Sales and Use Tax Reminders

Written by Kiley Wiechman, CPA, Manager

According to the American Institute of CPAs (AICPA), many states are increasing the number and scope of sales and use tax audits in order to increase revenue and close budget gaps. The State of Nebraska is no exception and our firm has recently been seeing an increase in audit activity from the Nebraska Department of Revenue. Because sales tax regulations can be very complex, and affect a wide range of businesses, including non-profit organizations, we would like to remind you of the following most commonly missed items:

  • Internet or catalog purchases
    • If you buy taxable items over the internet and are not charged sales tax, consumer’s use tax is due.
  • Out of state purchases
    • Items purchased tax-free out of state and delivered to a place in Nebraska are subject to consumer’s use tax.
  • Credit card purchases
    • For any purchases made by credit card, it is important to keep the receipt to verify that sales tax has been paid.
  • Inventory
    • Items purchased tax-free for resale that are later taken from inventory for business or personal use are subject to consumer’s use tax. This includes items given away as gifts or donations.
  • Computer consulting services
    • Charges for consultants who only provide generalized advice and who do not provide software or updates or modifications to software are not taxable.
    • Charges for services by a consultant that result in a transfer of software are subject to tax including charges for programming, program development, systems analysis, software customization and modification, upgrading of software programs, and charges for installation.
    • 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.
  • Food/catering services
    • Prepared foods such as restaurant meals and fountain drinks are taxable. Food sales from vending machines and by caterers are taxable.
  • Printing, copying and mailing
    • Printing and copying services are taxable.
    • Mailing lists provided in the form of labels, magnetic media, or disk (in electronic or any other format) are taxable.
  • Non-profit organizations
    • The 501(c) nonprofit status does not automatically mean the organization is exempt from Nebraska sales tax. Very few nonprofit organizations actually qualify for the sales and use tax exemption. Some of the following organizations can qualify for exemption:
      • Organizations created exclusively for religious purposes
      • Organizations providing services exclusively to the blind
      • Certain private educational institutions
      • Certain private colleges or universities
      • Nonprofit hospitals and certain nursing or care facilities
    • The Nebraska Department of Revenue is auditing non-profit organizations as well as for profit businesses.

Businesses should review all invoices received to determine if the appropriate sales tax has been charged. It is the business’ responsibility to pay use tax where sales tax is due but has not been charged.

Retailers who have a sales tax permit and file a Sales and Use Tax Return (Form 10), must use the same return to report any use tax. Other businesses that are not required to be licensed for sales tax should use Nebraska and Local Consumer’s Use Tax Return (Form 2) to report their use tax liability.

It should be noted that the Nebraska Department of Revenue is also auditing for items other than sales tax. The requirement to withhold tax on nonresident independent contractors performing services in Nebraska has been another area for tax assessment.

For more information on sales and use tax regulations, visit the Nebraska Department of Revenue website at www.revenue.ne.gov. Should you have any questions or concerns about how these tax regulations apply to your business or organization, please contact our office at 402.423.4343.

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