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Beginning October 1, 2002, Nebraska will have several alterations to their sales and use tax system. The sales tax rate was originally going to be 5.5%, up from 5%, from October 1, 2002 through September 30, 2003, but the rate increase was later extended indefinitely. In addition to the raise in the rate, there will be amendments to the taxability of certain services. Beginning October 1, 2002, these changes include but are not limited to the following:
• The following services will now be subject to sales and use tax: building cleaning and maintenance, pest control, and security; motor vehicle washing, waxing, towing, and painting; computer software training; and installing and applying tangible personal property if the sale of the property is subject to tax.
• If services are provided to real estate that is located in Nebraska
• The situs for services is deemed to be in Nebraska for each of the following services:
 Services provided to real estate if the real estate is located in the state.
 Services provided to personal property if the personal property is located in the state and the service is rendered for use in the state
 Computer software training if the training is performed at a location within the state for a customer located within the state.
• If an individual provides a service without specialized equipment or supplies at any individual residence, it is considered an occasional sale exempt from tax.
• The following exemptions from sales and use tax are repealed: (1) subscriptions to magazines or journals that are issued at average intervals not exceeding once each month; (2) refractory materials, lime, synthetic slag, mill rolls, and guides for use in manufacturing steel or cement; and (3) separately stated charges for training customers in the use of computer software.
• Exemption for services to aircraft: A sales and use tax exemption is enacted for services rendered to an aircraft brought into Nebraska by an out-of-state resident or by a person who has a business location in another state when the aircraft is not to be registered or based in Nebraska and will not remain in the state more than 10 days after the service is completed. (L.B. 1085, Laws 2002; L.B. 759, Laws 2003.)

(10/15/2002)

Effective October 1, 2002, Nebraska repeals the sales and use exemption for the following services: building cleaning and maintenance, pest control, and security; motor vehicle washing, waxing, towing, and painting; computer software training; and installing and applying tangible personal property if the sale of the property is subject to tax. Also, the Nebraska sales and use tax rate is increased from 5% to 5.5% for one year beginning on October 1, 2002 and ending October 1, 2003. Other exemptions that have been repealed include: subscriptions to magazines or journals that are issued at average intervals not exceeding once each month; refractory materials, lime, synthetic slag, mill rolls, and guides for use in manufacturing steel or cement; and separately stated charges for training customers in the use of computer software, all effective October 1, 2002. For those concerned with aircrafts, an exemption is enacted for services rendered to an aircraft brought into Nebraska by an out-of-state resident or by a person who will not remain in the state for more than 10 days after the service is completed. (L.B. 1085, Laws 2002)

(10/15/2002)

The difference between a taxable purchase of computer software and nontaxable charges for the service of software production for use of the employer are explained in a recent sales and use tax ruling. The billing method or invoicing may not aid in the distinction between taxable sales of computer software and nontaxable charges for personal employee services, so instead a written agreement between the company and the temporary service provider containing certain provisions may be used to establish correct taxability. (Revenue Ruling, 1-02-1, Docket No. 1-02-1)

(06/15/2002)

The tax on the purchase of a nonexclusive license to use certain computer software programs was refunded as it constituted tangible personal property and therefore qualified as property eligible for tax benefits. Typically, canned software, regardless of how it is delivered, is taxable in Nebraska. However, by fulfilling certain requirements under the Nebraska Employment and Investment Growth Act, the taxpayer was allowed a refund of sales and use tax. The data processing services allowed by the licensing of the software is one of the services targeted by the Act, which was created to encourage new business development, retain and expand existing Nebraska businesses, and promote new jobs and investment capital in the State. (First Data Corp., Nebraska Supreme court, No. S-00-716, March 8, 2002)

(04/15/2002)

Distinguishing between “repairing” and “restoring” software, the Nebraska Supreme Court has made a computer software support agreement subject to its use tax. By correcting software errors, the company did not restore the software and the agreement was, therefore, a maintenance agreement for which the state’s consumer use tax was applicable. (A & D Technical Supply Co., Inc., Nebraska Supreme Court, No. S-98-728, March 24, 2000)

(06/15/2000)

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