to impose local taxes. 

Therefore, Dakota County imposed a 0.5%. Nevertheless, this rate only applies with the state rate on sales when the location is outside a village or city that imposes a local sales and use tax rate.

Tax-Exempt Transactions

Under Nebraska legislation, there is no single list of transactions, goods, entities, or uses that are exempt from sales and use taxes. Instead, each transaction must be individually analyzed to determine if a tax exemption applies.

However, the Nebraska Department of Revenue provided a list of most exemptions, along with separate regulations that define, explain, and describe the limitations on these exemptions. Therefore, there are four exemptions: an entity-based exemption for the seller, an entity-based exemption for buyers, a product-based exemption, and a use-based exemption.

Regarding consumer goods and services, tax-exempt transactions include sales of food for human consumption, except for prepared food and food sold through vending machines, admissions charged by non-profit organizations, assistance in purchasing a motor vehicle for the disabled, newspapers, and repair work performed on any item whose sale is not subject to sales tax.

Nexus Rules in Nebraska

In addition to sales and use tax rules for taxable persons physically present in Nebraska, that is, those established physical nexus, taxable persons may be liable for sales and use tax if they establish economic or marketplace nexus.

Physical Nexus

Taxable persons that maintain, occupy, or use, permanently or temporarily, any office space, warehouse, storage, or sample room in Nebraska have a physical presence there, meaning they established a physical nexus.

Furthermore, if taxable persons do not have any real estate property in Nebraska but have a representative, agent, or salesperson who sells, delivers, or takes orders on their behalf, they are also considered to have a physical presence there.

Economic Nexus

Following the Wayfair ruling, Nebraska introduced an economic nexus requirement for taxable persons without physical presence, but who are selling tangible goods and taxable services to in-state consumers. Therefore, since 2019, if a remote or out-of-state seller makes more than USD 100,000 in retail sales, or has 200 or more Nebraska sales transactions in a previous or current calendar year, they must register for, collect, and remit Nebraska state and local sales taxes. The USD 100,000 threshold includes total Nebraska sales, except resales, subleases, or subrents.

Marketplace Nexus

The marketplace nexus applies to marketplace facilitators, defined as retailers for sales and use tax purposes in Nebraska legislation. Marketplace facilitators are persons who operate the multivendor marketplace platform (MMP). Therefore, if an MMP facilitates or makes sales exceeding USD 100,000 or 200 or more separate transactions, it must register for sales tax in Nebraska.

Taxable Goods and Services in Nebraska

Unless listed as exempt, any sales, leases, or rentals of tangible goods are subject to sales and use tax. Additionally, clothes sales are listed as taxable sales. Regarding the services, they are typically exempt from sales and use tax. 

However, several services are listed as taxable, including pest control services performed before, during, or after construction, the clean-up of a building under construction, towing services, detective services, the restoration and refinishing of tangible goods such as appliances, furniture, and musical instruments, and gunsmith services.

Nevertheless, taxable persons should analyze all the aspects of the service provided to determine whether it is taxable or not. For example, although pest control services are taxable, pest control applications for crops or land used in commercial agriculture are exempt from sales tax.

Bundled Transactions and the True Object Test

Bundled transactions involve the retail sale of two or more distinct and identifiable products sold for a single price. In other words, all products are sold at a single price, rather than being itemized and charged separately. Under the Nebraska rules for bundled transactions, the transaction is taxable if one or more products included in it are taxable.

Some transactions may include tangible goods and services, leading to the conclusion that they are bundled transactions. However, such transactions might not be treated as bundled if specific conditions are met. For example, if the primary reason for acquiring a tangible good is to utilize the service, such a sale is not considered bundled. Similarly, if transactions consist of two services, one of which is merely a supporting service to the other, and the second is the main service or the true object, such a transaction is not considered bundled.

Additionally, if a transaction includes both taxable and non-taxable tangible goods, and the taxable portion of the transaction is 10% or less of the total cost or price, then the transaction is not considered bundled.

Sellers that have bundled transactions that include telecommunications services, ancillary services, internet access, or audio or video programming services, that have both taxable and non-taxable elements, can separate the value of the non-taxable items in their records. Those sellers can charge, collect, and remit tax on taxable products.

In contrast, if sellers cannot clearly and accurately calculate and record the portion of the price that is for non-taxable products, they must charge, collect, and remit tax on the entire price of the bundled transaction.

E-Commerce Framework

Individuals and businesses that offer and sell tangible goods and taxable services to Nebraska consumers remotely and are not physically present in the state are required to register for, collect, and remit sales tax if they made more than USD 100,000 in retail sales or had 200 or more sales transactions in Nebraska in the current or previous calendar year.

However, it is necessary to differentiate between remote or out-of-state sellers who sell their goods and services directly through their own websites or other similar means, and those who sell through marketplace facilitators or MMPs.

Marketplace Rules

Sellers that make sales through the MMPs are known as marketplace sellers. The same threshold rules apply to e-commerce sellers as to those operating on marketplaces. If they exceed the threshold by making more than USD 100,000 in sales through an MMP or have 200 or more sales transactions in a current or previous calendar year, they must register for sales tax purposes in Nebraska.

Digital Goods and Services

Digital goods or products, such as digital music, movies, music videos, TV shows, or similar content, and e-books are subject to sales and use tax. Additionally, sales of digital codes that provide buyers the right to obtain digital music, movies, or e-books are subject to sales tax.

Furthermore, canned or prewritten software is subject to sales tax, regardless of how it is delivered, whether on a tangible medium or downloaded. Additionally, customs software, including enhancements, changes, or modifications to existing software, is subject to taxation. On the other hand, Software-as-a-Service (SaaS) is exempt from sales and use tax.

Digital Marketplace

Marketplace facilitators have been subject to sales and use tax rules since 2019, when Nebraska introduced specially developed regulations affected by the 2018 Wayfair ruling. Moreover, Nebraska's rules equalize the tax position of marketplaces with that of sellers. 

Digital Platform Operator

Firstly, individuals or businesses must meet specific requirements to be treated as marketplace facilitators or MMPs. For example, a payment processor appointed by a retailer to solely process the payment between the retailer and the customer is not considered a retailer. Therefore, marketplace facilitators operate websites or services where consumers can purchase goods or services from various sellers.

If marketplace facilitators exceed the marketplace nexus threshold during a current or previous calendar year, they are required to register for sales and use tax, collect, and remit taxes on behalf of marketplace sellers.

Unlike some other US states, in Nebraska, marketplace facilitators do not need to provide certification that they will collect and remit tax on behalf of the marketplace seller. Additionally, although marketplace facilitators are required to file sales returns for any sales they facilitate, they are not required to file a separate return for each marketplace seller.

Filing and Payment Requirements in Nebraska

Upon completing the registration process, the Nebraska Department of Revenue determines the frequency of tax return filing and payment, which can be monthly, quarterly, or annual. Generally, high-income taxpayers are required to file and pay their taxes more frequently than lower-income individuals or businesses. 

Therefore, annual tax returns and payments are required if the annual tax liability is under USD 900. Taxable persons whose annual tax liability is between USD 900 and USD 3,000 must file tax returns and pay due taxes quarterly. Monthly returns and payments are mandatory for taxable persons with an annual tax liability of USD 3,000 or more.

Penalties for Non-Compliance with Sales and Use Tax Requirements

Taxable persons who fail to submit a tax return or remit due tax on time will face a penalty of 10% of the unpaid tax, or USD 25, whichever is higher. However, if the failure to report or pay tax results from fraud or tax evasion, a penalty of 25% of the amount underreported or USD 50, whichever is higher, may be imposed.