Taxes in Nebraska > Sources of Major State and Local Taxes > Sales Taxes > Chronology of Changes in Sales and Use Tax Policy Since 1982

CHRONOLOGY OF CHANGES IN SALES
AND USE TAX POLICY SINCE 1982

Scroll below to view the entire chronology, or click on a year below to go directly to that year. Please note that information may not be available for all years.

1982 | 1983 | 1984 | 1985 | 1986 | 1987 | 1989
1990 | 1991 | 1993 | 1994 | 1995 | 1996 | 1998 | 1999
2000 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007

 

1982 - LB 757 - Increased the sales tax rate temporarily from May 1 through December 31, 1982 from 3% to 3.5%.

1983 - LB 17 - Allowed sales tax exemptions for film rentals where admission is charged, water and energy used in raising livestock, and custom computer software and training.

LB 59 - Increased the sales tax from 3.5% to 4% for nine months to create the Cash Reserve Fund. The amount raised was $30 million.

LB 169 - Provided that the Legislature is to set the sales and income tax rates, beginning January 1, 1984. Prior to this time, the State Board of Equalization set the sales and income tax rates on or before each November 15 so that revenue would be sufficient to fund the enacted budget and so that the two taxes raised similar amounts for the General Fund.

LB 363 - Eliminated the sales tax on food and the food sales tax credit against the income tax. Although the sales tax collected on food and the credit were supposed to be roughly equal, today the exemption of food costs about $130 million.

1984 - LB 791 - Exempted clinics owned by hospitals from the sales tax. Cost - $500,000.

LB 796 - Exempted medical oxygen from the sales tax.

LB 892 - Created the Economic Forecasting Advisory Board and set the sales tax rate at 3.5% and the income tax rate at 19% of federal liability.

1985 - LB 273 - Enacted a sales tax refund for new manufacturing equipment purchased for a plant expansion or relocation. There was to be no refund for replacing old equipment. The bill also terminated a renewable energy income tax credit effective January 1, 1986.

LB 282 - Struck the requirement that the Legislature set the sales and income tax rates so as to generate similar amounts of money for the General Fund and the requirement that income tax rates be changed in increments of one percent and sales tax rates in increments of one-half percent.

LB 715 - Expanded the sales tax base to include warranties and service contracts, custom computer software, and some utilities used by business. Overall, this expansion of the sales tax base was about $20 million.

1986 - LB 539 - Increased the sales tax rate from 3.5% to 4% effective January 1, 1987.

LB 561 - Exempted prescription oxygen from the sales tax.

LB 1027 - Extended the sales tax to the installation or provision of cable television or community antennae services and warranties and service agreements. The bill also exempted sales by booster clubs and certain farm machinery sold at auction. The net increase in revenue was estimated to be $1.2 million.

1987 - LB 304 - Extended the sales tax collection obligation to retailers soliciting sales in this state on a regular, continuous, or systematic basis by means of advertising.

LB 775 - Enacted the Employment and Investment Growth Act. This grants income tax credits and sales tax refunds for companies that hire at least 30 new employees and invest at least $3 million. The income tax credits are equal to 5% of the increased payroll at the project for five years and 10% of the investment in the project. The benefits also include a refund of any sales taxes paid on equipment or other taxable property purchased in connection with the project. LB 775 also repealed the two-year-old sales tax refund for purchases of industrial machinery and equipment for plant expansions. For projects promising at least $10 million in new investment and 100 new employees, qualifying companies may also receive a 15 year personal property tax exemption for mainframe computers, certain aircraft, and agricultural processing equipment used in connection with the project. For 2000, the cost of the program is estimated to be between $30 to $150 million depending on the percentage of the jobs claimed can be assumed to have been in the state regardless of the credit.

1989 - LB 198 - Exempted purchases by the State Fair from the sales tax.

LB 209 - Exempted carrier access charges between telephone companies from the sales tax. This bill prevented the assessment of $7.6 million in revenue annually and more than $37 million in retroactive liability to telephone companies pursuant to a position of the Revenue Department taken after the anti-trust breakup of AT&T.

LB 714 - Enacted the current three-choice election for building contractors for sales tax purposes. Contractors may be treated as retailers, as final consumers subject to tax, or as final consumers with a tax-free inventory.

LB 793 - Extended the sales tax to include satellite television programming and equipment.

1990 - LB 1059 increased the sales tax rate from 4% to 5% and the income tax rates by 8.5% for 1990 and an additional 8.5% for 1991 to fund the Tax Equity and Educational Support Act. This landmark school finance legislation dramatically increased state aid distributed to schools in an "equalized" manner. School costs were calculated per student within nine "tiers" or groups of similarly-sized schools and the formula enabled each school district to finance the average cost per student for the tier with a combination of state aid and property taxes at a defined "local effort rate." The rate varied based on the amount of appropriation available. LB 1059 also "rebated" 20% of the income tax paid by residents of the school district to the district. Total cost when fully implemented was about $210 million.

1991 - LB 300 - Exempted automobile rebates from the sales tax.

LB 444 - Exempted durable medical equipment from the sales tax.

LB 772 - Included sales of entire businesses and their assets within the definition of occasional sales exempt from tax.

1993 - LB 345 - In addition to a number of administrative changes, LB 345 changed the sales tax exemption for property incorporated into real estate to property annexed to real estate and eliminated the exemption for installation labor. The bill also granted sales tax exemptions for oxygen used in aquaculture, food sold at political events, and extended the sales tax refund for agricultural machinery to depreciable repair parts.

1994 - LB 901 - Exempted copyrighted programming and veterinary medicine from the sales tax at a net cost of $2 million.

LB 1087 - Restored the exemption for installation labor without the taxation of such labor ever having been enforced. This exemption was repealed in 2002.

1995 - LB 430 - Exempted from the sales tax refractory brick used in the making of steel or cement and molds, dies and patterns used for injection molding of plastic or stamped from metal. Cost - $1 million. The exemption for refractory brick was repealed in 2002.

1996 - LB 106 - Exempted water, chemicals and feed related to the raising of livestock from the sales tax. Cost - $3.5 million.

LB 1177 - Created the Municipal Equalization Fund and provided for aid to municipalities that are unable to raise the average amount of property tax revenue per capita with the average property tax levy. The bill also allowed counties to levy a sales tax of up to 1.5% in areas outside municipalities that have a sales tax to support the county share of jointly provided public safety services.

1998 - LB 1104 - Reduced the sales tax by percent from July 1, 1998 through June 30, 1999 at a cost of $95 million.

1999 - LB 232 - Exempted purchases by Natural Resources Districts from the sales tax. Cost - $275,000

LB 280 - Exempted mobility-enhancing equipment from the sales tax.

2000 - LB 557 - Exempted purchases by airport authorities from the sales tax. Cost - $225,000.

2002 - LB 57 - Exempted copies of public records from the sales tax.

LB 123 - Exempted elected county fair boards and drainage districts from the sales tax.

LB 947 - Brought Nebraska into compliance with the federal Mobile Telecommunications Sourcing Act by providing that mobile phone use be sourced at the home or business address of the contract owner regardless of where the calls are made or received. Increased revenue to the state was estimated to be about $670,000.

LB 1085 - Enacted a number of temporary tax increases and a permanent expansion of the sales tax base as follows: (1) Increases the cigarette tax by 30 cents per pack and the tobacco products tax by one-third for two years only, beginning October 1, 2002. The proceeds are to be deposited mostly in the Cash Reserve Fund, (2) Increases the sales tax rate from 5% to 5.5% for one year only, beginning October 1, 2002, (3) increases individual income tax rates by an average of 2.2% for tax year 2003 only, (4) Expands the sales tax base to include services such and building cleaning and maintenance, pest control, motor vehicle services and installation labor beginning October 1, 2002. The bill also repealed the previously-existing exemptions for refractory brick and subscription magazines, and (5) Requires companies taking advantage of bonus depreciation allowed by recent federal changes to add back 85% of such depreciation for purposes of the Nebraska return. The bonus depreciation lost can be deducted over five years beginning in 2005. Total revenue from LB 1085 is expected to be $120 million to the General Fund and $30 million to the Cash Reserve Fund.

2003 - LB 282 - LB 282 ratified the Streamlined Sales and Use Tax Agreement as approved by the implementing states, including Nebraska, on November 12, 2002. The bill also enacted conforming changes to the statutes that are required to participate with the other states in the Streamlined System. The bill did not change the tax base of the state of Nebraska in any way, but many definitions were changed or moved and all exemptions from tax were relocated to the same place in the statutes.

The bill also spelled out all the conditions Nebraska is agreeing to as a consequence of participating in the agreement. These conditions include using uniform definitions, sourcing, and rounding rules, providing sixty days notice for all state and local changes in rate or base, recognizing out-of-state companies that register for collection through the governing organization of the agreement, and complying with the decisions of the governing organization.

LB 759 - LB 759 retained the income tax rates adopted the previous year instead of allowing the rates to decrease to the 2002 level after tax year 2003. It also retained the cigarette and tobacco products tax increase indefinitely, with the proceeds of the cigarette tax after October 1, 2004 to be deposited in the General Fund. The bill also increased beer and liquor taxes by about 25%, effective October 1, 2003.

The bill expanded the sales tax base to include repair labor, except for repairs to motor vehicles and farm machinery, RV park charges, newspaper advertising supplements, animal specialty services, except veterinary services and services to livestock, and detective services. The bill also subjected repair or maintenance of personal property, the sales of which would be subject to sales tax, except for repairs to motor vehicles to the sales tax.

The bill provided that all annexation labor, and labor for repairs to real estate be taxable. However, it also provided exemptions for labor charges for new construction, the addition of a floor or room, finishing an unfinished space, restoring or reconstructing a structure damaged by a natural disaster, or building electrical generating or transmitting structures.

Rehabilitation of at least 75% of an existing building is also exempt, but the contractor is required to notify the Department of Revenue that that project qualifies for the exemption. Rehabilitation of an existing building that at least doubles the market value of the building allows the taxpayer to receive a refund through the Department of Revenue.

LB 759 was expected to generate $347 million for the biennium, or $236 million annually.

2004 – LB 841 extended the sales tax exemption for charitable entities to include intermediate care facilities for the mentally retarded. This change was consistent with previous interpretations of the exemption.

LB 1017 amended the taxation of construction labor to adopt a statutory presumption that a taxable project is 60% taxable labor and 40% materials upon which tax has already been paid. It also provided a mechanism for contractors or owners to receive pre-approval that a remodeling project is labor tax exempt.

2005LB 312 – In addition to sunsetting the Employment and Investment Growth Act and replacing it with the Nebraska Advantage Act, LB 312 exempted manufacturing machinery and equipment from the sales tax. The bill defined "manufacturing machinery and equipment" very broadly to include:

  1. equipment used by the manufacturer for transporting raw materials or components like assembly lines or mill rolls,
  2. molds and dies for forming cast or injected products and its packaging material,
  3. machinery to maintain the integrity of the product or environmental conditions, such as climate control or clean room equipment,
  4. testing equipment for quality control,
  5. computers that control a manufacturing process,
  6. machinery used to produce power or energy, such as steam turbines, or catalysts, solvents, and other solutions even if they do not become part of the finished product, and
  7. repair or replacement parts purchased for repairing or maintaining manufacturing machinery, such as refractory brick.

The exemption also includes all repair and service performed on such equipment from sales taxes.

LB 753 – Amended the definition of "construction services" that are within the sales tax base to include installing, furnishing or connecting utility services beginning Oct. 1, 2003, the operative date of LB 759 (2003). What this did is make the taxability of installing telephone or cable lines dependent upon whether or not the entire construction project is taxable or not based on the exemptions in LB 759 (2003).

2006LB 904 – changed the distribution of state sales taxes collected on sales of motor vehicles. Previously, the first 5% of sales tax collected was deposited in the Highway Trust Fund while any excess over 5% was deposited in the state's General Fund. After Oct. 1, 2006, these additional amounts, if any are deposited in the Highway Allocation Fund and distributed equally between cities and counties for their streets and roads.

The bill also required cities and counties to spend city sales taxes collected on motor vehicles for street and road purposes except for pre-existing bonds pledging this revenue for another purpose.

LB 968 – In addition to a variety of income tax cuts, a reduction in the assessment ratio for agricultural land, and increased homestead benefits, LB 968 enacted a new sales tax exemption for construction labor performed on single family homes and duplexes and a refund for owner-occupied condominiums.

2007LB 305 - Directed that sales tax from leasing of motor vehicles to the Highway Trust Fund, the same as sales taxes from the sale of motor vehicles. Previously, these funds flowed to the state general fund.

LB 367 - A multi-faceted tax cut proposal involving sales taxes, income taxes, property taxes and estate taxes.

Regarding sales taxes, the bill repealed the sales tax on construction labor for commercial projects, effective Oct. 1, 2007. It also granted a new sales tax exemption for community based wind-energy projects. It also increased the current tax credit for renewable energy projects slightly and eliminated the one megawatt capacity requirement to make the credit available for more projects.

 

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