SALES TAX TUESDAY 2018: Nebraska

by

There is an old saying that, “change is in the air…” well, that certainly is true when it comes to Nebraska. Nebraska is so big, there is plenty of room for change. Nebraska has nearly 2-million residents spread out over 77,000 square miles. While it's state capital is Lincoln, its largest city is Omaha, which is on the Missouri River, which separates it from the State of Iowa to the east.

Having spent our last week (feature wise) in South Dakota, and specifically the western 'bad lands,' we are traversing Nebraska this week in our 'Sales Tax RV' from the northwest to the southeast. So many of our sights are in the great plains of Nebraska. This route gives us great opportunity to see the changes over both geography, season and history because the plains are to a great extent just as they were during the western migration of pioneers in the 1800's.

And speaking of ‘change,’ you know that stuff that rattles around in your pocket, or the bottom of your purse? Since a dollar-bill had to be broken into change since the sales tax was over and above the purchase price… then we have made our way to the topic of the day, ‘Sales Tax’. After all, this is a 'Sales Tax Series' even if it seems more like a travel-log at times.

That means it's time to acknowledge that this is one in a series of articles covering sales tax issues associated with each and every state tax jurisdiction in the United States. Insightful Accountant teamed up once again with Avalara, the 'tax people' to bring you not only a state-by-state summary of sales tax facts, but to also explore breaking news features related to sales tax as we travel our way across the USA. But as much as we would like to focus on sales tax, we must get back to our travels.

When most people hear the term ‘rock hunting’ they think of digging around in the dirt or up a gentle slope for some particularly interesting, and maybe even valuable, rocks. I know back in my Scouting days when I was working toward my ‘Geology merit badge’ I had to go rock hunting several times to find examples of all the rocks I needed to earn my badge.

But things are a bit bigger in Nebraska, you don’t have to do any digging to go rock hunting there because ‘big rocks’ abound, and I do mean ‘big.’ Take for example, ‘Chimney Rock.’

Chimney Rock was most likely named by fur traders in the 1800’s, and later it would become one of the most recognizable landmarks for pioneers migrating west along the Oregon, California and Mormon trails. It is a 480-foot tall natural geologic formation dating back millions of years that eroded over time at the edge of the North Platte Valley.

Today, Chimney Rock is a national monument under the conservatorship of the National Park Service. It’s located near the town of Bayard, Nebraska. The visitor center provides educational exhibits and materials along with media presentations about life ‘along the trail’ during the westward migration.

But Chimney Rock isn’t the only ‘great rock’ by which to mark our trail while exploring Nebraska, you will surely want to also take in both ‘Courthouse Rock’ and ‘Jail Rock’ both of which are located just south of Bridgeport, Nebraska. These giants are erosional remnants of the ancient plateau that once bisected the North Platte River. They each rise more than 240 feet into the sky.

Like Chimney Rock, these natural geological markers were important in the westward migration of pioneers seeking a life beyond the Rocky Mountains. In fact, these two mammoths served as a crossroads of the Oregon and California Overland trails.

While today all three of these rocks are easily accessible by the nearby roads, they are still surrounded by the vast Nebraska landscape. When you are standing in the prairie grass and first see these natural obelisks in the distance, and then slowly approach them on foot, you can almost feel what it must have been like to be walking along side your family’s covered wagon in the trek toward a future only yet imagined.

As we begin our trek east we come to ‘Ogallala.’ You might remember in the Lonesome Dove story, Texas Ranger Augustus McCray was “bound for Ogallala” to see his long-lost-love Claire. It’s a bit updated from the early days that story depicted, but it still lays fame to its days gone by with a recreated western town. Worth a stop to take in a ‘sarsaparilla’ at the Crystal Palace Saloon. Just one big difference… we now have to pay ‘sales tax’ for our sarsaparilla unlike the days of old.

But we started this article on the topic of ‘change,’ and our next Nebraska sight is about as big a change from the grassy plains and monumental rocks as you can get because we have made it all the way to Omaha on the eastern border of the state.  While we are here, we are stopping for a visit at one of my favorite stopping off places anywhere I go, ‘the zoo.’ But this is not just any old zoo, I’m talking about the Henry Doorley Zoo. One reason this zoo is so special is that it is constantly changing with new zooscapes, exhibits, and wildlife (some much more wild, than others).

At this zoo we can find ourselves deep in a tropical rainforest, made better by virtue of the fact that it is totally indoors. In fact, it is the world’s largest indoor rainforest. But if that weren’t enough, we can transition into an arid desert (“I’m talking about the kind with sand, not the kind with whip-cream on top… I never understood why the two were spelled the same.”)

You will experience the waterfalls and high humidity of the rain forest along with tropical animals like you have never seen them before. Then transition into the desert dome as various sectors depict dry areas from around the world each with their own native wildlife. You won’t want to mis this Nebraska treasure. By the way, Nebraska does change sales tax on all ‘admissions’ so you will be forking over some of ‘that change’ to pay the tax collector when you buy your ticket.

And speaking of Omaha, we might as well try to find ourselves one of the ‘favorite son sandwiches’ of the state… a ‘Reuben.’ You know, toasted rye bread spread with Russian dressing, then piled high with corned beef, Swiss cheese and sauerkraut. I know what you are thinking, “why would a Reuben sandwich be the ‘favorite son sandwich’ of Nebraska, wasn’t it first made somewhere in New York or someplace like that?” Well, the Reuben was actually created right here in Omaha, Nebraska at the Blackstone Hotel when Bernard Schimmel made a sandwich for a poker player by the name of Reuben Kulakofsky. From that day forward the upscale version of a ‘corned beef on rye’ sandwich was known as a ‘Reuben.’

You didn’t really think that I was going to write a Sales Tax Tuesday article without having some food in it, did you?  You guessed right…and also that my Reuben is not without sales tax obligation. Someone might think that the Department of Revenue might ‘exempt’ the state’s ‘favorite son sandwich’… NOT!

But while we are spending time in Omaha we really should take the opportunity to get back to some of our ‘western heritage’ which we opened with in looking at a few big rocks. The Durham Western Heritage Museum is dedicated to telling the history of the western United States. Within the renovated Union Station that today looks the way it did during the golden age of the railroads, we will be taken back to yesteryear through a series of exhibits covering the history, culture, science and industry of America’s west. We will see the transition of this country in ways that only this museum has shown it.

Among the many exhibits you can see how Omaha itself grew from a prairie town into a thriving metropolis while maintaining a strong sense of community. More than 100 years of community history are represented in the exhibit from a replica of an old country store, to the first streetcar, from rawhide tepees to the St. Cecilia’s Cathedral. You can even hear the story of the very first ‘Bekins Moving’ truck and the start of one of Nebraska’s great companies that changed the way that people move from one place to another. And if you happen to be there ‘over the holidays’ then the experience is better than ever with their holiday cultural festival and concerts. And once again, thanks to the NDOR you will be paying sales tax as part of your admission fee.

Speaking of the NDOR, that's the Nebraska Department of Revenue, also know as the 'Nebraska Sales Tax Collector,' we had better turn our attention to the subject of Nebraska Sales Tax because it doesn't get much more strict or complex than this. Usually I am telling you that 'Sales tax provides critical revenue for states as well as many counties and cities.' Well, that's all to true when it comes to Nebraska (state) and cities... sorry counties you don't get a sales tax option in Nebraska. It seems when it comes to Nebraska there is only one question to ask..."What's not subject to sales tax" and the answer is... not much.

Retailers in Nebraska must collect sales tax on the gross receipts from retail sales unless a specific exemption applies. Gross receipts are the total amount of the sale, lease, or rental price without deduction for the cost of the property sold, labor or service costs, interest paid, or any other expense, and do not include any cash discounts, trade-in allowances, or finance charges imposed by the retailer.

Use tax is a complement to the Nebraska sales tax. It is imposed on the storage, use, distribution, or consumption of tangible personal property and most services purchased by the end user when Nebraska sales tax has not been paid.

  • The Nebraska state sales and use tax rate is 5.5%. In addition, local sales and use taxes can be set at 0.5%, 1%, 1.5%, 1.75%, or 2%.
  • The point of delivery determines the location of the sale. The sales tax rate is calculated at the rate in effect at that location. Deliveries into a Nebraska city that imposes a local option sales tax are taxed at the state rate (5.5%), plus the applicable local rate. Deliveries into another state are not subject to Nebraska sales tax.
  • Sales of food or food ingredients which are generally for home preparation and consumption are not taxable. Food which may be purchased exempt from sales tax includes cereals, eggs, fruits, meats, vegetables, milk, cooking oils, sugar, canned or bottled soft drinks, bottled water, and candy.
  • Prepared foods such as restaurant meals, fountain drinks, and ice cream sundaes are taxable. Food sales in vending machines, and by caterers are taxable.
  • Services are generally taxed at the location where the service is provided to the customer. Utility services are taxed where the meter is located.
  • Except for separately stated charges for U.S. postage on direct mail, all charges for delivery, freight, postage, shipping, handling, and other service charges for transportation of the item purchased are taxable whenever the item purchased is taxable and the charges are paid to the retailer of the item.
  • Many different services and labor charges are taxable. NDOR's "Frequently Asked Questions About Nebraska Sales and Use Tax on Certain Services," and their "Nebraska and Local Sales Tax" information guide should be committed to memory if you are trying 'do it yourself' sales tax in Nebraska.
  • Charges for 'production and assembly labor' are taxable. Charges for repair and installation labor are taxable when the property being repaired, replaced, or installed is taxable. NDOR has another guide covering Sales and Use Tax Regulation 1-082, Labor Charges.
  • As an agricultural state you might be wondering about labor charges to repair agricultural equipment as well as 'oil and gas' equipment (another big area of revenue production) within Nebraska, well the NDOR has two guides covering the details of what is and what is not "Agricultural Machinery & Equipment" and "Well Drilling and Irrigation Industry."
  • Labor charges to install new or upgraded component parts or accessories are taxable and outlined in the NDOR guide: "If you install or apply tangible personal property."
  • Labor charges to install new or upgraded component parts or accessories on a motor vehicle are taxable.
  • Charges for 'consultants who only provide generalized advice' and who do not provide software or updates or modifications to software are sales tax exempt. Charges for services by a consultant that result in a transfer of software, whether canned or custom, are subject to sales tax including charges for programming, program development, systems analysis, software customization and modification, upgrading of software programs, and charges for installation.
  • Even 'training charges' are taxable whenever paid to the seller of the software. Automatic or mandatory telephone support services that come with the transfer of software are taxable. The optional purchase of telephone support services which are separately stated are not taxable.

And that brings me to one more sales tax fact, when it 'comes to change' it abounds in terms of sales tax within Nebraska. There have been no less than 31 sales tax changes involving City boundaries that impact sales and use taxes during 2018, and on January 1st (2019) there are another 15 sales tax changes going into effect. How is a person to even keep up with all the rules, regulations and changes on top of changes?

While I would normally tell you it's easy to be lured into a false sense of compliance when it comes to sales tax in most places, that would be totally stupid of me to say in regard to Nebraska. How could anyway even think they were compliant on their own?  With an army of 'tax collectors' writing new regulations, guide books, bringing about change after change in what is and what isn't covered, what's exempt and what's not, what's in which jurisdiction today, and some other jurisdiction tomorrow, why risk it at all?

Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via AvaTax allows businesses to be fully sales tax compliant without sacrificing productivity. With Avalara you won't be wasting your time with checking which sales tax changes apply to you today, or letting sales tax compliance consume your valuable time that should be spent on building your business and servicing your customers.  You will have confidence in knowing that your sales tax is done right, and that Avalara is on your side should the Nebraska DOR come knocking on your door for any old reason at all.