Nebraska Tax Update: The Department of Revenue Institutes A New Contractor Database And Issues A Ruling On Sales Of Digital Media


by Matt Ottemann

Ottemann, Matthew
mottemann@mcgrathnorth.com
(402) 341-3070

LB 1001: To Avoid 5% Withholding, All Contractors Must Register For A New Database.  During the last legislative session, the legislature passed LB 1001, which requires the Department of Revenue to develop and maintain a database for contractors who perform construction services in Nebraska. To accomplish this, all contractors must file a Nebraska Revenue Contractor Database and Election, Form 16, with the Department of Revenue after August 1, 2008 (forms filed prior to August 1 were not accepted).

On or after January 1, 2009, any contractor who is paying a subcontractor for performing construction services will be required to withhold and remit to the Department of Revenue 5% of all payments made to the subcontractor, if the subcontractor is not listed in the Department’s Revenue Contractor Database. The database is intended to be available to the general public on the Department’s website in November.

Revenue Ruling 1-08-3: Rules Regarding Taxability Of Digital Media.  Beginning October 1, 2008, retail sales of digital music, movies, videos, and digital books will generally be subject to Nebraska sales and use tax when delivered electronically. The Department’s Revenue Ruling 1-08-3 specifies that the following types of sales are subject to Nebraska sales and use tax:

  • An on-line retailer sells music files for a set price per song.
  • An on-line retailer of movies and TV shows allows purchasers to view selected shows for a 24 hour period.
  • An on-line retailer of books sells subscriptions to a book club that provides purchasers with electronic book deliveries each month.
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