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The Nebraska State Tax Commissioner has ruled on a taxpayer’s question regarding the taxability of services associated with the installation or repair of telecommunications structures such as telephone, telegraph, mobile telephone or community television antennas. The Commissioner found that the contract amount charged to perform these services was taxable as construction services if the property is on the telecommunications service provider’s side of the “demarcation point.” Under Nebraska law, the demarcation point is the point where the equipment that is owned by the telecommunications service provider is connected to the equipment dedicated to their customer’s use. (Nebraska Department of Revenue, Revenue Ruling 1-07-02, December 14, 2007)


The Nebraska Department of Revenue recently mailed a notice to nearly 6,500 contractors, building and trade associations, and others involved in the construction industry, explaining the sales and use tax changes relating to contractor labor. Effective October 1, 2007, the following changes will be in effect: 1) contractor labor charges that are separately stated on the billing invoice will not be taxable, 2) contractor labor charges will not be taxable, and 3) the sale of warranties, guarantees, and service agreements that only cover the repair of buildings or fixtures such as hot water heaters, garbage disposals, and central heating and air conditioning units, will not be taxable. (Release, Nebraska Department of Revenue)


On April 6, 2006, Governor Dave Heineman signed LB 968 into law. A portion of the new bill repeals the sales tax on home-repair labor, rescinding the residential tax levied on homeowners. Exempted labor may relate to: the original construction of a new structure, building, or unit; the construction, repair, or annexation of any structure used for the generation, transmission, or distribution of electricity; or a major addition, remodeling, restoration, repair, or renovation of an existing structure. Examples include repairs to air conditioning and heating units, home painting projects, roofing repairs, carpet and laminate replacement, wood floor finishing, kitchen, basement, and bedroom remodeling projects. In addition to providing tax relief for home-repair labor, LB 968 also provides both income and property tax relief. It is expected that the sales tax portion of LB 968 will provide over $30 million in sales tax relief in the fiscal year beginning July 1, 2006. (2005 NE L 968 Enacted - Interim, (April 6, 2006))


Nebraska has implemented an incentive program through the Nebraska Advantage Act to encourage state investments. Depending on the cost of the proposed investment and the amount of new employees required for the project, an applicant for the incentive program will be designated to one of five tiers. Each tear will have its own mix of benefits. The incentives include a refund of sales and use tax on qualified items and various tax credits. Qualified items include property based within the state, as well as tangible personal property incorporated into certain real estate projects. Motor vehicles are excluded. In addition, a research tax credit is granted for research and experimental endeavors. The credit will equal 3% of the difference between the research cost incurred and the average research expenses sustained in the previous two years to claiming the credit. The credit is actionable annually for five consecutive years. (L.B. 312)


A Nebraska sales and use tax regulation regarding labor charges has been amended to clarify that charges for installation and repair labor are taxable when the item being replaced is taxable. The definition of repair labor has also been clarified to include labor associated with “replacing a used, worn, or damaged item of tangible personal property.” (Reg. 1-082, Nebraska Department of Revenue, effective July 16, 2005)



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