Neb. Admin. Code tit. 316 — Department of Revenue

Chapter 1 Sales and Use Tax Regulations

Neb. Admin. Code tit. 316, ch. 1 Sales and Use Tax Regulations {#sec-316-nac-1 omnilex-key=us-ne-regs-official--title-316--316 NAC 1}

REG-1-001 NATURE OF THE SALES TAX

001.01 The sales tax is imposed upon the gross receipts from all sales, leases, rentals, installation, application, repair, or maintenance of tangible personal property, the gross receipts of every person providing or installing utility services, the gross receipts of a retailer of intellectual or entertainment properties, the gross receipts from the sale of admissions, the gross receipts from renting or furnishing accommodations or lodging for periods of less than thirty days, and the gross receipts from the sale or providing of certain enumerated services. (Reg-1-007, Gross Receipts)

001.01A For the purposes of the sales and use tax regulations, the term property shall mean all tangible and intangible property, rights, licenses, and franchises subject to tax under section 77-2703(1) of the Nebraska Revised Statutes.

001.02 This tax is not upon the article sold, but upon the transaction called the sale. The term “sale” includes installment, conditional and credit sales, and includes any transfer of title or possession, segregation in contemplation of transfer of title or possession, exchange, barter, lease or rental, conditional sale, or otherwise in any manner or by any means for a consideration.

001.03 The amount of sales tax collected is a trust fund held by the collector that belongs to the state. Any sales tax that is improperly or erroneously collected also belongs to the state and must be remitted.

(Sections 77-2702.07, 77-2702.14, 77-2702.15, 77-2703(1), and 77-3905(6), R.R.S. 2003. October 1, 2003. )

REG-1-002 USE TAX

002.01 Use Tax in General. Use tax is not a duplication of the sales tax. The sales tax and the use tax complement each other and together provide a uniform tax upon the sale, lease, rental, storage, use, distribution, or other consumption of tangible personal property and certain specified labor and services. The tangible personal property, labor, and services which are included in the sales and use tax base are described in Reg-1-001.01, Nature of the Sales Tax.

002.02 Use Tax Imposed. The use tax is imposed upon the storage, use, distribution, or other consumption of tangible personal property and certain specified labor and services when the purchase of the tangible personal property, labor, or services would be subject to sales tax under Reg-1-001.01, Nature of the Sales Tax. Use tax applies whenever the sales tax has not been paid.

002.02A Any property, as defined in Reg-1-001 sold, leased, or rented by any person for delivery in Nebraska is presumed to be sold, leased, or rented for storage, use, distribution, or other consumption in Nebraska, until the contrary proven. The burden of proving that any property delivered in Nebraska is delivered for a purpose other than storage, use, distribution, or other consumption in Nebraska is on the person who purchases, leases, or rents the property.

002.02B If sales tax has been properly paid on the sale, purchase, use, or other consumption of property or services in another state at a rate equal to or greater than the rate in Nebraska, or if sales tax has been properly paid in Nebraska, no use tax is due. (Reg-1-071, Credit for Tax Paid to Another State)

002.03 Remittances. Use tax is paid directly to the Nebraska Department of Revenue (Department) by the purchaser. A permit is not required.

002.04 Exemptions. Use tax does not apply to the following transactions:

002.04A Transactions where the proper amount of Nebraska and local sales taxes have been paid, including sales tax remitted directly to the Department by a purchaser who holds a direct pay permit (Reg-1-097, Direct Pay Permit) or certificate of exemption for direct mail (Reg-1-105, Direct Mail);

002.04B Purchasing, leasing, renting, storing, using, distributing, or consuming property where the transaction is exempt from sales tax;

002.04C Transactions where the property has been used for its intended purpose in another state before it was brought into Nebraska. This subsection does not apply to motor vehicles, motorboats, or airplanes (Reg-1-020, Motor Vehicles, and Reg-1-067, Aircraft and Related Services);

002.04D Transactions where the property: was purchased from a seller not engaged in business in Nebraska, nor licensed to collect Nebraska sales tax; is only stored temporarily in Nebraska; and is subsequently taken to another state or processed, fabricated, or manufactured to be used for its intended purpose in another state;

002.04E Removing building materials from inventory for a construction project in another state, when the building materials were purchased from a seller not doing business in Nebraska, nor licensed to collect Nebraska sales taxes (Reg-1-017, Contractors); and

002.04F Purchases made from commissaries, base exchanges, ships’ stores, or voluntary, unincorporated organizations of personnel of any branch of the Armed Forces of the U. S. by any person authorized to make these purchases.

002.05 Use tax is due on the following transactions:

002.05A Purchases for delivery in Nebraska from out-of-state retailers when the applicable state and local sales taxes have not been paid;

002.05B Retail purchases made in this state when the applicable state and local sales taxes have not been paid;

002.05C Purchases at retail from federal government agencies and instrumentalities not required to collect Nebraska sales taxes, except as provided in Reg-1-002.04F;

002.05D Purchases where an exempt sale certificate was originally given, but the property is subsequently put to a taxable use;

002.05E Use of property which was originally purchased tax-exempt using a resale certificate, but is later used for personal or business purposes;

002.05F Purchases from out-of-state retailers of property that is delivered or used in Nebraska and would be taxable if purchased in Nebraska, even if the purchase of the property is exempt in the other state; and

002.05G Purchases of property in Nebraska that is manufactured, processed, or fabricated in another state and that is not used for its intended purposes in the other state after its manufacture, processing, or fabrication.

002.06 Use of Property Purchased Using a Resale Certificate. If a purchaser who gives a resale certificate makes any use of the property other than retention, demonstration, or display while holding it for sale, lease, or rental in the regular course of business, the use is taxable to that purchaser as of the time when the property is first used in Nebraska. Except for aircraft as provided in Reg-1-067, Aircraft and Related Services, the sales price of that property is the measure of the use tax. The tax rate is the rate in effect at the time of first use. (Reg-1-035, Consumption of Untaxed Property.)

002.07 Calculating Use Tax. The amount of use tax is computed by multiplying the sales price of the property by the applicable tax rate in effect at the time of first use. The rate applicable for use tax is the same as the rate for state and local sales taxes. Sales price means the total amount of consideration for the property received and includes cash, credit, property, and services rendered without any deduction for the cost or other expenses of the seller, charges for delivery, installation, or any other amounts charged by the seller to complete the sale.

002.08 Persons holding a sales tax permit may report and pay all use tax due on the Nebraska and Local Sales and Use Tax Return, Form 10, or a Nebraska and Local Business Use Tax Return, Form 2.

002.09 Persons who are not required to hold a sales tax permit, but who are liable for use tax, must pay the tax directly to the Department using a Nebraska and Local Business Use Tax Return, Form 2, or a Nebraska and Local Individual Use Tax Return, Form 3. Unless otherwise required by the Department, these persons must file returns annually if the expected annual amount of tax will not exceed $900. If the expected annual amount of tax is between $900 and $3,000, the returns must be filed quarterly. Those with expected annual amounts of tax greater than $3,000 must file monthly.

002.09A Persons who are registered under the Streamlined Sales and Use Tax Agreement (SSUTA) may follow the filing frequency guidelines outlined in the SSUTA.

002.09B Persons who are not required to hold a sales tax permit may also pay use tax on a Nebraska Individual Income Tax Return, Form 1040N.

002.10 Returns that are not filed electronically must be properly signed. The return and the remittance are timely filed if mailed, postage prepaid, on or before the 20th day of the month following the close of the reporting period.

002.10A When the 20th day falls on a Saturday, Sunday, or an approved holiday, a return or remittance is timely filed if mailed, postage prepaid, on the next succeeding day which is not a Saturday, Sunday, or an approved holiday. A U.S. Postal Service postmark will be conclusive evidence of the date of mailing for the purpose of timely filing a return or remittance.

002.10B A private postage meter date or a date stamped by a private delivery service will be considered the date of filing if the date of the stamp is no more than four days before the date the return is received by the Department, excluding Saturdays, Sundays, or approved holidays. If the date of the stamp is more than four days before the date the return is received by the Department, the return is considered filed on the date received.

002.10C The Department will accept filing and payment methods pursuant to the SSUTA for Model 1, 2, or 3 sellers.

002.11 Unless there are amounts, words, statements, numbers, zeros, or figures shown on the use tax lines of a Nebraska and Local Sales and Use Tax Return, Form 10, submitting the form to the Department does not constitute the filing of a use tax return.

002.11A If the person files a return, the statute of limitations for issuing a deficiency determination is three years after the last day of the month following the reporting period, or three years after the return was filed, whichever is later. If the person fails to file a return, the statute of limitations for issuing a deficiency determination is six years after the last day of the month following the reporting period.

002.11B If the person does not enter amounts, words, statements, numbers, zeros, or figures on the appropriate line of a Nebraska and Local Sales and Use Tax Return, Form 10, the statute of limitations for issuing a deficiency determination for that reporting period is extended to six years after the last day of the month following the reporting period.

002.11C Statements by the person that no use tax is due, or entries made by the Department that did not come from a filed return, do not constitute the filing of a return and do not limit the statute of limitations to three years.

002.12 Remittances must be made to the Department in the form of electronic funds transfer, check, credit card, draft, money order, or other payment method as approved by the Tax Commissioner. Checks, drafts, or money orders should be made payable to the Nebraska Department of Revenue. Cash, post-dated checks, or postage stamps cannot be sent as payment. Cash may be used only when payment is made in person at an office of the Department.

002.13 Any person who fails to file the return or remit the tax due by the due date will be subject to a penalty equal to 10% of the unpaid tax, or $25, whichever is greater. If the failure to file a return or remit the use tax is a result of fraud, or an intent to evade the tax, a penalty of 25% of the amount of the understatement, or $50, whichever is greater, may be assessed. Interest is imposed at the rate specified in Neb. Rev. Stat. § 45-104.02 from the due date to the date payment is received.

(Neb. Rev. Stat. §§ 77-1702, 77-1784, 77-2701.35 77-2701.37, 77-2701.42, 77-2703(2), 77-2704.30, 77-2704.31, 77-2704.44, 77-2706(3), 77-2708, and 77-2709, and McDonald’s Executive Offices v. Nebraska Department of Revenue, 243 Neb. 82 (1993), J.C. Penney Co., Inc. v. Balka, 254 Neb. 521 (1998), and 4 U.S.C. § 107. June 24, 2017.)

REG-1-003 NON-NEXUS SELLERS

003.01 The responsibility to collect tax does not rest solely on Nebraska-based sellers. Every out-of-state seller, except as set out in this regulation, making retail sales of property or services for delivery in the State of Nebraska or leasing or renting property with delivery to lessees within this state must obtain a permit, collect, and remit Nebraska sales tax.

003.02 The seller is not obligated to collect sales tax when he or she is not engaged in business in this state as defined in Reg-1-004, Permits. Where no obligation to register for collection of the Nebraska tax exists, the seller may make application for a sales tax permit, and in fact is encouraged to make application for such a permit in order that the appropriate use tax might be collected from Nebraska customers. The Nebraska purchaser is required to pay the use tax liability directly to the Department of Revenue when a use tax is due and the retailer does not have a permit in this state to collect, report, and remit collections of use tax.

003.03 The Tax Commissioner may require non-nexus sellers to file the same return as is required from retailers collecting the sales tax or, at the Tax Commissioner’s discretion, to file a separate return.

003.03A The Nebraska Department of Revenue encourages retailers in Nebraska who are making sales in other states to become licensed and collect the appropriate tax for the other state.

(Sections 77-2704.30, 77-2704.31, 77-2705, and 77-2708(1), R.R.S. 2003, and section 77-2703(2), R.S.Supp., 2004. April 12, 2005.)

REG-1-004 PERMITS

004.01 Every person engaging in business as a retailer in Nebraska must obtain a sales tax permit by submitting a Nebraska Tax Application, Form 20, or register through an alternative method as authorized under the Streamlined Sales Tax Agreement.

004.02 Engaging in business in this state means and includes any of the following:

004.02A Maintaining, occupying, or using permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business in this state;

004.02B Having any representatives, agents, salesmen, canvassers, or solicitors operating in this state under the authority of the retailer or a subsidiary of the retailer for the purposes of selling, delivering, or taking of orders for any property;

004.02C Deriving receipts from the rental or lease of property in this state;

004.02D Soliciting retail sales of property from residents of this state on a continuous, regular, or systematic basis by means of advertising which is broadcast from or relayed from a transmitter within this state or distributed from a location within this state;

004.02E Soliciting orders from residents of this state for property by mail, if the solicitations are continuous, regular, seasonal, or systematic and if the retailer benefits from any banking, financing, debt collection, or marketing activities occurring in this state or benefits from the location in this state of authorized installation, servicing, or repair facilities;

004.02F Being owned or controlled by the same interests which own or control any retailer engaged in business in the same or similar line of business in this state;

004.02G Maintaining or having a franchisee or licensee operating under the retailer’s trade name in this state if the franchisee or licensee is required to collect the tax under the Nebraska Revenue Act of 1967; or

004.02H Doing any of the above as a retailer of services or on behalf of a retailer of services enumerated as taxable in Reg-1-007, Gross Receipts.

004.03 A separate application for each Nebraska retail location is required unless applying through the Streamlined Sales Tax Agreement.

004.04 Out-of-state retailers who are not engaged in business as specified in 004.02, are not required to obtain a permit. However, as a service to their Nebraska customers, those retailers are encouraged to obtain a license which allows them to collect and remit the tax in the same manner as a retailer who is engaged in business in this state. This will preclude the purchasers from having to accrue and remit their consumer’s use tax liability directly to the Department of Revenue.

004.05 Upon examination and approval of the application, the Department of Revenue shall issue to the retailer the appropriate sales tax permit for each Nebraska business location. The permit is permanent, not transferrable, and valid only for the retailer in whose name it is issued and for the conduct of business at the place designated. The permit must be conspicuously displayed at the place of business.

004.05A Retailers moving their locations may file a Nebraska change request to change the location address shown on their permits. New permits with the new address will be issued.

004.06 Retailers who temporarily will not be making any sales, may cancel their permits. When sales are resumed, the permits may be reinstated without any charge.

004.07 Upon violation of any of the sales tax statutes or regulations, the Department of Revenue may revoke or suspend the permit or permits of the violator. The procedures for revocation hearings are contained in Practice and Procedure Reg-33-008.

004.07A Following the revocation of a sales tax permit, the Department of Revenue will consider issuance of another permit only if all tax liabilities, including interest and penalties, have been paid in full, and sufficient security has been posted with the Department to ensure future compliance.

004.07A(1) The amount of the security required before the Department will reissue a sales tax permit will be no greater than three times the estimated average amount payable for the seller’s reporting period or five times the estimated average amount payable for the reporting period in the case of persons habitually delinquent.

004.08 Anyone whose permit has been previously suspended or revoked shall pay the Department of Revenue, in addition to the required security specified in Reg-004.07A(1), a fee of twenty-five dollars ($25.00) for the renewal or reissuance of a permit in the event of a first revocation, and fifty dollars ($50.00) for each successive revocation. A new permit will not be issued to the same person until the Department of Revenue is satisfied that such person will comply with the sales and use tax statutes and regulations.

004.09 Anyone who engages in business as a retailer in this state without a permit or permits or after a permit has been suspended, and each officer of any corporation which so engages in business, shall be guilty of a misdemeanor. Upon conviction thereof, such person and each such officer shall be fined an amount not to exceed five hundred dollars ($500.00) per each day of operation.

(Sections 77-2701.13 and 77-2713(3), R.R.S. 2003, and sections 77-2703(2), 77-2705, 77-27,131, R.S.Supp., 2008. February 22, 2009)

REG-1-005 RETAILERS AND SELLERS

005.01 Retailer means any seller and wherever either of these terms is used, it is construed to include the other. Retailer includes:

005.01A Any person engaged in the business of selling, leasing, or renting property or services whenever the receipts are subject to sales tax;

005.01B Any person engaged in the business of making sales at auction of tangible personal property for storage, use, or other consumption, or who is collecting the proceeds of an auction (Reg-1-034 Auction and Consignment Sales);

005.01C Any person who leases or rents tangible personal property to another for storage, use, or other consumption, except film rentals when sales tax is charged on the admission, and interchanged railroad rolling stock (Reg-1-018 Rent or Lease of Tangible Personal Property);

005.01D Any person who is renting or furnishing lodging for periods of less than 30 days, except a facility which is either licensed under the Health Care Facility Licensure Act of the Nebraska Revised Statutes, or operated by an educational institution established or recognized under Chapter 79 or 85 of the Nebraska Revised Statutes, when rooms are regularly used to house students for a consideration for periods in excess of 30 days (Reg-1-046, Hotels, Lodgings, and Accommodations);

005.01E Any person who is furnishing telephone, mobile telecommunications, telegraph, gas, electricity, sewer, or water service (Reg-1-065, Telecommunications Service, and Reg-1-066, Sewer and Water);

005.01F Any person who is furnishing community or county antenna television service or satellite programming service (Reg-1-081, Community or County Antenna Television Service);

005.01G Any person who is charging admissions, except admissions charged by elementary or secondary schools, public or private, or school districts, student organizations, or parent-teacher associations pursuant to an agreement with proper school authorities, or admissions to fund-raising events by ballot question committees, candidate committees, independent committees, and political party committees that are registered with the Political Accountability and Disclosure Commission or are for candidates for federal office (Reg-1-044, Admissions);

005.01H Any person who is renting or otherwise furnishing tangible personal property under an agreement requiring the periodic cleaning or laundering of such tangible personal property (Reg-1-049, Linen and Clothing Suppliers);

005.01I Any person who is selling or otherwise providing warranties, guarantees, service contracts, or maintenance agreements covering taxable property or services (Reg-1-074, Warranties and Guarantees);

005.01J Any person who is selling or otherwise providing computer software or computer software training, when provided by the retailer that sold the software (Reg-1-088 Computer Software);

005.01K Any contractor who has elected to be treated as a retailer, or any contractor who has failed to make an election (Reg-1-017, Contractors);

005.01L Any person who is selling live plants, other than as a part of the transfer of an improvement to real estate or the real estate (Reg-1-017, Contractors);

005.01M Any person who is the promoter, operator, or organizer of a fair, flea market, craft show, or similar event (Reg-1-033, Transient and Itinerant Sellers.)

005.01M(1) Retailer does not include any person making sales at a fair, flea market, craft show, or similar event when the licensed promoter, operator, or organizer has arranged to remit the sales tax on behalf of that person for the show.

005.01N Any person providing any of the following:

005.01N(1) Animal specialty services, except for veterinary services and specialty services performed on livestock (Reg-1-102, Animal Specialty Services);

005.01N(2) Building cleaning services (Reg-1-098, Building Cleaning);

005.01N(3) Digital audio works, digital audiovisual works, digital books, and digital codes;

005.01N(4) Installing and applying tangible personal property where the sale of the property is subject to tax (Reg-1-082, Labor Charges);

005.01N(5) Motor vehicle washing, waxing, towing, and painting services (Reg-1-099, Motor Vehicle Services);

005.01N(6) Pest control services (Reg-1-100, Pest Control Services);

005.01N(7) Recreational vehicle park services (Reg-1-103, Recreational Vehicle Park Services);

005.01N(8) Repairing or maintaining tangible personal property, except motor vehicles, where the sale of the property would be subject to tax (Reg-1-082, Labor Charges); and

005.01N(9) Security and detective services (Reg-1-101, Security and Detective Services.)

005.01O Option 1 contractors who install, construct, service, repair, replace, upgrade, or remove outlets, wire, cable, or any other property for telephone, telegraph, cable, satellite, or mobile telecommunications services on the customer’s or service provider’s side of the demarcation point (Reg-1-017, Contractors.)

005.01P Option 2 and Option 3 contractors who install, construct, service, repair, replace, upgrade, or remove outlets, wire, cable, or any other property for telephone, telegraph, cable, satellite, or mobile telecommunications services (Reg-1-017, Contractors):

005.01P(1) On the service provider’s side of the demarcation point, or

005.01P(2) On the customer’s side of the demarcation point when acting as a subcontractor for telephone, telegraph, cable, satellite, or mobile telecommunications service providers.

005.02 A distributor may enter into an agreement with the Department of Revenue to collect tax for representatives working for the distributor. The distributor must collect and remit tax from representatives on the sales price of each item sold at the tax rate imposed at the delivery location of each sale. When the distributor has entered into this agreement, the individual representatives are not required to hold their own sales tax permits.

005.03 A person does not have to be engaged solely in a retail business in order to be liable for collecting, reporting, and remitting the sales and use tax. Manufacturers, producers, or wholesalers are liable for collection of the tax to the extent that they make sales at retail or have gross receipts which are taxable. Sales are sales for resale only if a resale certificate is received from the purchaser. All other sales are presumed to be taxable.

005.04 Model 1 seller means a seller that has selected a certified service provider as its agent to perform all the seller’s sales and use tax functions, other than the seller’s obligation to remit tax on its own retail purchases.

005.05 Model 2 seller means a seller that has selected a certified automated system to perform part of its sales and use tax functions but retains responsibility for remitting the tax.

005.06 Model 3 seller means a seller that has sales in at least five member states of the Streamlined Sales Tax Agreement, has total annual sales revenue of at least five hundred million dollars, has a proprietary system that calculates the amount of tax due each jurisdiction, and has entered into a performance agreement with the member states that establishes a tax performance standard for the seller.

(Sections 77-2701.16, 77-2701.21, 77-2701.22, 77-2701.23, 77-2701.31, 77-2701.32, and 77-2705, R.R.S 2009. June 6, 2011.)

REG-1-006 RETAIL SALE OR SALE AT RETAIL

006.01 Retail sale or sale at retail means any sale, lease, or rental for any purpose other than for resale, sublease, or subrent.

006.01A Gross receipts from sales at retail in this state are taxable except as otherwise provided.

006.01B Retail sale includes the sale or exchange of property or services for property, for money, or for services. Retail sale includes every transaction constituting a sale, whether conditional, installment, credit, or otherwise. In general, retail sale or sale at retail includes all sales of tangible personal property, or of other items the gross receipts of which are taxable. (Reg-1-007, Gross Receipts).

006.02 The test of a sale at retail is whether or not the sale is to a purchaser for use or consumption and not for resale. Services are generally consumed by the purchaser and are only rarely purchased for resale. (See Reg-1-013, Sale for Resale, or Reg-1-023, Ingredient or Component Part).

006.03 The question of who makes the sale is immaterial. The controlling consideration is whether it is a sale to a final consumer or user and not for resale.

006.04 The location of the sale is generally where the purchaser or lessee takes delivery of the property or service.

006.04A The sale occurs in this state even if the buyer intends to take the property or service to another state.

006.04B Freight terms such as FOB shipping point or FOB destination, or declarations of the parties made after the completion of the transaction are not sufficient to show where the sale occurs.

006.05 If the location where the purchaser takes delivery of the property or service cannot be determined, the sale is taxed at the address for the purchaser according to the retailer’s records.

006.06 If the retailer’s records do not contain an address for the purchaser, an address obtained during the transaction, including from a payment document, may be used.

006.07 If the location of the sale cannot be determined under any of the above, the sale is taxed at the location from which the property was shipped, from which the digital goods or computer software was first available for transmission by the seller, or from which the service was provided.

006.08 The sale of utilities occurs where the meter is located or the connection is furnished.

006.09 A sale of a maintenance agreement with the covered property occurs where the property is delivered, or where the motor vehicle, trailer, semitrailer, or motorboat is registered.

006.09A A sale of a maintenance agreement separate from the covered property occurs at the location where the property being covered is normally used.

006.10 A sale occurs in another state when the seller is required by the terms of the sale to deliver the property or service to a point outside this state.

006.10A The Department of Revenue will assume that delivery is required when the item is so large or dangerous that it requires special handling, the seller normally provides the special handling, and the seller actually delivers the item in another state.

006.10B Acceptable proof of transportation outside this state is a waybill or bill of lading, an insurance or other receipt issued by the United States Postal Service, or a trip sheet signed by both the seller’s delivery agent and the person who received the goods.

006.10C If the property or service is returned to Nebraska after delivery by the seller, it is taxable in Nebraska. The buyer must pay the use tax directly to the Department of Revenue.

006.11 The provisions of this regulation do not apply to motor vehicles, trailers, and semitrailers which are sold, rented, or leased for periods of one year or more; to motorboats which are sold, rented, or leased for periods of one year or more, or to sales of aircraft that do not qualify as transportation equipment as defined in Reg-1-019, Rental or Lease of Vehicles. See also Reg-1-020, Motor Vehicles, Reg-1-067, Aircraft and Related Services, and Reg-1-096, Motorboats, for the rules on these rentals and sales.

(Section 77-2701.31, R.R.S. 2003, and sections 77-2701.34, 77-2703(1)(g), and 77-2703.01, R.S.Supp., 2008. February 22, 2009)

REG-1-007 GROSS RECEIPTS DEFINED

007.01 Gross receipts means the total amount of the sale or lease or rental price of retail sales by retailers, valued in money, whether received in money or otherwise. Gross receipts includes the value of any property, services, commodities, or precious metals, including gold or silver coins, received. Gross receipts include:

007.01A The gross revenue received from the installation of, or from furnishing:

007.01A(1) Mobile telecommunications service that originates and terminates in the same state to a customer with a place of primary use in Nebraska,

007.01A(2) Ancillary services, except for conference bridging services, and

007.01A(3) Intrastate telephone communications services, except for value-added, nonvoice data service. (Reg-1-065, Telecommunications Services);

007.01B The gross revenue received from installing or furnishing intrastate telegraph service, (Reg-1-065, Telecommunications Services);

007.01C The gross revenue received from furnishing gas, electricity, sewer, and water service, (Reg-1-066, Sewer and Water);

007.01D The gross revenue received from installing or furnishing satellite services or community or county antenna television service, (Reg-1-081, Community or County Antenna Television Service);

007.01D(1) If any or all of the charge for installation is free to the customer and is paid by the satellite or community or county antenna television service provider to the installer, the tax must be paid and remitted by the service provider.

007.01E The gross revenue received from admissions, (Reg-1-044, Admissions);

007.01F The gross revenue received from the sale, lease, rental, installation, application, repair, or maintenance of property, including sales through vending machines to users or consumers, and sales for amounts so small that no tax is collected;

007.01G The gross revenue received from providing lodging for any period less than 30 days, (Reg-1-046, Hotels, Lodgings, and Accommodations);

007.01H The gross revenue received from the sale, lease, license, franchise or rental of intellectual or entertainment properties, including computer software, videotapes, and movie film, (Reg-1-045, Motion Picture Film and Videotape and Reg-1-088, Computer Software);

007.01I The gross revenue from charges for delivery or freight or for shipping and handling received by the retailer in conjunction with a taxable sale, (Reg-1-026, Finance, Carrying, Service, and Interest Charges and Reg-1-079, Delivery Charges);

007.01J The gross revenue received from the sale of maintenance agreements, service contracts, guarantees, or warranties, when the property covered or the services to be provided are taxable (Reg-1-074 Warranties and Guarantees);

007.01K The gross revenue received from computer software training provided by the retailer that sold the software, (Reg-1-088, Computer Software);

007.01L The gross revenue received from providing building cleaning services, (Reg-1-098, Building Cleaning and Maintenance);

007.01M The gross revenue received from providing pest control services, (Reg-1-100, Pest Control Services);

007.01N The gross revenue received from providing security or detective services, (Reg-1-101, Security and Detective Services);

007.01O The gross revenue received from providing recreational vehicle park services, (Reg-1-103, Recreational Vehicle Park Services);

007.01P The gross revenue received from providing motor vehicle washing, waxing, towing, and painting, (Reg-1-099, Motor Vehicle Services);

007.01Q The gross revenue received from bundled transactions when one or more of the products included in the bundle are taxable, (Reg- 1-108, Bundled Transactions);

007.01R The gross revenue received from providing animal specialty services, (Reg-1-102, Animal Specialty Services);

007.01S The gross revenue received from membership fees paid to access the retailer’s premises or to receive discounts where the sales made on the premises or to which the discounts apply are subject to tax; and

007.01T The total amount of the sale without deduction for:

007.01T(1) The cost of materials used, labor or service costs, interest paid, losses, or any other expense;

007.01T(2) The cost of transportation of property;

007.01T(3) The amount charged for warranties, guaranties, service contracts, or maintenance agreements;

007.01T(4) Cash rebates or refunds paid by the manufacturer to either the retailer or the purchaser, For rebates on motor vehicles, see Reg-1-020, Motor Vehicles;

007.01T(5) The amount paid for any occupation taxes, import duties, manufacturer’s excise taxes, or property taxes levied against the property;

007.01T(6) The cost of any license, franchise, or lease of computer software or entertainment properties such as videotapes or movie films; and

007.01T(7) Any charge required to be paid in connection with the purchase, lease, or rental of property subject to tax.

007.02 Gross receipts does not include the following:

007.02A Discounts allowed and taken on sales, (Reg-1-024, Cash Discounts);

007.02B If property is returned by the purchaser, that portion of the sales price refunded to the customer either in cash or credit, (Reg-1-025, Returned Articles);

007.02C Charges for financing, carrying charges, service charges, and interest charges for credit sales, (Reg-1-026, Finance, Carrying, Service, and Interest Charges);

007.02D The value of property accepted as partial consideration on the retail sale of other similar property, (Reg-1-029, Trade-ins or Exchanges);

007.02E The amount collected for the federal luxury excise taxes on consumers; and

007.02F The amount charged for the federal retail tax on heavy trucks, trailers, and tractors.

(Sections 77-2701.16, 77-2701.27, 77-2701.48, 77-2701.49, 77-2701.50, 77-2701.51, 77-2701.52, 77-2701.53, and 77-2703, R.R.S, 2009. November 6, 2010.)

REG-1-008 RECORDS

008.01 Retailers are Required to Keep Records. Every retailer is required to keep records necessary to determine the amount of tax due. These records must include the normal books of account ordinarily maintained by the average prudent businessperson engaged in a similar activity, together with all documents supporting entries in the books of account. Schedules and working papers used in preparing tax returns must also be retained.

008.01A Every retailer must keep exempt sale certificates, resale certificates, energy source exemption certificates, or other adequate proof to support a tax exemption for any sales. The retailer must keep all documentation necessary to support deductions from gross receipts on the tax return.

008.01B Model 1, 2, and 3 sellers may maintain records in accordance with the Streamlined Sales and Use Tax Agreement.

008.02 The records created at the time of sale may be sales slips, sales invoices, guest checks, tally sheets, itemized lists, or other memoranda. A cash register tape may be acceptable if it preserves sufficient information.

008.02A Property may be described by a symbol if the symbol is representative of a class of merchandise or services which are always taxable or tax exempt. If a retailer sells only tax exempt merchandise in a "Department P,” a description of this merchandise as "Department P" is sufficient if the retailer uses that symbol consistently to describe the same merchandise.

008.02B However, if a retailer sells several types of merchandise, both taxable and tax exempt, in a single department, his or her records must individually identify the types of merchandise which are tax exempt.

008.03 When Tax is Commingled with Receipts. A retailer who maintains records where the amount of tax collected is commingled with the receipts from the sale may determine taxable receipts in the following manner:

008.03A The receipts from any sales which are specifically exempt or otherwise excluded from sales tax are subtracted from total receipts. The remainder represents the receipts from the taxable sales plus the tax collected, and

008.03B The remainder is divided by one plus the rate of tax in effect.

008.04 Records Required to Determine Use Tax. Every person storing, using, or otherwise consuming property in Nebraska must keep receipts, invoices, and other pertinent records necessary to establish the amount of tax for which the person is liable. Any person having information relating to taxable sales of property in the person’s possession or custody, may be required at any time to submit the names and addresses of the purchasers, the sales price of the property, and the date of the sale.

008.05 Right to Examine Records. The Tax Commissioner or any person authorized in writing by the Tax Commissioner may examine the books, papers, records, electronic media, or equipment of any person to ascertain or verify the accuracy of any return filed; or, if no return is filed by the person, to ascertain and determine the amount required to be paid. The right to examine books, papers, records, electronic media, and equipment of any person includes, but is not limited to, the right to request and retain paper or electronic copies of the books, papers, records, and media.

008.06 Administrative Subpoenas. The Tax Commissioner may require persons undergoing an audit, examination, or review to provide records that are necessary to make a proper determination of the person’s compliance with, or the amount due under, the laws of this state. If warranted, the Tax Commissioner may issue an administrative subpoena.

008.06A An administrative subpoena must clearly state the scope of the demand for records and any other requirements and state when, where, and how to comply with the administrative subpoena.

008.06B An administrative subpoena may be enforced by the Attorney General, acting on behalf of the Tax Commissioner, in an action filed in the District Court of Lancaster County.

008.07 Records must be retained for a minimum of three years after the return is filed, or while any refund claim or petition for redetermination of a deficiency determination is pending, unless the Nebraska Department of Revenue (Department) authorizes their destruction in writing at an earlier date. However, the Department may issue a deficiency determination within six years after any amount of tax is determined due and payable when a properly completed return has not been filed or the amount of the deficiency exceeds 25% of the amount stated on the return.

008.08 When records are missing, all gross receipts are presumed to be taxable, or the Department may estimate a person's liability for tax based on the best available records. The person required to keep the records has the burden to show that the gross receipts are not taxable or that the estimate is incorrect.

(Neb. Rev. Stat. §§ 77-366, 77-375, 77-376, 77-377, 77-2705(7), 77-2709, and 77-2711. June 24, 2017.)

REG-1-009 ACCOUNTING METHODS

009.01 Gross sales must be reported in accordance with the method of accounting regularly employed in keeping the books of the particular taxpayer. Retailers may use either the cash basis, accrual basis, or any other generally recognized accounting basis which correctly reflects the operation of the business. When a basis of accounting has been adopted for reporting sales tax, the retailer may not change that basis of accounting without prior permission from the Department of Revenue.

009.02 Retailers maintaining their regular books and records on the cash basis shall make returns on the basis of cash received during the period, provided this basis clearly reflects the operation of the business.

009.03 Retailers maintaining their regular books and records on the accrual basis, or any other basis of accounting recognized under generally accepted accounting principles, shall make returns on that basis and shall report all sales recorded during the period on the corresponding Nebraska and Local Sales and Use Tax Return, Form 10.

009.04 As is explained in Reg-1-016, Changes in Rate of Tax, the basis on which returns are required to be made shall also serve as the basis for determining the rate at which the tax is to be collected by the retailer from the purchaser.

009.05 Retailers maintaining their books and records on the accrual basis, may elect to defer remittance of sales tax not yet collected on credit, conditional, and installment sales. If such election is made, it shall be pursuant to the following conditions:

009.05A The election must be submitted in writing to the Nebraska Department of Revenue prior to the retailer’s change in reporting,

009.05B Such election shall become effective the first day of the month following the month the notice of election is received by the Department; provided, such notice is postmarked no later than the 15th day of the month. Elections postmarked after the 15th day of the month shall become effective the first day of the next succeeding month (i.e., election notice postmarked September 10, effective date of election, October 1; election notice postmarked September 17, effective date of election, November 1.)

009.05C The election will be acknowledged by the Department; such acknowledgment is to be maintained with the retailer’s records.

009.05D This option is available only to retailers who finance their own sales or discount them to a qualified subsidiary corporation.

009.05D(1) Retailers who accept bank or similar credit cards or who discount their credit sales to a third party, may not defer the sales tax remittance on these sales. However, retailers who both carry their own credit and discount some credit sales to a third party, may defer the sales tax remittance on that portion of credit sales carried by the retailer.

009.05D(2) Retailers who discount their credit sales to a subsidiary corporation may elect to defer the sales tax until the subsidiary receives payment on the account. If the subsidiary corporation does not obtain a Nebraska sales tax permit, the retailer must obtain a surety bond in favor of the State of Nebraska in an amount not less than two (2) times the amount of sales tax payable on outstanding Nebraska accounts receivable held by the subsidiary as of the end of the prior calendar year. The Nebraska Department of Revenue will provide the necessary information and bond conditions upon written request. Each retailer maintaining a surety bond, shall review the amount of each bond at the close of each calendar year, adjusting same to reflect the minimum bond requirement.

009.05D(3) Failure of the subsidiary to maintain a sales tax permit, or of the retailer to maintain a bond in the required amount shall result in all sales tax not previously remitted on recorded sales becoming due and payable. The tax must be paid by the next required sales tax return filing date.

009.05E Once in effect, this election shall remain in force for a period of not less than one (1) year from the date the election becomes effective.

009.05F Retailers who wish to discontinue remitting under this option and remit sales tax in accordance with paragraph 009.03, are required to notify the Department. Payment of all deferred sales taxes will be remitted on their next required sales tax filing date corresponding to the tax period within which the notice is received by the Department. Should a retailer discontinue business while under this option, all deferred sales taxes must be remitted on its final sales tax return.

009.05G For retailers deferring sales tax remittances, the amount of tax due on a sale is determined by the sales tax rate in effect at the time the sale is recorded.

009.05H Retailers deferring sales tax remittances under this option do not qualify for the bad debt deduction as sales tax is remitted after the receipt of payment.(Reg-1-028, Bad Debts)

(Section 77-2701.10, 77-2703(1), and 77-2708(1)(b)(iv), R.S.Supp., 2008. February 22, 2009.)

REG-1-010 THE SALES AND USE TAX RETURN

010.01 A retailer must file a return for each reporting period or portion of a reporting period. The return must be filed for every tax reporting period even if there have been no sales.

010.02 The filing frequency is the reporting period assigned by the Nebraska Department of Revenue (Department). Except as provided below, annual returns are required if the retailer’s yearly tax liability is less than $900, quarterly returns are required if the yearly tax liability is $900 or more and less than $3,000, and monthly returns are required if the yearly tax liability is $3,000 or more.

010.02A Sellers who are Model 1, 2, or 3 sellers may follow the filing frequency guidelines outlined in the Streamlined Sales Tax Agreement (SSUTA).

010.02B Sellers who are registered under the SSUTA, but do not have a legal requirement to register in the state, and who are not Model 1, 2, or 3 sellers, may follow the filing frequency guidelines outlined in the SSUTA.

010.02C Retailers who have not obtained a permit or been assigned a filing frequency have a monthly filing frequency.

010.02D The Tax Commissioner has discretion to assign an annual return for seasonal retailers, even if the yearly tax liability exceeds the amounts listed in Reg-1-010.02.

010.03 Retailers must report and account for gross receipts.

010.03A The return includes both a sales tax return and a use tax return. Unless there are amounts, words, statements, numbers, zeros, or figures shown on the appropriate lines of a paper Nebraska and Local Sales and Use Tax Return, Form 10, mailing the form to the Department does not constitute the filing of either or both returns.

010.03A(1) If the retailer files a return, the statute of limitations for issuing a deficiency determination is three years after the last day of the month following the reporting period, or three years after the return was filed, whichever is later. If the retailer fails to file a return, the statute of limitations for issuing a deficiency determination is five years after the last day of the month following the reporting period.

010.03A(2) If the retailer does not enter amounts, words, statements, numbers, zeros, or figures on a paper Nebraska and Local Sales and Use Tax Return, Form 10, the statute of limitations for issuing a deficiency determination for that reporting period is extended beyond three years to five years. This extension of the statute of limitations does not apply to returns that are electronically filed.

010.03A(3) Statements by the retailer that no sales were made or no tax is due, or entries made by the Department to the account of the retailer indicating that no tax is due, do not constitute the filing of either or both returns and does not limit the statute of limitations to three years.

010.03B The return must be filed within 20 days following the end of the reporting period. The retailer is entitled to deduct and withhold a collection fee from the amount of sales tax which otherwise would be due. No fee may be deducted for reporting use tax or tax remitted pursuant to a direct payment permit.

010.03C The Tax Commissioner will accept the format for filing and payment methods allowed pursuant to the SSUTA.

010.03D The Tax Commissioner may require some or all taxpayers to file returns and remit payments electronically.

010.04 Unless otherwise provided in the SSUTA, the Tax Commissioner may require that returns be signed by the person required to file the return or by his or her duly authorized agent.

010.05 Returns that are not filed electronically must be properly signed.

010.06 The return and the remittance are considered timely filed if received, delivered, or mailed, postage prepaid, on or before the 20th day of the month following the close of the reporting period. When the last day falls on a Saturday, Sunday, or an approved holiday, the return is considered timely filed if received, delivered, or mailed, postage prepaid, on the next day which is not a Saturday, Sunday, or an approved holiday.

010.06A A United States Postal Service postmark is conclusive evidence of the date of mailing for the purpose of timely filing a return.

010.06B A private postage meter date or a date stamped by a private delivery service will be considered the date of mailing if the date of the stamp is no more than four days before the date the return is received by the Department, excluding Saturdays, Sundays, or approved holidays. If the date of the stamp is more than four days before the date the return is received by the Department, the return is considered filed on the date received.

010.06C Failure to file the return or to remit the tax due by the due date will subject the taxpayer to a penalty equal to 10% of the unpaid tax or $25.00, whichever is greater. Interest is imposed at the rate specified in Neb. Rev. Stat. § 45-104.02 from the due date to the date payment is received.

010.07 Remittance must be in the form of a electronic funds transfer, check, credit card, draft, money order, or other payment method as approved by the Tax Commissioner, made payable to the Nebraska Department of Revenue. Cash, post-dated checks, or postage stamps cannot be sent as payment. Cash may be used when payment is made in person at an office of the Department.

010.08 If any understatement on a return is a result of fraud or an intent to evade the sales or use tax, a penalty of 25% of the amount of the understatement or $50, whichever is greater, may be assessed.

010.09 Criminal Penalties

010.09A Any person required to collect, account for, or pay over any sales or use taxes who willfully fails to collect, truthfully account for, or pay over these taxes is guilty of a Class IV felony.

010.09B Any person who willfully attempts in any manner to evade any sales or use taxes is guilty of a Class IV felony.

010.09C Any person who willfully assists in or advises in preparing or filing a false or fraudulent return, is guilty of a Class IV felony, whether or not the falsity or fraud is with the knowledge or consent of the person authorized or required to file the return.

(Neb. Rev. Stat. §§ 77-1784, 77-2705.01, 77-2708(1), 77-2709, 77-2712.05, 77-2713, and 77-27,125, and McDonald’s Executive Offices v. Nebraska Department of Revenue, 243 Neb. 82 (1993). July 3, 2013.)

REG-1-011 BRACKET SYSTEM FOR ADDING AND COLLECTING SALES TAX

011.01 A bracket system correlating sales price to the appropriate sales or use tax charge may be used by the seller. Copies of the bracket schedule established by the Department of Revenue are available upon request.

011.02 The sales or use tax liability may be computed by multiplying the sales price by the applicable tax rate in effect. All persons using machine or computer billing are authorized by the Department of Revenue to use a straight percentage basis of calculating the tax on such billings. If the calculation of the tax results in a fraction of a cent, the tax liability should be carried to the third decimal place and rounded to the nearest whole cent. If the third decimal place is four or less, round down and if the third decimal place is greater than four, round up.

011.03 Although retail sales may be made on which no tax is collected because of the size of the sale, e.g., a 10-cent sale, the receipts from such sales are included in taxable sales on which the retailer must compute and remit the tax.

011.04 When more than one item is purchased, the tax may be computed on the total amount of the combined taxable purchases or on the individual items. However, when the tax is allowed to be included in the amount of the purchase, the tax is computed on each item separately, rather than on the total of all purchases.

(Section 77-3,117, R.R.S. 2003, and section 77-2703(1)(d), R.S.Supp., 2004. April 12, 2005.)

REG-1-012 EXEMPTIONS

012.01 Certain transactions are exempt from sales and use taxes. Transactions may be exempt because of:

012.01A The seller (entity-based exemption);

012.01B The item sold (product-based exemption);

012.01C The buyer (entity-based exemption);

012.01D The buyer's intended use of the item (use-based exemption); or

012.01E A combination of two or more of these characteristics.

012.02 There is no single, comprehensive list of transactions, items, entities, and uses that are exempt from sales and use taxes. Each transaction must be evaluated individually to determine if an exemption applies. Refer to the website of the Nebraska Department of Revenue (www.revenue.nebraska.gov) for a list of most exemptions and separate regulations that define, explain, and describe limitations on the exemptions.

(Neb. Rev. Stat. § 77-2712.05(3). June 24, 2017.)

REG-1-013 SALE FOR RESALE — RESALE CERTIFICATE

013.01 A sale for resale is a sale of property (services) to any purchaser for the purpose of resale in the normal course of the purchaser’s business. The property may be resold either in the form or condition in which it was purchased, or as an ingredient or component part of other property. (Reg-1-023, Component Parts--Manufacturing, Processing, and Fabrication) A sale for resale includes a sale of property to a purchaser for the sole purpose of leasing or renting the property to others, if the lease or rental payments are at a fair market value.

013.01A Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts.

013.01B A sale for resale does not include the sale of property to a purchaser whose subsequent lease or rental of that property is incidental to the lease or rental of real estate.

013.02 The burden of proving that a sale of property is not a sale at retail is on the retailer (seller) unless the retailer accepts a properly completed resale certificate or obtains the relevant data elements showing that the property is purchased for the purpose of reselling, leasing, or renting in the regular course of the purchaser’s business or is to be used as an ingredient or component part of other property to be sold, leased, or rented. The resale certificate is a part of the retailer’s records and must be retained in the same manner as other sales tax records.

013.03 A properly completed resale certificate received from the purchaser is proof for the retailer that the sale was for resale.

013.03A To be properly completed, a resale certificate received before, in conjunction with, or within 90 days after the time of the sale must be fully completed as provided in subdivisions 013.03B(1) through 013.03B(4). A resale certificate received within 120 days after a request for substantiation made by the Department of Revenue (Department) must be both fully completed and accepted in good faith to be properly completed.

013.03B To be fully completed, the resale certificate must include all of the following:

013.03B(1) Identification of both the purchaser and the retailer including the type of business engaged in by the purchaser, and the reason for the exemption;

013.03B(2) The sales tax permit number of the purchaser. If the purchaser is licensed as a retailer in Nebraska or another state which requires a permit, the resale certificate must include the sales tax permit number. If the purchaser has no sales tax permit number, the resale certificate must state the reason the purchaser has no sales tax permit number;

013.03B(3) If a paper resale certificate is used, an authorized signature. In other cases, another form of authorization as allowed by the Streamlined Sales and Use Tax Agreement (SSUTA); and

013.03B(4) The date of issuance.

013.04 If a purchaser who gives a resale certificate makes any use of the property other than retention, demonstration, or display while holding it for sale, lease, or rental in the regular course of business, this use removes it from the “sale for resale” exemption category and the use is taxable to the purchaser at the time the property is first used for a purpose other than resale. Except for a purchaser of aircraft as provided in Reg-1-067, Aircraft and Related Services, the sales price of the property is the measure of the tax base. (See Reg-1-035, Consumption of Untaxed Property)

013.05 The retailer or certified service provider (CSP) holding a properly completed resale certificate is relieved from liability for tax, penalty, and interest. However, retailers or CSPs who fraudulently fail to collect tax or who solicit purchasers to participate in unlawful claims of exemption are liable for the tax not collected, and any penalty and interest.

013.06 A retailer or CSP who has a recurring business relationship with the purchaser is not required to obtain a separate resale certificate for each sale, but may accept a “blanket” resale certificate covering future sales. A recurring business relationship exists when sales occur at least once every 12 months.

013.07 Sales where the retailer is required to make delivery outside of Nebraska need not be supported by resale certificates if the sales are supported by bills of lading, certificates of out-of-state delivery, or other documentation. However, where delivery to the out-of-state purchaser, or an agent of the purchaser, occurs in this state, sales tax must be collected unless the sale is otherwise exempt, in which case the retailer may accept a properly completed resale or exempt sale certificate.

013.08 If a resale certificate or satisfactory evidence of the data elements in support of a claim that a sale is exempt cannot be produced for the Department within the time frames noted below, the retailer making the sale is responsible for the tax on the transaction.

013.08A Retailers or CSPs are relieved from liability for the tax if a properly completed resale certificate is received or if the retailer or CSP otherwise obtains the relevant data elements supporting the exemption, prior to, in conjunction with, or within 90 days after the date of the sale.

013.08B Retailers or CSPs are relieved from liability for the tax if a properly completed resale certificate is accepted in good faith, or if the retailer or CSP otherwise obtains the relevant data elements supporting the exemption, within 120 days after a request for substantiation made by the Department.

013.08C Retailers or CSPs may only accept a fully completed resale certificate under subsection 013.08B of this section with a good faith belief that the purchase is a valid sale for resale to be relieved from liability. If the resale certificate is not received in good faith, the retailer or CSP is liable for the tax not collected, and any penalty and interest.

013.09 Any purchaser, or agent of the purchaser, who issues a resale certificate to the retailer for any purchase taxable under the Nebraska Revenue Act, which is purchased for a use other than resale, lease, or rental in the regular course of the purchaser’s business, is subject to a penalty of $100 or ten times the tax, whichever is larger, for each instance of presentation and misuse. With regard to a blanket resale certificate, the penalty applies to each purchase made during the period the blanket certificate is in effect.

013.10 Any purchaser, or agent of the purchaser, who fraudulently signs a resale certificate with intent to avoid payment of the tax may, in addition to the penalty set out in section 013.09, be found guilty of a Class IV misdemeanor.

013.11 The Department will recognize only the Nebraska Resale or Exempt Sale Certificate, Form 13, a previously approved paper or electronic substitute for this Form 13, the Multistate Tax Commission Uniform Sales and Use Tax Certificate, or a certificate of exemption authorized by the SSUTA.

013.12 Retailers must maintain records of resale transactions. The Department may make and retain copies of any resale certificates.

(Sections 77-2701.34, 77-2703(1)(f), 77-2706(1), (2), (3), and (4), 77-2706.01, and 77-2711(4), R.R.S. 2009. November 6, 2010.)

REG-1-014 EXEMPT SALE CERTIFICATE

014.01 Certain sales, leases, or rentals, and the storage, use, or other consumption of property (services) are not taxable. Exempt transactions may be divided into four groups. The four groups are transactions that are exempt due to the characteristics of:

014.01A The retailer (seller) (entity-based exemption);

014.01B The property sold (product-based exemption);

014.01C The buyer (entity-based exemption); and

014.01D The buyer’s intended use of the item (use-based exemption).

Transactions described in subsections 014.01A and 014.01B do not need to be supported by exempt sale certificates, provided the retailer’s records clearly show the nature of the retailer and the property being sold. A purchaser making a purchase that is exempt because it is an occasional sale is required to obtain an exempt sale certificate or other documentation from the retailer that the sale was exempt.

Transactions described in subsections 014.01C and 014.01D must be supported by exempt sale certificates or other suitable documentation. (See Reg-1-012, Exemptions)

014.02 The burden of proving that any sale of property is not taxable is on the retailer and sufficient records must be kept which reveal the nature of each exempt sale. A retailer must obtain an exempt sale certificate or obtain the relevant data elements from the purchaser in support of the claim that the sale is exempt. The exempt sale certificate is a part of the retailer’s records and must be retained in the same manner as other sales tax records.

014.03 Exemption numbers in the form of numbered certificates of exemption are issued by the Nebraska Department of Revenue (Department) and must be provided by nonprofit organizations, public schools, and common or contract carriers when making exempt purchases. (See Reg-1-069, Common and Contract Carrier Vehicles, Reg-1-090, Nonprofit Organizations, and Reg-1-092, Educational Institutions)

014.04 The following organizations are not issued numbered certificates of exemption by the Department: The United States government, its agencies, and corporations wholly owned by the United States government; the state, its agencies, and political subdivisions, other than public schools. Purchases by many Nebraska political subdivisions, all other states, and all political subdivisions of other states are taxable except for purchases of industrial machinery and equipment, including repair parts, where the other state grants a reciprocal exemption for Nebraska or its political subdivisions.

014.05 A properly completed exempt sale certificate received from the purchaser is adequate proof for the retailer that the sale was exempt from the sales and use tax.

014.05A To be properly completed, an exempt sale certificate received before, in conjunction with, or within 90 days after the time of the sale must be fully completed as provided in subdivisions 014.05B(1) through 014.05B(5). An exempt sale certificate received within 120 days after a request for substantiation made by the Department must be both fully completed and accepted in good faith to be properly completed.

014.05B To be fully completed, the exemption certificate must include all of the following:

014.05B(1) Identification of both purchaser and retailer;

014.05B(2) A statement of the basis for exemption, including the type of activity engaged in by the purchaser;

014.05B(3) A statement that the certificate is for a single purchase or is a blanket certificate covering future sales;

014.05B(4) If a paper certificate is provided, an authorized signature. In other cases, another form of authorization as allowed by the Streamlined Sales and Use Tax Agreement (SSUTA); and

014.05B(5) The date of issuance.

014.06 The retailer or certified service provider (CSP) holding a properly completed exempt sale certificate is relieved from liability for tax, penalty, and interest. However, retailers or CSPs who fraudulently fail to collect tax or who solicit purchasers to participate in unlawful claims of exemption are liable for the tax not collected, and any penalty and interest.

014.07 A retailer or CSP who has a recurring business relationship with the same purchaser is not required to obtain a separate exempt sale certificate for each sale but may accept a “blanket” certificate covering future sales. A recurring business relationship exists when sales occur at least once every 12 months.

014.08 If an exempt sale certificate or satisfactory evidence in support of a claim that a sale is exempt cannot be provided to the Department within the time frames noted below, the retailer making the sale is responsible for the tax on the transaction.

014.08A Retailers or CSPs are relieved from liability for tax if a properly completed exemption certificate is received, or if the retailer or CSP otherwise obtains the relevant data elements supporting the exemption, prior to, in conjunction with, or within 90 days after the date of the sale.

014.08B Retailers or CSPs are relieved from liability for the tax if a properly completed exemption certificate is accepted in good faith, or if the retailer or CSP otherwise obtains the relevant data elements supporting the exemption in good faith, within 120 days after a request for substantiation made by the Department.

014.08C Retailers or CSPs may only accept a fully completed exemption certificate under subsection 014.08B of this section with a good faith belief that the purchase is a valid exempt sale to be relieved from liability. If the exemption certificate is not received in good faith, the retailer or CSP is liable for the tax not collected, and any penalty and interest.

014.09 Any purchaser, or agent of the purchaser, who issues an exempt sale certificate to the retailer for any purchase which is not exempt from sales and use tax under the Nebraska Revenue Act, is subject to a penalty of $100 or ten times the tax, whichever is larger, for each instance of presentation and misuse. With regard to a blanket exempt sale certificate, the penalty applies to each purchase made during the period the blanket certificate is in effect.

014.10 Any purchaser, or agent of the purchaser, who fraudulently signs an exempt sale certificate with intent to avoid payment of the tax may, in addition to the penalty set out in section 014.09, be found guilty of a Class IV misdemeanor.

014.11 The Department will recognize only the Nebraska Resale or Exempt Sale Certificate, Form 13, a previously approved paper or electronic substitute, a Nebraska Energy Source Exemption Certificate, Form 13E, a Nebraska Certificate of Exemption for Mobility Enhancing Equipment, Form 13ME, or a certificate of exemption authorized by the SSUTA for all sales except sales to the federal government. Sales to the federal government, or an agency or wholly owned corporation of the federal government, may be supported in either of two ways. First, the exemption may be supported by a regular federal certificate of exemption form. An alternative procedure is maintaining purchase documentation clearly identifying the purchaser as the federal government, or an agency or wholly owned corporation of the federal government. The best documents available are those which show payment was made by a United States Treasury Department warrant. (Reg-1-072, United States Government and Federal Corporations)

014.12 Retailers must maintain records of exempt transactions. The Department may make and retain copies of any exempt sale certificate.

(Sections 77-2703(1)(f), 77-2705(7) and (8), 77-2706, 77-2711(3)(a) and (4), and 77- 2713(5), R.R.S. 2009. November 6, 2010.)

REG-1-015 COMMON AND CONTRACT CARRIERS (MULTISTATE OPERATIONS) - TAX DEFERRAL

015.01 Any person, firm, or corporation operating as a common or contract carrier engaged in multistate operations, may apply to the Nebraska Department of Revenue for special permission to defer the incidence of the sales and use tax on certain purchases within or without this state, where the item purchased is first stored here for subsequent use in multistate operations, and at the time of purchase, the final location of the use of the item is unknown. The special permission referred to in this regulation is not related to the common and contract carrier exemption referred to in Reg-1-069, Common and Contract Carrier Vehicles.

015.02 Upon receipt of a request for permission to defer taxes, an investigation will be made to determine whether the applicant maintains satisfactory records to show where the purchased property is actually used. Such request must be written and be accompanied by a $10.00 fee. If a favorable report results from the investigation, the Nebraska Department of Revenue will issue a special permission letter to the respective common or contract carrier. This special permission letter is issued in the form of a certificate of exemption. The common or contract carrier receiving the letter should furnish a copy of the letter to those vendors from whom purchases are made where use is unknown at the time of purchase in order that sales or use tax will be excluded from such purchases. Such letter shall not be used when purchases are made which knowingly have been or will be used or consumed within this state.

015.03 A retailer (seller) repeatedly making the same type of exempt sale to common or contract carriers need not take a separate copy of the special permission letter for each sale but may, at his or her risk, take a blanket certificate covering all future sales. If the Nebraska Department of Revenue determines that any such sale was not exempt, the retailer (seller) shall be liable for the tax, penalty, and interest. If a single special permission letter is taken, identification of the common or contract carrier must appear upon the memoranda created at the time of sale.

015.04 When items that were purchased tax exempt are later used in this state by the common or contract carrier, use tax is due at the applicable rate in effect at the time of use. This liability must be reported on the appropriate return to be filed for the period corresponding to the month of use.

(Section 77-2706(6), R.R.S. 1943.January 24, 1993.)

REG-1-016 CHANGES IN RATE OF TAX

016.01 The rate at which the sales and use tax is imposed is subject to change or the base may be altered by legislation which extends the tax to transactions previously not taxed. The purpose of this regulation is to set out the manner in which such occurrences will affect the tax on sales and purchases made where pre-existing contracts or obligations are involved so that retailers and consumers alike can take note of possible increases for which they may become liable.

016.02 For sales, leases, or rentals, the sales tax is imposed and shall be collected and remitted by the retailer at the rate in effect at the time the gross receipts are recorded as sales under the accounting method used by the retailer to maintain his or her books and records. A lease or rental agreement which extends through a tax rate change, will recognize the changed tax rate on payments recorded on or after the rate change. (Reg-1-009, Accounting Methods.)

016.02A For the rental or lease of a motor vehicle, the sales tax is imposed at the rate in effect at the time of the delivery of the motor vehicle regardless of changes in the rate during the term of the lease.

016.03 If the use tax is not required to be remitted at the time of purchase, the applicable use tax rate is that rate in effect at the time of use according to the accounting basis used to maintain the taxpayer’s books and records.

016.04 The retailer on a cash basis of accounting will collect and report the tax at the rate in effect at the time he or she receives a payment without regard to whether the payment is in satisfaction of an obligation predating a change in the rate. The retailer using an accrual basis of accounting will collect and report the tax at the rate in effect at the time he or she records the sale.

016.05 Persons providing services covering a period starting before, and ending after, the effective date of a rate change will bill tax as follows: (a) for a rate increase, the change will apply to the first billing period starting on or after the effective date of the change; and (b) for a rate decrease, the change will apply to bills rendered on or after the effective date of the change.

016.06 When construction contractors operating under either Option 2 or Option 3 purchase construction materials to be consumed by them, they are obligated to pay the tax on the same basis as other consumers without regard to whether the purchase of such materials is for use in completion of a construction contract executed prior to a change in the rate. However, when a written contract exists for a fixed-price construction, reconstruction, alteration, or improvement project and the sales tax rate is increased during the term of that fixed-price contract, the contractor may apply for a refund of the increased sales tax; provided, such refund amount exceeds ten dollars ($10.00). The contractor must submit a copy of the contract and any other evidence necessary to establish his or her entitlement to the refund.

016.06A In the event that the sales tax rate is decreased during the term of the fixed-price contract, the contractor shall pay to the Department of Revenue the difference between the decreased tax rate and the tax rate in effect prior to the decrease; provided, the amount of such payment exceeds ten dollars ($10.00). This procedure results in the contractor’s final sales tax liability on fixed-price written contracts, to equal the rate in effect at the time the contract was entered into.

016.07 For fixed-price contracts in which the contractor labor is taxable and which were in progress on October 1, 2007, the date on which such contractor labor became exempt, the taxpayer shall pay to the Department of Revenue the difference between the decreased tax collected and the tax that would have been due on the contractor labor prior to the change; provided, the amount of such payment exceeds ten dollars ($10.00). Failure to make the required payment constitutes a criminal act.

(Section 77-2701.03, R.R.S. 2003, and sections 77-2703(1) and (2), 77-2704.32, and 77-2704.33, R.S.Supp., 2008. February 22, 2009.)

REG-1-017 CONTRACTORS

017.01 Gross receipts from construction projects or the repair of real estate or fixtures are generally exempt from sales or use tax, except as otherwise stated in this regulation. In most cases, sales or purchases of building materials are taxable.

017.02 The following definitions will be used for all regulations in Title 316, Chapter 1.

017.02A Annexed means attached to real estate so that: (1) the property becomes real estate; or (2) the installation or removal of the property requires specialized skills or tools and is performed or supervised by a recognized trade professional.

017.02B Building means any free-standing structure enclosed within a roof and exterior walls. It does not have to be enclosed on all sides. It is designed for the housing, shelter, enclosure, and support of individuals, animals, manufacturing, or property of any kind. It must be annexed to the land.

017.02B(1) A building includes manufactured housing that is either set up for occupancy as a dwelling according to local building codes, or that is permanently annexed to real estate. (See Reg-1-018, Rent or Lease of Tangible Personal Property.)

017.02C Building materials mean any property, including fixtures, that will be annexed to the land or an improvement on the land. Building materials do not include tools, supplies, or any items that will not be annexed.

017.02D Contractor means any person who repairs property annexed to, or who annexes property to, real estate, including leased property, by attaching building materials to the annexed property or improvement being built or repaired, or who arranges for annexation of property.

017.02E Demarcation point means the point at which the wire or cable that is owned and maintained by a telephone or cable company is connected to the inside station wiring owned by and dedicated to the customer’s use.

017.02F Fixture means a piece of equipment that must be annexed to the building or structure in order to properly function, yet remains identifiable as a separate item. Examples are central air conditioners, water heaters, garbage disposals, built-in dishwashers, and furnaces.

017.02G Live plants means and includes trees, shrubs, flowers, and sod. Live plants do not include seeds.

017.02H Option 1 contractor means a contractor who has elected to be taxed as a retailer of building materials with a tax-exempt inventory or a contractor who has not made an election. See section 017.05 of this regulation.

017.02I Option 2 contractor means a contractor who has elected to be taxed as the consumer of building materials with a tax-paid inventory. See section 017.06 of this regulation.

017.02J Option 3 contractor means a contractor who has elected to be taxed as the consumer of building materials with a tax-free inventory. See section 017.07 of this regulation.

017.02K Recognized trade professional means any person required to be licensed to practice his or her trade, such as a plumber or electrician.

017.02L Supplies mean items consumed or used during construction that do not become a part of the building or structure.

017.02M Structure means any construction composed of building materials arranged and fitted together in some way and annexed to land, such as a bridge, highway, street light, dam, television tower, fence, sewer, water line, or billboard.

017.03 Contractors may choose how they want to treat building materials for tax purposes. There are three options available to the contractor for the taxation of building materials. The choice of an option is made by the Nebraska Department of Labor’s online Contractor/Subcontractor Registration Application located at www.dol.nebraska.gov. The contractor/subcontractor registration information, including the contractor option elected, is displayed in the Contractor Registration Database. Before performing any construction work in Nebraska, a contractor must be registered in the Contractor Registration Database.

017.03A The option selected applies to all construction contracts. A contractor may not operate under more than one option at the same time.

017.03B If the registration application is not completed or an election is not made, the contractor will be treated as a retailer under Option 1 for sales and use tax purposes.

017.04 Contractors may change their option using the Department of Labor’s website (www.dol.nebraska.gov) for contractor/subcontractor registration. The new contractor option applies to all contracts in progress and also to all new contracts.

017.04A Any contractor who changes from a tax-free inventory (Option 1 or Option 3) to a tax-paid inventory (Option 2) must remit use tax to the Department of Revenue (Department) on all building materials in inventory on the date the change is effective. The contractor must also begin paying sales tax on all purchases as of the date the change is effective. Option 1 contractors must also remit use tax on any building materials on which sales or use tax has not already been paid or collected that has been incorporated into an ongoing project.

017.04B Any contractor who changes from a tax-paid inventory (Option 2) to a tax-free inventory (Option 1 or Option 3) will receive a credit for the sales or use tax previously paid on its building materials in inventory at the time the contractor option change becomes effective. To receive the credit, the contractor must submit a signed statement to the Department that details the amount of credit to which it is entitled. The credit will be placed on the contractor’s account and can be used as the building materials that were in inventory are annexed and payments become due to the Department. The contractor is not entitled to a refund of any sales or use tax previously paid on the building materials in inventory.

017.05 OPTION 1-To be treated as a retailer with a tax exempt inventory.

017.05A Option 1 contractors are retailers of building materials that become annexed. All Option 1 contractors must have a Nebraska Sales Tax Permit.

017.05B Option 1 contractors must pay sales tax or remit use tax on all tools, supplies, equipment, scaffolding, and barricades purchased, rented, or leased; and on all purchases of taxable services such as building cleaning, pest control, and security services. Option 1 contractors cannot purchase these items exempt for resale or by using a Purchasing Agent Appointment.

017.05C Buildings and Structures, Construction and Repair.

017.05C(1) Option 1 contractors must collect sales tax from all of their customers, including contractors, on the total amount charged for building materials they annex to real estate or use to repair fixtures or property annexed to real estate, even if they sell a building or structure.

017.05C(2) Option 1 contractors who fabricate, produce, or repair building materials that they subsequently annex to real property will not collect sales tax on these labor charges if the labor charges are separately stated.

017.05C(3) Fabrication, production, or repair labor performed by another person on building materials for an Option 1 contractor are part of the cost of the building materials. The Option 1 contractor must collect sales tax on the total amount charged to the customer for building materials, including these labor charges, which are annexed to real estate by the Option 1 contractor. (Reg-1-082, Labor Charges.)

017.05C(4) Option 1 contractors will not normally collect sales tax on separately stated labor charges of the Option 1 contractor. (Reg-1-082, Labor Charges.)

017.05C(4)(a) Option 1 contractors who charge one amount for both building materials and labor must collect sales tax on the total amount charged.

017.05C(5) Option 1 contractors may purchase all building materials and other property for resale without paying sales tax by issuing to the vendor a properly completed Nebraska Resale or Exempt Sale Certificate, Form 13, Section A.

017.05C(5)(a) Option 1 contractors must pay sales tax or remit use tax on all charges for building materials annexed by another Option 1 subcontractor.

017.05C(5)(b) Option 1 contractors are not required to remit use tax on building materials annexed in a construction project that is in another state or in a construction project that is outside the United States.

017.05C(5)(c) Option 1 contractors may purchase for resale any fabrication, production, or repair labor performed by another person on building materials that will be annexed to real estate by the Option 1 contractor.

017.05D Property not Annexed.

017.05D(1) Option 1 contractors are retailers of building materials or other property that is not annexed. Option 1 contractors must collect sales tax on the total amount charged unless the sale is otherwise exempt.

017.05D(2) Option 1 contractors must collect sales tax on the total amount charged for installation of tangible personal property that does not become annexed to real estate. Tangible personal property that normally does not become annexed includes draperies, window air conditioners, and silt fencing.

017.05D(3) Silt fencing is not annexed to real estate. Silt fencing is similar to tools or supplies used by a contractor to complete its construction contract.

017.05D(3)(a) Option 1 contractors who only install silt fencing are making retail sales and must collect sales tax on the total amount charged.

017.05D(3)(b) Option 1 contractors who install silt fencing as part of their construction contract are the consumers of the silt fencing materials and must pay sales tax or remit use tax on their cost of the silt fencing materials.

017.05D(3)(c) Option 1 contractors must pay sales tax or remit use tax on the total amount paid for the silt fencing materials and labor to another person who only installs silt fencing. Option 1 contractors cannot purchase silt fencing tax-exempt for resale.

017.05D(4) Option 1 contractors must collect sales tax on the total amount charged for repairing or fabricating tangible personal property that is not annexed by the Option 1 contractor (Reg-1-082, Labor Charges.).

017.05D(5) Option 1 contractors who provide taxable services such as building cleaning, pest control, or security services are making retail sales and must collect sales tax on the total amount charged for these services. (See Reg-1-098, Building Cleaning and Maintenance; Reg-1-100, Pest Control Services; and Reg-1-101, Security and Detective Services.)

017.05E Telephone, Cable, Satellite Services, and Other Utilities.

017.05E(1) Option 1 contractors who install, construct, service, repair, replace, upgrade, or remove outlets, wire, cable, satellite dishes or receivers, or any other property for telephone, telegraph, cable, satellite services, and mobile telecommunication services on the general distribution system or on the customer’s side of the demarcation point must collect sales tax on the total amount charged for the materials and labor regardless of whether the property is annexed or remains tangible personal property.

017.05E(2) If any or all of the charge for installation of tangible personal property is paid to the Option 1 contractor by a third-party service provider, any sales or use tax due on that part of the activation commission, finder’s fee, installation charge, or similar payment made by the third-party service provider must be paid to the Department by the third-party service provider (Reg-1-081, Community or County Antenna Television Services.)

017.05E(3) Option 1 contractors will not collect sales tax on labor charges for installing or connecting gas, electricity, sewer, and water services.

017.05F Manufacturing Machinery and Equipment. (Reg-1-107 Manufacturing Machinery and Equipment Exemption.)

017.05F(1) Option 1 contractors will not collect sales tax on qualifying manufacturing machinery and equipment sold to a manufacturer whether the equipment remains tangible personal property or is annexed if the Option 1 contractor obtains a properly completed Resale or Exempt Sale Certificate, Form 13, from the manufacturer. (Reg-1-107, Manufacturing Machinery and Equipment Exemption.)

017.05F(2) Option 1 contractors will not collect sales tax on the installation or repair of qualified manufacturing machinery and equipment if the Option 1 contractor obtains a properly completed Resale or Exempt Sale Certificate, Form 13, from the manufacturer.

017.05F(3) Option 1 contractors will not collect sales tax on the amount charged for repair or replacement parts or accessories purchased for use in maintaining, repairing, or refurbishing qualified manufacturing machinery and equipment if the Option 1 contractor obtains a properly completed Resale or Exempt Sale Certificate, Form 13, from the manufacturer.

017.05F(4) Option 1 contractors may purchase qualified manufacturing machinery and equipment for resale by issuing a properly completed Resale or Exempt Sale Certificate, Form 13, to the seller.

017.05G Live Plants.

017.05G(1) Option 1 contractors planting live plants must collect sales tax on the total amount charged for the live plants and on the labor charge for installation of the live plants.

017.05G(2) Option 1 contractors who annex building materials and install live plants, must collect sales tax on the total amount charged, unless the labor charges for annexing the building materials are separately stated from the labor charges for installing live plants.

017.05G(3) Option 1 contractors must pay sales tax or remit use tax on all live plants and the installation for the live plants installed by another person.

017.05H Exempt Organizations and Exempt Governmental Units.

017.05H(1) Option 1 contractors annexing building materials for exempt organizations or exempt governmental units will not collect tax on the building materials when the exempt organization or exempt governmental unit has followed the procedures in section 017.08 of this regulation.

017.05H(2) Option 1 contractors will not collect sales tax on qualified materials for use in a community-based energy development (C-BED) project.

017.05I Direct Pay Permits.

017.05I(1) Option 1 contractors who annex building materials for a project owner holding a valid direct pay permit may accept a copy of the direct pay permit and will not collect sales tax on the amount charged directly to the project owner for the building materials.

017.06 OPTION 2-To be treated as a consumer with a tax-paid inventory.

017.06A Option 2 contractors are consumers of building materials that become annexed. Option 2 contractors who make sales described in subsections 017.06D, 017.06E, or 017.06G are retailers and must have a Nebraska Sales Tax Permit.

017.06B Option 2 contractors must pay sales tax or remit use tax on all tools, supplies, equipment, scaffolding, and barricades purchased, rented, or leased; and on all purchases of taxable services such as building cleaning, pest control, and security services. Option 2 contractors cannot purchase these items exempt for resale or by using a Purchasing Agent Appointment.

017.06C Buildings and Structures, Construction and Repair.

017.06C(1) Option 2 contractors will not normally collect sales tax on any repairs or improvements to real estate or property annexed to real estate.

017.06C(2) Option 2 contractors who fabricate, produce, or repair building materials that they subsequently annex to real property will not collect sales tax on these labor charges if the labor charges are separately stated.

017.06C(3) Option 2 contractors must pay sales tax on all building materials and other taxable items when purchased or received.

017.06C(3)(a) Option 2 contractors must remit use tax directly to the Department on all building materials and other taxable items on which no sales tax has been paid when the materials or other items are received.

017.06C(3)(b) Option 2 contractors must pay sales tax or remit use tax on all charges for building materials annexed by an Option 1 subcontractor.

017.06C(3)(c) Option 2 contractors must pay sales or remit use tax on fabrication, production, or repair labor performed by another person on building materials which are annexed to real estate by the Option 2 contractor. (Reg-1-082, Labor Charges.)

017.06C(4) Option 2 contractors are not allowed a credit or refund for sales or use taxes paid on building materials subject to sales tax, that are withdrawn from tax-paid inventory for annexation to real estate in another state.

017.06C(4)(a) Option 2 contractors may receive a credit or refund for use tax paid on building materials that are withdrawn from inventory for annexation to real estate in another state only if the seller of the building materials is not licensed to collect sales tax in this state and is not engaged in business in this state. (Reg-1-004.02 for definition of “engaged in business in this state.”)

017.06C(4)(b) Option 2 contractors may receive a credit or refund of tax paid on building materials used in a construction project that is outside the United States.

017.06D Property not Annexed.

017.06D(1) Option 2 contractors are retailers for any sales of building materials or other property that is not annexed. Option 2 contractors must collect sales tax on the total amount charged unless the sale is otherwise exempt.

017.06D(1)(a) When retail sales of tax-paid inventory items are made, the Option 2 contractor must collect sales tax on the full sales price. The tax reported to the Department will be the difference between the Nebraska and local option tax the contractor previously paid on the items and the tax collected from the customer.

017.06D(2) Option 2 contractors must collect sales tax on the total amount charged for installation of tangible personal property that does not become annexed to real estate. Tangible personal property that normally does not become annexed includes draperies, window air conditioners, and silt fencing.

017.06D(3) Silt fencing is not annexed to real estate. Silt fencing is similar to tools or supplies used by a contractor to complete its construction contract.

017.06D(3)(a) Option 2 contractors who only installs silt fencing are making retail sales and must collect sales tax on the total amount charged.

017.06D(3)(b) Option 2 contractors who install silt fencing as part of their construction contract are the consumers of the silt fencing materials and must pay sales tax or remit use tax on their cost of the silt fencing materials.

017.06D(3)(c) Option 2 contractors must pay sales tax or remit use tax on the total amount paid for the silt fencing materials and labor to another person who only installs silt fencing.

017.06D(4) Option 2 contractors must collect sales tax on the total amount charged for repairing or fabricating tangible personal property that is not annexed by the Option 2 contractor (Reg-1-082, Labor Charges.)

017.06D(5) Option 2 contractors who provide taxable services such as building cleaning, pest control, or security services are making retail sales and must collect sales tax on the total amount charged for these services. (Reg-1-098, Building Cleaning and Maintenance; Reg-1-100, Pest Control Services; and Reg-1-101, Security and Detective Services.)

017.06D(6) Option 2 contractors may purchase items tax-exempt when these items will be resold without being annexed.

017.06E Telephone, Cable Satellite Services, and Other Utilities.

017.06E(1) Option 2 contractors who install, construct, service, repair, replace, upgrade, or remove outlets, wire, cable, satellite dishes or receivers, or any other property for telephone, telegraph, cable, satellite services, and mobile telecommunications services must collect sales tax as follows:

017.06E(1)(a) Option 2 contractors must collect sales tax on the total amount charged when working on the service provider’s side of the demarcation point (i.e., the general distribution system) whether the property is annexed or remains tangible personal property.

017.02E(1)(b) Option 2 contractors must collect sales tax on the total amount charged when acting as a subcontractor for a telephone, telegraph, or mobile telecommunications service provider on the customer’s side of the demarcation point.

017.02E(1)(c) Except as provided in subsection 017.06E(1)(b), Option 2 contractors will not collect sales tax when working on the customer’s side of the demarcation point.

017.02E(1)(d) Option 2 contractors will not collect sales tax on labor charges for installing or connecting gas, electricity, sewer, and water services.

017.06E(2) Option 2 contractors must pay sales tax or remit use tax on all of their purchases of wire, cable, outlets, and other property used to install or construct telephone, telegraph, cable, satellite services, and mobile telecommunications services.

017.02E(3) If any or all of the charge for installation of tangible personal property is paid to the Option 2 contractor by a third-party service provider, any sales or use tax due on that part of the activation commission, finder’s fee, installation charge, or similar payment made by the third-party service provider must be paid to the Department by the third party service provider. (Reg-1-081, Community and County Antenna Television Service.)

017.06F Manufacturing Machinery and Equipment. (Reg-1-107, Manufacturing Machinery and Equipment Exemption.)

017.06F(1) Option 2 contractors must pay sales tax or remit use tax on all manufacturing machinery and equipment and any related repair or replacement parts they purchase and annex for a manufacturer.

017.06F(1)(a) Option 2 contractors cannot purchase these items without paying tax even if they have a Nebraska Resale or Exempt Sale Certificate, Form 13, or a Purchasing Agent Appointment and Delegation of Authority for Sales and Use Tax, Form 17, from a manufacturer.

017.06F(2) Option 2 contractors will not collect sales tax on charges to install, or repair qualified manufacturing machinery and equipment.

017.06G Live Plants.

017.06G(1) Option 2 contractors planting live plants must collect sales tax on the total amount charged for the live plants, and on the labor charge for installation of the live plants.

017.06G(2) Option 2 contractors who annex building materials and install live plants must collect sales tax on the total amount charged, unless the charges for annexing the building materials are separately stated from the labor charges for installing live plants.

017.06G(3) Option 2 contractors must pay sales tax or remit use tax on all live plants and the installation for the live plants installed by another person.

017.06H Exempt Organizations and Exempt Governmental Units.

017.06H(1) Option 2 contractors annexing building materials for exempt organizations or exempt governmental units may purchase building materials without paying the sales or use tax when the exempt organization or exempt governmental unit has followed the procedures in section 017.08 of this regulation.

017.06H(2) Option 2 contractors may purchase qualified materials for use in a community-based energy development (C-BED) project tax exempt.

017.06I Direct Pay Permits.

017.06I(1) Option 2 contractors must pay sales tax or remit use tax on building materials annexed even if they have a copy of the direct pay permit from the project owner.

017.07 OPTION 3-To be treated as a consumer with a tax EXEMPT inventory.

017.07A Option 3 contractors are consumers of building materials that become annexed. Option 3 contractors who make sales described in subsections 017.07D, 017.07E, or 017.07G are retailers and must have a Nebraska Sales Tax Permit.

017.07B Option 3 contractors must pay sales tax or remit use tax on all tools, supplies, equipment, scaffolding, and barricades purchased, rented, or leased; and on all purchases of taxable services such as building cleaning, pest control, and security services. Option 3 contractors cannot purchase these items exempt for resale or by using a Purchasing Agent Appointment.

017.07C Buildings and Structures, Construction and Repair.

017.07C(1) Option 3 contractors will not normally collect sales tax on any repairs or improvements to real estate or property annexed to real estate.

017.07C(2) Option 3 contractors who fabricate, produce, or repair building materials that they subsequently annex to real property will not collect sales tax on these labor charges if the labor charges are separately stated.

017.07C(3) All building materials and other property that will be resold may be purchased for resale purposes without paying tax by issuing to the vendor a properly completed Nebraska Resale or Exempt Sale Certificate, Form 13, Section A.

017.07C(3)(a) Option 3 contractors must remit use tax directly to the Department on all building materials when the building materials are removed from inventory or when received at the job site.

017.07C(3)(b) Option 3 contractors must remit use tax directly to the Department on all other taxable property on which no sales tax was paid when the property is received.

017.07C(3)(c) Option 3 contractors must remit use tax directly to the Department on fabrication, production, or repair labor performed by another person on building materials which are annexed to real estate by the Option 3 contractor. (Reg-1-082, Labor Charges.)

017.07C(4) Option 3 contractors must pay sales tax or remit use tax on all charges for building materials annexed by an Option 1 subcontractor.

017.07C(5) Option 3 contractors must remit use tax on building materials purchased with a resale certificate that are withdrawn from inventory for annexation to real estate in another state.

017.07C(5)(a) Option 3 contractors are not required to remit use tax on building materials used in a construction project that is outside the United States.

017.07C(5)(b) Option 3 contractors are not required to remit use tax on building materials withdrawn from inventory for annexation to real estate in another state if the seller of the building materials is not engaged in business in this state and is not licensed to collect sales tax in this state (Reg-1-002, Consumer’s Use Tax). (See also Reg-1-004.02 for the definition of “engaged in business in this state.”)

017.07D Property not Annexed.

017.07D(1) Option 3 contractors are retailers for any sales of building materials or other property that is not annexed. Option 3 contractors must collect sales tax on the total amount charged.

017.07D(2) Option 3 contractors must collect sales tax on the total amount charged for installation of tangible personal property that does not become annexed to real estate. Tangible personal property that normally does not become annexed includes draperies, window air conditioners, and silt fencing.

017.07D(3) Silt fencing is not annexed to real estate. Silt fencing is similar to tools or supplies used by a contractor to complete its construction contract.

017.07D(3)(a) Option 3 contractors hired only to install silt fencing are making retail sales and must collect tax on the total amount charged.

017.07D(3)(b) Option 3 contractors who install silt fencing as part of their construction contract are the consumers of the silt fencing and must remit use tax on their cost of the silt fencing materials.

017.07D(3)(c) Option 3 contractors must pay sales tax or remit use tax on the total amount paid for the silt fencing materials and labor to another person who only installs silt fencing. Option 3 contractors cannot purchase silt fencing tax-exempt for resale.

017.07D(4) Option 3 contractors must collect and remit sales tax on the total amount charged for repairing or fabricating tangible personal property that is not annexed by the Option 3 contractor.

017.07D(5) Option 3 contractors who provide taxable services such as building cleaning, pest control, or security services are making retail sales and to must collect and remit sales tax on the total amount charged for these services. (See Reg-1-098, Building Cleaning and Maintenance; Reg-1-100, Pest Control Services; and Reg-1-101, Security and Detective Services.)

017.07D(6) Option 3 contractors will not remit use tax on items that are resold without being annexed.

017.07E Telephone, Cable, Satellite Services, and Other Utilities.

017.07E(1) Option 3 contractors who install, construct, service, repair, replace, upgrade, or remove outlets, wire, cable, satellite dishes or receivers, or any other property for telephone, telegraph, cable, satellite services, and mobile telecommunication services providers must collect sales tax as follows:

017.07E(1)(a) Option 3 contractors must collect sales tax on the total amount charged when working on the service provider’s side of the demarcation point, (i.e., the general distribution system) whether the property is annexed or remains tangible personal property.

017.07E(1)(b) Option 3 contractors must collect sales tax on the total amount charged when acting as a subcontractor for a telephone, telegraph, or mobile telecommunications service provider on the customer’s side of the demarcation point.

017.07E(2)(c) Except as provided in 017.07E(1)(b), Option 3 contractors will not collect sales tax when working on the customer’s side of the demarcation point.

017.07E(1)(d) Option 3 contractors will not collect sales tax on labor charges for installing or connecting gas, electricity, sewer, and water services.

017.07E(2) Option 3 contractors must remit use tax on all wire, cable, outlets, and other property used to install or construct telephone, telegraph, cable, satellite, services, and mobile telecommunication services.

017.07E(3) If any or all of the charge for installation of tangible personal property is paid to the Option 3 contractor by a third-party service provider, any tax due on that part of the activation commission, finder’s fee, installation charge, or similar payment made by the third-party service provider shall be paid to the Department by the third-party service provider (Reg-1-081, Community and County Antenna Television Service.)

017.07F Manufacturing Machinery and Equipment (Reg-1-107 Manufacturing Machinery and Equipment Exemption.)

017.07F(1) Option 3 contractors must remit use tax on all manufacturing machinery and equipment and any related repair or replacement parts they purchase and annex for a manufacturer.

017.07F(1)(a) Option 3 contractors must remit use tax on these items even if they have a Nebraska Resale or Exempt Sale Certificate, Form 13, or a Purchasing Agent Appointment and Delegation of Authority for Sales and Use Tax, Form 17, from a manufacturer.

017.07F(2) Option 3 contractors will not collect sales tax on charges to install, or repair qualified manufacturing machinery and equipment.

017.07G Live Plants.

017.07G(1) Option 3 contractors planting live plants must collect sales tax on the total amount charged for the live plants, and on the labor charge for installation of the live plants.

017.07G(2) Option 3 contractors who annex building materials and install live plants must collect sales tax on the total amount charged unless the charges for annexing the building materials are separately stated from the labor charges for installing live plants.

017.07G(3) Option 3 contractors must pay sales tax or remit use tax on all live plants and the installation for the live plants installed by another person.

017.07H Exempt Organizations and Exempt Governmental Units.

017.07H(1) Option 3 contractors annexing building materials for exempt organizations or exempt governmental units are not required to remit use tax on building materials when the exempt organization or exempt governmental unit has followed the procedures in section 017.08 of this regulation.

017.07H(2) Option 3 contractors are not required to remit use tax on their cost of qualified materials for use in a community-based energy development (C-BED) project.

017.07I Direct Pay Permits.

017.07I(1) Option 3 contractors must remit use tax on building materials annexed even if they have a copy of the direct payment permit from the project owner.

017.08 Projects for Exempt Organizations and Exempt Governmental Units.

017.08A Qualified exempt organizations and exempt governmental units are listed in Reg-1-012, Exemptions. The following procedures allow the exempt organizations or exempt governmental units to have construction completed without the payment of tax on building materials which are physically annexed to the building or structure and which subsequently are owned by the exempt governmental unit or exempt organization. The contractor must pay sales tax or remit use tax on its purchases or rentals of tools, supplies, equipment, scaffolding, barricades, and on all purchases of taxable services such as building cleaning, pest control and security services.

017.08A(1) An exempt organization or exempt governmental unit may furnish building materials. The organization or governmental unit will issue a properly completed Nebraska Resale or Exempt Sale Certificate, Form 13, to the retailers of the building materials.

017.08A(2) The exempt organization or exempt governmental unit, as project owner, may be entitled to a refund of tax paid on building materials. The United States government, the state, and educational institutions under the governance of the University of Nebraska Board of Regents, or State College Board of Trustees will not receive any refunds.

017.08A(2)(a) If the exempt organization or exempt governmental unit will not appoint the contractor as a purchasing agent, the Option 2 or Option 3 contractor must pay sales tax or remit use tax on all building materials. The exempt organization or exempt governmental unit may obtain a refund of the tax paid if:

017.08A(2)(b) The Option 2 or Option 3 contractor provides the exempt organization or exempt governmental unit with a certified statement of the tax paid on the building materials by the contractor and all subcontractors, and

017.08A(2)(c) The exempt organization or exempt governmental unit applies for a refund from the Department. The exempt organization or exempt governmental unit may apply for a refund of any sales tax it paid directly on building materials, and any sales or use tax paid or remitted on building materials by Option 2 or 3 contractors as shown on a certified statement from the contractor.

017.08A(3) The exempt organization or exempt governmental unit may appoint the contractor as a purchasing agent. The contractor may then purchase building materials tax-free. The appointment as a purchasing agent for the exempt organization or exempt governmental unit must be made before the building materials are annexed.

017.08A(3)(a) The contractor will delegate to all subcontractors the authorization as purchasing agent.

017.08A(3)(b) The contractor or subcontractors will provide an exempt sale certificate and a copy of the purchasing agent appointment to suppliers when purchasing the building materials to be annexed.

017.08A(3)(c) The appointment must be made using a Purchasing Agent Appointment and Delegation of Authority for Sales and Use Tax, Form 17, or a previously approved substitute form containing the same information.

017.08A(3)(d) The United States government may use its own forms to make the purchasing agent appointment. If the United States government chooses not to issue a purchasing agent appointment, the building materials will be taxable.

017.08A(3)(e) The applicable Purchasing Agent Appointment and Delegation of Authority for Sales and Use Tax, Form 17, or exempt sale certificate will be kept by the contractor or subcontractor who has been appointed or delegated as purchasing agent.

017.08A(4) When a contractor is operating under Option 1, and is the only contractor involved in the project, that contractor may accept a Nebraska Resale or Exempt Sale Certificate, Form 13, from the exempt organization or exempt governmental unit. The Option 1 contractor will not charge sales tax to the exempt organization or exempt governmental unit.

017.08A(5) When the contractor is operating under either Option 2 or Option 3, the contractor cannot accept an exempt sale certificate from the exempt organization or exempt governmental unit. The exempt organization or exempt governmental unit must appoint the Option 2 or Option 3 contractor as its purchasing agent, buy the materials, or apply for a refund of sales tax that is paid.

017.08B When an organization is required to be licensed, certified, approved, or accredited in order to be an exempt organization, but the organization was not licensed, certified, approved, or accredited at the time of the construction, the organization cannot issue either a purchasing agent appointment or an exemption certificate. When the organization becomes licensed, certified, approved, or accredited upon completion of the project, the exempt organization may apply for a refund of the tax remitted or collected by the contractors.

017.08C Generally, a contractor cannot obtain a refund of any tax remitted or collected on a project for an exempt organization or exempt governmental unit. The refund will normally be paid to the exempt organization or exempt governmental unit. A contractor may only obtain a refund or credit of tax paid on building materials when the contractor was appointed as a purchasing agent before the materials were annexed and the contractor paid tax on the building materials.

017.09 Fixed Price Contracts.

017.09A A contractor using fixed-price contracts may owe the state additional tax or may receive a refund of tax on building materials used in fixed-price contracts when there is a tax rate change.

017.09A(1) If the tax rate is decreased during the term of the fixed-price contract, the contractor must remit to the Department the difference between the tax actually paid on building materials and the tax that would have been paid at the tax rate in effect prior to the decrease, provided the amount of such payment exceeds ten dollars.

017.09A(2) If the tax rate is increased during the term of a fixed-price contract, the contractor must pay to the Department the sales or use tax at the increased rate on all materials purchased. The contractor may receive a refund of the amount of the additional sales or use tax paid because of the rate increase, provided the amount of the additional sales or use tax exceeds ten dollars.

017.09A(2)(a) The contractor must submit a copy of the contract and any other appropriate evidence to document the amount of additional sales or use tax paid on the building materials in the project.

017.09A(3) A change in the property taxed or exempted from tax is not a tax rate change for the purposes of this subsection.

017.09A(4) An adoption, repeal, or change in the rate of a local option tax is a tax rate change for purposes of this subsection and may result in a refund, or require the payment of additional tax.

017.09B An owner of a construction project completed using a fixed-price contract may owe the state additional sales or use tax on contractor labor in fixed-price contracts when the taxability of contractor labor changes.

017.09B(1) If the sales or use tax on contractor labor no longer applies to a construction project during the term of the fixed-price contract, the owner of the construction project must pay to the contractor or the Department, the difference between the sales or use tax actually paid on contractor labor and the sales or use tax that would have been paid prior to the change, provided the amount of such payment exceeds ten dollars.

(Section 48-2117, R.S. Supp. 2009 and sections 77-2701.10, 77-2701.16, 77-2701.34, 77-2701.42, 77-2701.44, , 77-2704.12, 77-2704.15, 77-2704.32, 77-2704.33, 77-2704.44, and 77-2704.55, R.R.S., 2009. June 6, 2011.)

REG-1-018 RENT OR LEASE OF TANGIBLE PERSONAL PROPERTY

018.01 Any person who leases or rents property for storage, use, or other consumption in this state is a retailer. A lease or rental is the transfer of possession or control of property for a fixed or indeterminate term for a consideration. A lease or rental may include future options to purchase or extend the lease or rental agreement.

018.01A Receipts from a lease or rental of property requiring recurring periodic payments are sourced as follows: the first periodic payment is sourced at the location where the property is received by the lessee; payments subsequent to the first payment are sourced at the primary property location. The primary property location is an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business when use of this address does not constitute bad faith. The property location is not altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and service calls.

018.01B Receipts from the lease or rental of property not requiring recurring payments are sourced where the property is received by the lessee.

018.02 Retailers who lease or rent property must obtain a permit, and collect and remit the state and applicable local sales tax to the Nebraska Department of Revenue (Department) in the same manner as any other retailer. The sales tax is computed on the total amount for which the property is leased or rented, valued in money whether paid in money or otherwise, without any deduction or exclusion of any cost components such as:

018.02A The cost of the property leased or rented;

018.02B The cost of material used, labor or service costs, interest charged, insurance, losses, or any other expenses;

018.02C The cost of transportation of the property at any time; and

018.02D The amount of any excise or property taxes levied against the property.

018.03 The total amount for which property is leased or rented includes any services which are a part of the lease or rental and any amount for which credit is given to the lessee by the lessor. If the lease or rental charge is comprised of a fixed amount plus a variable amount, sales tax applies to the total of these charges.

018.04 If a retailer establishes a separate price schedule for his or her product when the sale includes the use of the seller’s equipment by the purchaser, then the difference between the product price with the equipment and the product price without the equipment is a lease or rental subject to the sales and use tax.

018.05 A sale for the sole purpose of that purchaser’s leasing or renting the property to another person is a sale for which a resale certificate may properly be issued, except where:

018.05A The lease or rental payments are not at a fair market value;

018.05B The property is used by the purchaser and is also leased or rented to others, in which case both the purchase of the property is taxable and the subsequent lease or rental of the property is also taxable; and

018.05C The property is incidental to the lease or rental of real estate, such as furniture for a furnished apartment.

018.06 A sale to an unrelated person or entity conditioned upon a simultaneous lease back to the original owner is a sale for which a resale certificate may properly be issued.

018.07 The charge for the lease or rental of a cabin trailer, mobile home, or similar property for less than 30 days is taxable. If the lease or rental period is for 30 days or more, it is also a taxable lease or rental of property unless the cabin trailer or mobile home has either been permanently annexed to realty or set up for occupancy as a dwelling for human occupancy according to local building codes. (Reg-1-046, Hotels, Lodgings, and Accommodations)

018.07A A cabin trailer or mobile home has been permanently annexed to the land when a permanent foundation, such as a concrete slab or concrete footings, secures the cabin trailer or mobile home to the site. Blocking and leveling the ground or setting the unit on concrete blocks is not permanent annexation to the land.

018.08 A lease or rental of property from a subsidiary to the parent, from a parent to a subsidiary, from one subsidiary to another subsidiary of the same parent, or between brother-sister companies is exempt when the lessor has paid the tax on its purchase of the property being leased. A lessor has the same sales and use tax liability on the purchase of property to be leased to the lessee as if the lessee had purchased the property directly.

018.08A This exemption applies to corporations that have at least 50 percent common ownership, and other entities that would be considered a parent, subsidiary, or brother-sister if they were corporations.

018.08B Sole proprietorships are not entities separate and apart from the owners and do not qualify for this exemption.

018.09 A lease or rental will not qualify as an occasional sale.

018.10 Regardless of how a transaction is characterized under generally accepted accounting principles, a lease or rental does not include the following transactions:

018.10A A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments;

018.10B A transfer of possession or control of property under an agreement that requires the transfer of title upon completion of the required payments and payment of a nominal option price that does not exceed the greater of $100.00 or one percent of the total required payments; and

018.10C Providing property, such as equipment, along with an operator where the operator is necessary for the property to perform as designed. For this exclusion, the operator must do more than maintain, inspect, or set up the property. For motor vehicles with an operator, see Reg-1-019, Rental or Lease of Vehicles.

018.11 Leases or rentals of motion picture films, video tapes, digital products, and satellite services to a person who receives the product or service electronically for further broadcast, transmission, retransmission, licensing, relicensing, distribution, redistribution, or exhibition of the product or service for use where a taxable admission is later charged for showing, are exempt.

018.12 Leases or rentals of lodgings for periods of 30 days or more, are exempt.

018.13 Under Neb. Rev. Stat. section 77-2704.08, when a lessee has an option to purchase the property during the term of the lease or rental, and to apply some or all of the lease or rental payments to the purchase price of the property, the sales price may be reduced by the amount of any lease or rental payments applied to the purchase price if the lessor collected sales tax on the payments.

018.14 The classification of a transaction as a lease or rental is determined by the law in effect at the inception of the lease or rental.

(Sections 77-2701.16, 77-2701.18, 77-2701.32, 77-2701.34, 77-2701.35, 77-2703.01, 77-2704.08, and 77-2704.28, R.R.S., 2009. November 6, 2010.)

REG-1-019 RENTAL OR LEASE OF VEHICLES

019.01 When the words rental or lease or derivatives thereof are hereafter used, they shall be deemed to be synonymous for the purposes of this regulation. When the word motor vehicle or vehicle is used it shall refer to automobiles, trucks, trailers, semitrailers, and truck tractors as defined in section 60-301 of the Nebraska Revised Statutes which are not classified as transportation equipment.

019.01A Lease or rental shall have the same meaning as in Reg-1-018, but shall also include any agreement covering motor vehicles where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined for federal income tax purposes.

019.02 A rental occurs when the person to whom a motor vehicle is rented exercises control over the vehicle. Control over the vehicle may be exercised by the person renting it even when drivers are furnished when:

019.02A The person has the exclusive use of the vehicle for a period of time; and

019.02B The person has the right to direct the manner of the use of the vehicle, whether exercised or not, for that period.

019.03 All lessors of motor vehicles are retailers. They are required to obtain a permit and must collect and remit the tax on the gross lease receipts, except as provided in 019.07. (For the proper amount of tax to be collected when the tax rate changes see Reg-1-016.02A). A lessor collecting the tax on the lease receipts may purchase and register the vehicles to be leased without payment of the tax on the purchase price. The lessor is purchasing such vehicles for resale. Before registering leased vehicles tax-free, evidence that the lessor holds a permit to properly collect the tax on the lease receipts must be provided to the Department of Motor Vehicles or the county treasurer, or other designated county official, of the county in which registration will occur.

019.03A Receipts from the rental or lease of a motor vehicle, other than transportation equipment, requiring recurring periodic payments are taxable at the primary property location.

019.03B Receipts from the rental or lease of a motor vehicle not requiring recurring periodic payments are taxed at the location where the vehicle is received by the purchaser.

019.03C Receipts from the rental or lease of transportation equipment are taxable where the seller transfers physical possession or control of the equipment to the buyer.

019.03C(1) Transportation equipment means:

019.03C(1)(a) Locomotives and railcars that are utilized for the carriage of persons or property in interstate commerce;

019.03C(1)(b) Trucks and truck tractors with a gross weight rating of ten thousand and one pounds or greater, or trailers, semitrailers, or passenger buses that are (i) registered through the International Registration Plan and (ii) operated under authority of a carrier authorized and certified by the United States Department of Transportation or another federal authority to engage in the carriage of persons or property in interstate commerce;

019.03C(1)(c) Aircraft operated by air carriers authorized and certificated by the United States Department of Transportation or another federal authority or a foreign authority to engage in the carriage of persons or property in interstate or foreign commerce; and

019.03C(1)(d) Containers designed for use on and component parts attached or secured on transportation equipment identified in Reg-1-019.03C(1)(a) through Reg-1-019.03C(1)(c).

019.04 The total amount for which the motor vehicle is leased includes any services which are a part of the lease and any amount for which credit is given to the lessee by the lessor. If the lease or rental charge is comprised of a fixed amount plus a variable amount, (e.g., $15.00 per day plus $0.15 per mile) sales or use tax applies to the total of these charges.

019.04A The total amount for which a vehicle is leased does not include any amount paid by the lessee to the county treasurer, other designated county official, or the Department of Motor Vehicles for in lieu of property tax.

019.05 A lease of a motor vehicle from a subsidiary to the parent, from a parent to a subsidiary, from one subsidiary to another subsidiary of the same parent, or between brother-sister companies is exempt when the lessor has paid the tax on its purchase of the motor vehicle being leased. Such lessor shall have the same sales and use tax liability on the purchase of the motor vehicle to be leased to the lessee as if the lessee had purchased the motor vehicle directly. This subdivision applies to corporations that have at least fifty percent common ownership, and other entities that would be considered a parent, subsidiary, or brother-sister if they were corporations.

019.06 The receipts from the lease of motor vehicles to be engaged as common or contract carrier vehicles by persons holding a numbered certificate of exemption issued by the Department of Revenue are exempt; provided, the lessor is furnished evidence that the lessee holds such certificate or number.

019.07 In lieu of collecting and remitting tax upon the gross receipts, the lessor may elect to pay the tax on the cost of all vehicles, including vehicles presently under lease. The election does not apply to motor vehicles leased for use as common or contract carrier vehicles. If such an election is made, it shall be pursuant to the following conditions:

019.07A Notice shall be filed with the Department of Revenue and such election shall be effective only upon approval;

019.07B The election, when made and approved by the Department of Revenue, shall remain in force and effect for a period of not less than two years; and

019.07C The election shall apply to all vehicles of the lessor leased for periods of one year or more, except for vehicles leased for use as common or contract carrier vehicles. Persons leasing motor vehicles for both periods of less than one year and for periods of one year or more and who have elected to remit the applicable tax on the cost of the motor vehicles at the time of purchase, must segregate the taxable receipts from the nontaxable receipts in their records.

019.08 The election shall be filed on forms prescribed by the Department of Revenue and in addition to general information shall contain a list of all vehicles under existing lease as to term of the lease, model, year, make, and fair market value, as of the date of the election. If some of the vehicles are leased for use as common or contract carrier vehicles, the list must show which vehicles are being used as common or contract carriers, the lessee of each vehicle, and the lessee’s Nebraska common or contract carrier exemption number.

019.09 Vehicles under existing lease on the effective date of the election, with at least one year remaining on the existing lease, shall be valued at their fair market value and the state and applicable city sales tax computed on such amounts. The computed tax must be remitted to the Department of Motor Vehicles or the county treasurer, or other designated county official, of the county in which the vehicles are registered within five (5) days from the receipt of approval of the lessor’s option. The lessor must pay the state and applicable city sales tax on the fair market value of any vehicle the first time it is leased for a period of one year or more after the effective date of the option, unless the tax was previously paid at the time of purchase or under this subsection. The lessor must submit proof of payment of the tax to the Nebraska Department of Revenue, Taxpayer Services, P.O. Box 94818, Lincoln, Nebraska 68509.

019.10 The lessor who elects to pay the tax on the cost of such vehicles will purchase and pay the tax in the following manner: The seller shall state on the sales invoice the dollar amount of the tax and furnish the purchaser a certified statement of the transaction on a form provided by the Department of Revenue. The applicable tax will be paid by the purchaser to the Department of Motor Vehicles or the county treasurer, or other designated county official, at the time of application for registration of the motor vehicle for operation on the highways of this state. The Department of Motor Vehicles or the county treasurer, or other designated county official, shall furnish a statement for completion by the purchaser when the purchase was made from an out-of-state dealer. The purchaser will be responsible for establishing the cost (price paid) for such motor vehicle with a copy of the sales invoice or other documents.

019.10A The lessor who made the election and is purchasing a vehicle to be leased for use as a common or contract carrier vehicle, shall purchase such vehicle for resale and will not pay the tax at the time of registration.

019.10B When a vehicle that was purchased for use as a common or contract carrier vehicle is first leased for one year or more to a person who is not a common or contract carrier, the lessor shall pay the tax on the fair market value of the vehicle at the time of the lease.

019.11 A lessor who has been operating under this election for at least two years may make application to the Department of Revenue, to terminate such election. Until such time as an application to terminate has been received and acknowledged by the Department, the retailer shall continue to operate as set out in 019.07 through 019.10. The application to terminate shall be in the form of a written request and, when acknowledged by the Department, will become effective on the first day of the month following the postmark date of the acknowledgment.

019.12 Tax paid on vehicles under existing leases at the time the election is terminated cannot be refunded either to the lessor or lessee. State and applicable local option sales tax will be charged and collected on the gross vehicle lease receipts beginning with the billing issued on or after the first day of the month following the postmark date of the acknowledgment of termination.

(Sections 77-2701.33 and 77-2701.35, R.R.S. 2003, and sections 77-2701.34, 77-2703(1)(g) and (h), and 77-2703.01(8) and (9), R.S.Supp., 2004. April 12, 2005.)

REG-1-020 MOTOR VEHICLES

020.01 Motor vehicles as used in this regulation shall mean motor vehicles, trailers, and semitrailers as defined in Section 60-301 of the Nebraska Revised Statutes. Every motor vehicle dealer in Nebraska is required to obtain a sales tax permit for each place of business in this state even though they make no sales other than of motor vehicles. The dealer shall file a tax return reporting gross sales in the same manner as all other retailers.

020.02 The sales and use tax imposed upon the sale of motor vehicles shall be the liability of the purchaser and the tax shall be collected by the county treasurer, or other designated county official, or the Department of Motor Vehicles at the time the purchaser makes application for registration of the motor vehicle for operation upon the highways of this state. If the purchaser retains such motor vehicle in this state and does not register it for operation upon the highways of this state within thirty days of the purchase date, the tax shall be paid immediately to the county treasurer, or other designated county official. If the tax is not paid within thirty days of the purchase date, the county treasurer, or other designated county official, shall collect the tax, interest from the thirtieth day until the date of payment, and a penalty of five dollars ($5.00).

020.03 The dealer or seller is not authorized to collect the tax on the sale of motor vehicles but shall, at the time of the sale, state on the sales invoice the dollar amount of the tax and furnish the purchaser a Nebraska Sales/Use Tax and Tire Fee Statement for Motor Vehicle and Trailer Sales, Form 6.

020.03A The tax due shall be computed on the difference between the total sales price and the total of any trade-in allowance for another motor vehicle taken by any person and any rebates used to reduce the selling price of the vehicle.

020.03B All information requested by the Nebraska Department of Revenue must be furnished and a copy of each Form 6 must be sent to the Nebraska Department of Revenue by the seller at the time the tax return is filed. Any dealer or seller who fails or refuses to furnish such information or who falsifies any Form 6 may be found guilty of a misdemeanor and shall, upon conviction, be punished by a fine of not less than twenty-five dollars ($25.00) nor more than one hundred dollars ($100.00) for each offense.

020.03C Any dealer or seller who willfully prepares a false or fraudulent sales or use tax return or Form 6 may be found guilty of a Class IV felony and shall, upon conviction, be fined not more than ten thousand dollars ($10,000.00), or be imprisoned not more than five years, or both.

020.03D Any purchaser, or the agent thereof, who completes a Nebraska Sales/Use Tax and Tire Fee Statement for Motor Vehicle and Trailer Sales, Form 6, claiming an exemption for any purchase which is not exempt from sales and use tax under sections 77-2701 through 77-27,135 of the Nebraska Revised Statutes, shall be subject to a penalty of one hundred dollars ($100.00) or ten times the tax, whichever amount is larger. Any purchaser, or the agent thereof, who fraudulently signs a Form 6 with the intention to avoid payment of the tax may, in addition to the above penalty, be found guilty of a Class IV misdemeanor.

020.03E Any seller who willfully understates the amount upon which the sales tax is due shall be subject to an administrative penalty of one thousand dollars ($1,000.00).

020.04 County treasurers, or other designated county officials, of all counties in Nebraska and the Department of Motor Vehicles are appointed as sales and use tax collectors for all sales of motor vehicles made outside of this state to purchasers or users of motor vehicles required to be registered in this state. The county treasurer, or other designated county official, shall collect the applicable use tax from the purchaser of a motor vehicle purchased outside of this state at the time application for registration is made. The full use tax on the purchase price shall be collected by the county treasurer, or other designated county official, or the Department of Motor Vehicles if a sales or occupation tax was not paid by the purchaser in the state of purchase. If a sales or occupation tax was lawfully paid in the state of purchase at a rate less than the tax imposed in this state, use tax must be collected on the difference as a condition for registration in this state.

020.05 The purchase of a licensed motor vehicle may be exempt for any of the following reasons:

020.05A If the owner of a motor vehicle is, or was, a nonresident of this state and establishes as a fact that he or she purchased the motor vehicle outside of this state and there registered, titled, and licensed the motor vehicle, and actually used the motor vehicle for the primary purpose for which it was acquired, then the use tax is not required for licensing or registering in this state;

020.05A(1) Licensed for operation on the highways does not include any temporary registration, licensing, or in transit procedure that allows nonresidents to operate the motor vehicle on the highways of the other state, commonwealth, territory, possession, or country for a limited time with the intent to remove the motor vehicle from the other state, commonwealth, territory, possession, or country.

020.05B The motor vehicle is purchased for the purpose of renting or leasing with the rental or lease payment set at a fair market value, and the purchaser holds a sales tax permit so as to remit tax on the lease or rental receipts;

020.05C The motor vehicle is a gift to the applicant or received through inheritance and tax was previously paid by the donor or prior owner;

020.05D The purchase of the motor vehicle is exempt under paragraphs 012.02C or 012.02D of Reg-1-012, Exemptions;

020.05E The motor vehicle is purchased by a disabled person and the maximum amount allowed by law is contributed by the Veterans Administration of the United States or the Nebraska Health and Human Services Finance and Support. If the contributed amount is less than the maximum amount, only the amount of the contribution is exempt; or

020.05F The motor vehicle is sold pursuant to an occasional sale as set out in Reg-1-022, Occasional Sales.

020.06 If the purchase of a licensed motor vehicle is exempt for any of the reasons in paragraph 020.05, the county treasurer, or other designated county official, or the Department of Motor Vehicles may, after obtaining a properly completed Form 6 accurately identifying the basis for exemption, complete the registration without collecting the tax.

020.07 Motorcycles, or other all-terrain vehicles, that are not equipped for use upon the highway at the time of sale, as required by the Department of Motor Vehicles, are not treated as motor vehicles for sales and use tax purposes. A person engaged in the business of selling these vehicles must collect the sales tax at the time of sale rather than issuing a Form 6.

020.08 A rebate received by the purchaser from a manufacturer after the sale does not reduce the sales and use tax base. The retail price remains at the amount agreed upon at the time of the sale which is the amount upon which the tax must be collected.

020.08A A rebate received from a manufacturer that is used to reduce the selling price of the vehicle reduces the sales and use tax base. A rebate is used to reduce the selling price of the car when it is transferred to the dealer at the time of the sale and is shown on the sales invoice as a price reduction, partial payment, or a down payment.

020.09 Sales and use tax paid upon a vehicle which is subsequently destroyed is not refundable. The tax is imposed upon the sales transaction and the subsequent destruction of the vehicle has no effect on that sales transaction.

020.09A The purchase of a vehicle with the insurance proceeds from another vehicle is taxable. The insurance proceeds cannot be used as a trade-in or other reduction in the sales price.

020.10 If the purchaser receives a settlement under the Nebraska Lemon Law, or under arbitration as an alternative to the Lemon Law, the amount received from the manufacturer or dealer includes all of the sales and use tax that is refundable. No additional refunds will be paid by the Department of Revenue.

(Sections 60-301, and 77-2703(1)(j) R.S.Supp., 1998, and sections 77-2702.07, 77-2702.09, 77-2702.17, 77-2702.18, 77-2704.12, 77-2704.21, 77-2713, and 77-2708(1)(c), R.R.S. 1996. November 11, 1998.)

REG-1-021 MOTOR VEHICLES USED BY THE MANUFACTURER BEFORE SALE

021.01 Manufacturers of motor vehicles who withdraw such vehicles from inventory or stock for company purposes such as demonstrations, promotional or executive use, prior to the sale thereof, shall be required to pay a tax on such uses.

021.02 The tax shall be computed and paid monthly to the Department of Revenue by the motor vehicle manufacturer as part of his or her regular report of taxes due on the sale or use of taxable property and services.

021.03 The base on which the tax is to be computed shall be determined monthly by multiplying 2 1/2% times the total invoice cost to the distributors or dealers of vehicles of the same make, model, and accessory equipment. The base as so computed shall be multiplied by the tax rate in effect to arrive at the tax required to be paid.

(Section 77-2703(1)(k), R.S.Supp., 1993. May 14, 1994.)

REG-1-022 OCCASIONAL SALES

022.01 Occasional sales are exempt from sales tax. Occasional sale means a sale, but not a lease or rental, of property in a transaction described in Reg-1-022.02 through Reg-1-022.09.

022.02 An occasional sale includes transactions where the property is the subject of an intercompany sale from a subsidiary to the parent, from a parent to a subsidiary, from one subsidiary to another subsidiary of the same parent, or between brother-sister companies.

022.02A This applies to corporations that have at least 50% common ownership, and other entities that would be considered a parent, subsidiary, or brother-sister if they were corporations.

022.02B Sole proprietorships are not entities separate and apart from the owners and do not qualify for this exemption.

022.03 An occasional sale includes sales of property:

022.03A From one corporation to another corporation pursuant to a reorganization. Reorganization means a statutory merger or consolidation; or the acquisition by a corporation of substantially all of the properties of another corporation when the consideration is solely all or a part of the voting stock of the acquiring corporation or of its parent or subsidiary corporation;

022.03B From one limited liability company to another limited liability company pursuant to a reorganization;

022.03C In connection with the winding up, dissolution, or liquidation of a corporation, partnership, or limited liability company if there is a distribution of the property of the corporation, partnership, or limited liability company to the owners substantially in proportion to their share of stock or securities in the corporation, or interests of the owners of the partnership or limited liability company;

022.03D To a corporation, partnership, or limited liability company for the purpose of organizing the corporation, partnership, or limited liability company or contributing additional capital to a corporation when the former owners of the property are in control of the corporation, partnership, or limited liability company immediately after the transfer, and the stock, securities, or interest received by each is substantially in proportion to his or her interest in the property prior to the transfer; or

022.03E Any other transaction that qualifies as a tax-free transaction under the Internal Revenue Code.

022.04 The transactions described in Reg-1-022.02 and Reg-1-022.03 may involve new or used property, motor vehicles, or motorboats. Persons claiming the occasional sale exclusion for purchases of motor vehicles or motorboats must provide the county treasurer, or other designated county official, with evidence that the transfer falls within Reg-1-022.02 or Reg-1-022.03, at the time of registration of the motor vehicle or motorboat.

022.05 Occasional sale includes the sale of either new or used business assets, where a person liquidates his or her business in a single transaction to a single buyer. The liquidation must be all or substantially all of the property of the trade or business.

022.06 Occasional sale includes a sale of used business or farm machinery or equipment which was productively used by a seller or the seller’s predecessor as a depreciable capital asset for at least one year in the business. The purchaser must obtain an exempt sale certificate or other documentation from the seller demonstrating that the sale was sales tax exempt. See Reg-1-014.

022.07 The transactions described in Reg-1-022.02 through Reg-1-022.06 may include aircraft, and are occasional sales only if the seller or the seller’s predecessor previously paid sales or use tax, the seller purchased the property prior to June 1, 1967, or the sale was exempt from sales and use tax when the property was purchased.

022.08 Occasional sale includes a sale of household goods and personal effects by an individual when the property was originally acquired and used for personal use. These sales must occur at an individual's residence, and may include the property of more than one person, or be carried out by an individual on an online auction site.

022.08A These sales may not be held on more than three days during a calendar year at any residence or on an online auction site.

022.08B These sales may not include property which is similar to property that is sold by the individual or any member of his or her household in a trade or business.

022.08C Household goods and personal effects do not include motor vehicles, motorboats, or aircraft.

022.09 Occasional sale includes one sale activity during a calendar year by a nonprofit religious organization.

022.09A The sale must be during an activity of the nonprofit religious organization, but it does not have to take place at a location owned by the nonprofit religious organization.

022.09B The sale may last up to three consecutive days.

022.09C The nonprofit religious organization may have the assistance of an auctioneer at this sale without having to collect sales tax on the property or services sold.

022.09D The nonprofit religious organization may sell anything it owns at its sale. The property or services sold may be made especially for the sale, purchased for the sale, or donated to the nonprofit religious organization for the sale. Sales of motor vehicles, trailers, or semi-trailers made at the sale are not occasional sales.

022.10 Occasional sale does not include:

022.10A Any sale that is made, supervised, or aided by an auctioneer, or agent or employee of an auctioneer, except for a sale by a nonprofit religious organization as provided in Reg-1-022.09C;

022.10B Any sale of inventory or property purchased for resale or for lease;

022.10C Any sale of a motor vehicle or motorboat, except a sale described in Reg-1-022.02 or Reg-1-022.03; or

022.10D Any sale of new property, except a sale described in Reg-1-022.02, Reg-1-022.03, Reg-1-022.05, or Reg-1-022.09.

(Neb. Rev. Stat. §§ 77-2701.24 and 77-2704.48, and Attorney General Opinion Number 252, June 16, 1978, June 24, 2017.)

REG-1-023 COMPONENT PARTS - MANUFACTURING, PROCESSING, AND FABRICATION

023.01 Property that becomes an ingredient or component part of a product manufactured, processed, assembled, or fabricated for sale by the purchaser is exempt. Property that is necessary for production but which does not become an ingredient or component part of the product sold is taxable.

023.02 To qualify as exempt the property must meet all of the following conditions:

023.02A The property must physically or chemically enter into and remain a part of the finished product;

023.02B The property must be an essential ingredient or component of the finished product; and

023.02C The finished product must be a product that was manufactured, processed, or fabricated for sale by the purchaser of the ingredient or component part.

023.03 A resale certificate should be used to purchase property that qualifies for exemption as an ingredient or component part.

023.04 Fabrication labor performed directly on the product being produced for sale can be purchased for resale.

023.05 Not all sales of property or products to manufacturers, processors, or fabricators are exempt. The property or products which are consumed by them in manufacturing or processing, but which do not become an ingredient or component part of the article, substance, or commodity manufactured, processed, or fabricated, are taxable. The manufacturer, processor, or fabricator is the final buyer or ultimate consumer of such property or product, and the sale to the manufacturer, processor, or fabricator is a taxable sale. Similarly, the purchase of equipment and supplies is taxable. They do not enter into the processing of, and do not form a part of the product sold.

023.06 Since most services are not durable, they cannot generally be a component of another service. The services which are necessary for the production of another service are normally consumed by the purchaser of the service, do not become a component of the service sold, and are taxable. However, a service that becomes a component of a service offered for sale by the purchaser is exempt.

023.07 To qualify as exempt as a component of another service, the service must meet all of the following conditions:

023.07A The service purchased must directly enter into and remain a part of the finished service delivered to the customer;

023.07B The service must be substantially the same as, and an essential component of, the finished service; and

023.07C The finished service must be a service that was performed for sale by the purchaser of the component service.

023.08 A resale certificate should be used to purchase a service that qualifies for exemption as a component part.

023.09 Property or products sold to service providers are consumed by them in providing the service, and do not become a component of the service. The service provider is the final buyer or ultimate consumer of such property or product, and the sale to the service provider is a taxable sale. Similarly, the purchase of equipment and supplies used in performing the service is taxable.

(Sections 77-2702.13, 77-2702.16, 77-2702.19, and 77-2702.23, R.R.S. 2003. October 1, 2003.)

REG-1-024 DISCOUNTS AND REBATES

024.01 A cash discount allowed by the retailer is a reduction in the sales price, and the tax is computed and paid on the sales price after allowance for the discount. These discounts must appear on the invoices, records, and accounts of the retailer and be substantiated to the satisfaction of the Nebraska Department of Revenue. A discount cannot be deducted from gross receipts if it is applied to a sale of property or services which is exempt from sales tax.

024.02 A cash discount may be offered by the seller to induce payment within a specified time. A volume discount may be offered by the seller to induce larger purchases. Sales tax is calculated on the sales price of the property less the cash or volume discount allowed at the time of the sale. If the discount is not allowed until a later time, these discounts are allowed as deductions on the seller's sales tax return only when there is sufficient evidence in the seller’s records to indicate that the discounts have been given to the purchaser, the sales reported on the sales tax return are the amount of sales before discounts, and the purchaser was credited or refunded any sales tax associated with the discount.

024.03 A cash rebate or instant rebate is not deductible in arriving at the sales price.

024.03A A cash rebate is given to the purchaser directly by a manufacturer after the sales transaction is complete, and is contingent upon the purchaser submitting proof that the sales transaction has been finalized.

024.03B An instant rebate is allowed at the point of sale without any additional conditions or requirements placed on the buyer, but is also reimbursed by the manufacturer to the seller.

024.03C Because the sales tax is imposed upon the gross receipts of the seller (Reg-1-001, Nature of the Sales Tax), a subsequent rebate of a portion of the sales price by a third party does not reduce the seller’s gross receipts upon which the sales tax is imposed.

024.04 Vouchers, other certificates, price reductions, or group discounts which are reimbursed by a third party are not cash or volume discounts and do not reduce the seller’s gross receipts upon which sales tax is imposed. (Reg-1-037, Trading Stamps, Coupons, Vouchers, Certificates, and Group Discounts).

024.05 See Reg-1-020, Motor Vehicles, for rebates on motor vehicles and Reg-1-096, Motorboats, for rebates on motorboats.

(Neb. Rev. Stat. §§ 77-2701.16 and 77-2701.35. June 24, 2017.)

REG-1-025 RETURNED ARTICLES

025.01 In the event taxable purchases are returned to the retailer by the purchaser or consumer and the sale is entirely rescinded, the retailer or an agent of the retailer certified under the Streamlined Sales Tax Agreement shall refund or give credit to the purchaser the amount of tax previously paid or charged. If only a portion of the purchase price is refunded or credited, the amount of tax to be refunded or credited by the retailer shall be computed based upon the amount of the purchase price to be refunded or credited exclusive of the tax.

025.02 No refund or credit for tax shall be given by the retailer for the return of any merchandise which is exempt from the tax. No refund or credit for tax shall be given by the retailer for goods sold for resale and returned.

025.03 The retailer or an agent certified under the Streamlined Sales Tax Agreement may deduct from gross sales on his or her tax return that portion of the sales price of the property that is refunded or credited to the purchaser; provided, he or she has previously remitted the tax to the Department of Revenue. Any charge for the return of the item, such as a restocking fee, is a portion of the purchase price that is not refunded. The deduction is to be taken on his or her tax return for the period in which the refund was made or credit given.

025.04 See Reg-1-020, Motor Vehicles, for motor vehicles or trailers returned under the Nebraska Lemon Law.

(Section 77-2701.35, R.R.S. 2003, and section 77-2701.16, R.S.Supp., 2004. April 12, 2005.)

REG-1-026 FINANCE, CARRYING, SERVICE, AND INTEREST CHARGES

026.01 Finance, carrying, service, and interest charges which are separately stated in the sales contract and are solely for the purpose of allowing a delayed payment of the sales price are not taxable; provided, that such charges are not used as a means of avoiding imposition of the tax upon the actual sales price. The retailer or an agent of the retailer certified under the Streamlined Sales Tax Agreement is required to keep complete and adequate records showing the division of gross receipts between finance, carrying, service, or interest charges and the selling price of property or services.

026.02 Handling, crating, packing, shipping, and service charges for preparing an item for sale or transportation are taxable.

(Section 77-2701.35, R.R.S. 2003, and section 77-2701.16, R.S.Supp., 2004. April 12, 2005.)

REG-1-027 REPOSSESSIONS

027.01 The sales tax previously remitted by a retailer arising from the sale of property, which is subsequently repossessed, may be allowed as a credit against the retailer’s current sales tax liability, but only to the extent of the portion of the purchase price remaining unpaid at the time of repossession. In determining the unpaid amount, all payments and credits to the account must be prorated to the purchase price, tax, finance, carrying, service, and interest charges which were not taxable under Reg-1-026, Finance, Carrying, Service, and Interest Charges. No credit is allowable for expenses incurred by the retailer in attempting to collect the account or repossessing the property.

027.02 Credit for the amount of taxes paid on such unpaid portion of the purchase price of the repossessed property shall be taken on a return filed within a reasonable time after the property has been repossessed. If the retailer remitted the tax on a cash accounting basis or collected the full tax from the purchaser at the time of purchase, a credit is not allowed when the property is repossessed. A credit is allowed only if the sale of the property which has been repossessed was taxable.

027.02A No credit may be taken for the unpaid portion of the purchase price of any motor vehicle or licensable trailer since the tax is collected by the county treasurer, or other designated county official, or Department of Motor Vehicles.

027.02B No credit may be taken by any person other than the retailer who sold the item and remitted the tax. The retailer cannot take a credit when a third-party repossesses the property.

027.03 If the unpaid portion of the purchase price, or any part thereof, is subsequently collected by any means other than by sale of the repossessed property, then a tax, at the rate in effect at the time the receipts are realized under the accounting basis used by the retailer shall be paid on the amount so collected.

027.04 The transaction whereby the property is repossessed is not a sale in itself and there is no tax due on a repossession. When the repossessed property is used other than for demonstration or display to potential purchasers, the repossessor owes a use tax on the property. The amount of the unpaid debt shall be the taxable amount. However, when property which has been repossessed either by the original retailer, a finance company or other financial institution is resold, the gross receipts from such sales are taxable. The property is not normally an occasional sale since the seller has not paid tax nor productively used the property for one year.

(Section 77-2708(2)(1)(ii), R.S.Supp., 1993. May 14, 1994.)

REG-1-028 BAD DEBTS

028.01 A retailer may deduct from gross receipts on his or her tax return the amount found worthless for federal income tax purposes and actually deducted or if the reserve method is elected, charged against bad debt reserve; provided, the sales or use tax has been previously remitted to the state by the retailer. The deduction should be taken on the return for the period in which the amount was found worthless and charged off for income tax purposes.

028.02 This regulation does not apply to retailers who remit sales tax on the cash basis or who have elected to remit sales tax in accordance with paragraph 009.05 of Regulation 1-009, Accounting Methods.

028.03 No deduction is allowable for expenses incurred by the retailer in attempting to enforce the collection of any account receivable, or for that portion of a debt recovered that is retained by or paid to a third party as compensation for services rendered in collecting the account.

028.04 If the amount of an account found to be worthless and charged off for income tax purposes is comprised in part of nontaxable receipts, such as interest, carrying charges, finance charges, service charges and other charges exempt from sales or use tax and in part of taxable receipts upon which tax has been paid, a bad debt deduction may be claimed only with respect to the unpaid amount upon which tax has been remitted. In determining the unpaid amount, all payments and credits to the account must be prorated against the various elements comprising the amount the purchaser contracted to pay.

028.05 In support of claims for such credit, retailers must maintain complete and adequate records showing:

028.05A Date of original sale;

028.05B Name and address of purchaser;

028.05C Amount purchaser contracted to pay;

028.05D Amount on which retailer remitted tax;

028.05E All payments or other credits applied to account of purchaser; and

028.05F Evidence that the uncollectible portion of gross receipts on which tax was remitted actually has been legally charged off as a bad debt for income tax purposes.

028.06 If any accounts found worthless and charged off are thereafter in whole or in part collected, the amount so collected shall be included in the first return filed after such collection and the amount of the tax thereon remitted with the return. Any payments made on a debt previously charged off are applied first proportionally to the taxable price of the property or service and sales tax thereon, and secondly to the interest, service charges, and any other charges.

(Section 77-2708(2)(j), R.R.S. 2003. April 12, 2005.)

REG-1-029 TRADE-INS OR EXCHANGES

029.01 When property is sold and part of the sales price is satisfied by trading in used property that is similar to the property being sold, the retailer must collect and remit sales tax on the difference between the total selling price and the amount allowed on the trade-in. If the property provided by the purchaser is not similar to the property being purchased, or is a commodity regularly traded on an open market, the transaction is a barter transaction and not a trade-in, and tax must be collected on the full price of the property sold.

029.02 If the trade-in allowance is greater than the value at which the trade-in is later carried for inventory purposes, the excess is not an allowable cash discount on a subsequent sales tax return. There is no refund of sales tax previously paid on the property traded in, even if the buyer is paid for the difference.

029.03 The full selling price is included in "gross sales and services" on the Nebraska and Local Sales and Use Tax Return, Form 10, and the trade-in allowance for the property taken in trade is deducted to calculate "net taxable sales." The deduction for the trade-in allowance cannot exceed the sales price of the property sold, even if the buyer is paid for the difference.

029.04 If the property taken in trade is used by the retailer and not resold in the retailer's regular course of business, the retailer must collect and remit sales tax on the difference between the total selling price and the amount allowed on the trade-in. The retailer must also pay use tax on the amount allowed on the trade-in for using the property. (Reg-1-035, Consumption of Untaxed Property.)

029.05 See Reg-1-020, Motor Vehicles, and Reg-1-096, Motorboats, for exchanges of motor vehicles and motor boats.

(Neb. Rev. Stat. §§ 77-2701.16 and 77-2701.35. June 24, 2017.)

REG-1-030 LAY-AWAY AND WILL-CALL SALES

030.01 In the case of lay-away or will-call sales (including those in which a deposit is made by the customer), retailers who maintain records on a cash basis must report cash collections on lay-away sales on the return for the period in which the cash is received.

030.02 All other retailers must report lay-away sales on the return for the period in which they are entered as a sale on the retailer’s books.

030.03 If the deposit is forfeited by the customer, the seller shall include only the amount of the deposit received in his or her taxable receipts.

(Section 77-2703(1), R.S.Supp., 1992. January 24, 1993.)

REG-1-031 COIN-OPERATED MACHINES

031.01 General. For the purposes of this regulation, a coin-operated machine shall include all machines where coins or substitutes for coins are inserted to render the machine operable. Owners, other than lessors, of all coin-operated machines are the ultimate consumers of said machines and are required to pay sales or use tax on the purchase price.

A lessor who purchases coin-operated machines exclusively for the purpose of leasing or renting them shall furnish his or her supplier a Nebraska Resale or Exempt Sale Certificate, Form 13. The lessor shall collect and remit the tax on the gross lease or rental receipts. The receipts from leasing or renting a coin-operated machine are taxable even if the sales by the machine are exempt. For purposes of imposing the sales tax on receipts from the operation of coin-operated machines, they are placed in one of three general categories: those which vend property, those which are operated for amusement, entertainment, or recreation, and those which provide other services.

031.02 Vending property. When property is sold by means of a vending machine, the person owning the property being sold through the vending machine is the retailer and is responsible for sales tax on the entire gross receipts therefrom regardless of how such receipts are divided.

031.02A The sales tax does not have to be separately stated and collected from the customer on sales of property through vending machines.

031.02B Where the retailer has machines at various locations, only one sales tax permit shall be required. Such retailer shall keep accurate records of the time and place of installation of each machine, the date of removal from any location, the amount of the gross receipts from each vending machine, and the gross receipts from the lease or rental of any vending machine.

031.02C The gross receipts therefrom include the state and applicable local option sales tax. The location of the machine determines the applicable local option sales tax. In determining the amount of sales tax to be remitted on vending machine sales, use the procedures described in 008.03 of Reg-1-008, Records.

031.03 For amusement. Coin-operated amusement machines shall include, but are not necessarily limited to, such devices as:

031.03A Pinball games;

031.03B Shuffleboard;

031.03C Bowling games;

031.03D Radio-ray rifle games;

031.03E Baseball games;

031.03F Football games;

031.03G Racing games;

031.03H Boxing games;

031.03I Coin-operated pool tables;

031.03J Video arcade games; and

031.03K Coin-operated musical devices.

031.04 Every owner or lessee of coin-operated amusement machines is required to be in compliance with the provisions of the Mechanical Amusement Device Tax Act, of the Nebraska Revised Statutes. Such compliance shall exempt such gross receipts from the sales tax which would or could otherwise apply. If the owner or lessee is not in compliance with the Mechanical Amusement Device Tax Act, the machines may be seized, and the owner will have to remit the sales tax on the receipts from the machines in addition to the other taxes, fines and penalties, (For more information see the Mechanical Amusement Device Regulations). Nothing in this regulation shall be construed as exempting the original purchase or lease receipts, as applicable, of such machines from the tax.

031.05 For other services. These machines do not sell property and are not for amusement but do other things such as provide blood pressures or weight. If the machines also provide fortunes or similar items they are amusement devices.

031.05A See Reg-1-048, Laundries and Dry Cleaners, regarding coin-operated laundry and dry cleaning devices.

031.05B See Reg-1-065, Telephone and Telegraph Communication Services, regarding the receipts from coin-operated telephones.

031.05C See Reg-1-099, Motor Vehicle Services, regarding the receipts from coin-operated car washes.

031.05D The gross receipts of machines for other services are exempt unless the services provided are otherwise taxable.

031.05E When taxable services are provided by a coin-operated machine, 031.02A and 031.02C apply to those machines.

(Sections 77-2703(1)(c) and 77-3005, R.R.S. 2003. October 1, 2003.)

REG-1-032 LEASED DEPARTMENTS

032.01 Where a retailer has leased certain of the departments in his or her business place to other persons for the purpose of selling property to consumers, each such lessee shall be required to secure a sales tax permit as a retailer. The lessee shall be responsible for the filing of separate tax returns and the payment of the tax due on its sales; provided, the lessee keeps separate books of account and makes his or her own collections on account of the sales.

032.02 If the retailer (lessor) keeps the books for the leased departments and makes collections on account of their sales, the lessor may, as agent for the lessee, make the required separate returns and pay the taxes due. The lessor cannot include the leased department on his or her combined sales tax return. The lessee shall not be relieved of his or her liability in the case the lessor fails to make the proper returns or fails to pay the taxes due.

(Section 77-2705(3) and (5), R.S.Supp., 1993. May 14, 1994.)

REG-1-033 TRANSIENT AND ITINERANT SELLERS

033.01 The requirement that any person must have a sales tax permit before he or she may lawfully sell property or services at retail in this state applies to all forms of retail selling, including sales made through stores; from private residences; at flea markets, fairs, or temporary booths; from trucks and wagons; by house-to-house canvass; by advertising through newspapers, radio, or television; or in any similar manner.

033.02 A distributor that uses mobile salespersons may enter into an agreement with the Nebraska Department of Revenue (Department) to collect and remit sales taxes for salespersons working for the distributor as independent contractors. When the distributor has entered into an agreement:

033.02A The individual sellers do not need sales tax permits; and

033.02B The distributor must record the retail price of each item sold and the location of each sale.

033.03 The promoter or operator of a trade show, craft show, flea market, or fair must be licensed as a retailer if:

033.03A The promoter and the sellers making sales at the event agree that the promoter will collect and remit the tax for those who do not have a sales tax permits. If the promoter and the seller enter into this kind of agreement, the seller is not required to obtain a sales tax permit; or

033.03B The promoter is making taxable sales.

033.04 Persons who sell property at retail from locations other than a store may be required to post a bond with the Department as a condition of obtaining a sales tax permit. The bond assures full compliance with the provisions of the Revenue Act, and that all sales taxes due are collected and remitted.

033.05 Transient and itinerant sellers who have obtained a sales tax permit must have the original or a copy of the permit in their possession and must display it upon request.

(Neb. Rev. Stat. §§ 77-2702.14, 77-2705(3), and 77-2713(1). June 24, 2017.)

REG-1-034 AUCTION AND CONSIGNMENT SALES

034.01 All auction and consignment sales of property are sales at retail and the auctioneer is a retailer who must collect and remit the tax on all sales except as follows:

034.01A If an auctioneer is an agent of a retail seller, then the seller or other agent of the seller is responsible for the collection and remittance of the tax on each transaction;

034.01B If another person acts as clerk for an auction sale and handles the money for the sale, then the clerk is the retailer and is responsible to collect and remit the tax on items sold; or

034.01C If the sale is otherwise exempt because of the nature of the item sold, the nature of the purchaser, or the intended use of the item, such sales are exempt and not taxable. See Reg-1-012, Exemptions.

034.02 All sales made by auctioneers or consignees from an auction house or any other place under the control of an auctioneer or consignee are taxable sales subject only to the exception in item 034.01C of this regulation or the exception for sales by religious organizations in Reg-1-091, Religious Organizations.

(Sections 77-2702.09, 77-2702.14, and 77-2704.35 R.S.Supp., 1993. May 14, 1994.)

REG-1-035 CONSUMPTION OF UNTAXED PROPERTY

035.01 Persons who take property originally purchased tax free with a resale certificate or from inventory (stock) for personal or business use, consumption, or gift, must report and pay a use tax on such property. Such persons must enter on their books the cost of all such property and pay the applicable tax on their purchase price of the property at the rate in effect at the time of use. The cost of those articles taken from stock should be reported on the applicable line of the Nebraska and Local Sales and Use Tax Return.

035.01A Retailers who use property, such as cellular telephones, satellite dishes, or DVRs, as an inducement to obtain signed service contracts for a third party service provider must pay consumer’s use tax on the difference between the retailer’s cost of the property and any amount received for such property.

035.02 Retailers of aircraft may, in lieu of paying the applicable tax on their purchase price of the aircraft used for personal or business purposes, elect to pay the tax on the gross receipts realized from the use of such aircraft. If such election is made, it shall be pursuant to the conditions set forth in Reg-1-067, Aircraft and Related Services.

035.03 Destruction or other disposition, for which no consideration is received, of property purchased for resale and subsequently determined to be unsalable is not considered to be personal or business consumption and is therefore not taxable.

35.03A However, disposition of such property is taxable if used as a gift or contribution by the owner. The tax is due on the original cost of the property.

035.04 Destruction of property for research and development or testing purposes is taxable.

(Sections 77-2706(3), and 77-2706.01, R.R.S. 2003, and section 77-2703(2), R.S.Supp., 2005. March 7, 2006.)

REG-1-036 DONATIONS, PRIZES, AND PROMOTIONAL GIVE-AWAYS

036.01 Donations. Donors are the consumers of any property purchased to be donated and the purchase of the property in Nebraska is taxable, unless an exemption otherwise applies. If a gift is delivered in Nebraska to either the donor or the donee, sales tax must be collected by the retailer from the donor.

036.01A If a person donates cash to an organization that is exempt from paying sales tax (sales tax exempt nonprofit), the sales tax exempt nonprofit can purchase property to be given away in a raffle or contest without paying or collecting sales tax.

036.01B Persons who purchase property that is donated to a sales tax exempt nonprofit are the consumers of the property donated and must pay sales tax on the purchase whether the property is delivered to the donor or to the sales tax exempt nonprofit.

036.01C If the donated property is a motor vehicle, the donor must pay use tax to the county treasurer based on the cost of the motor vehicle to the donor and the location of the donor.

036.02 Out-of-State Deliveries. Retailers who deliver property to either the donor or the donee at a location outside of Nebraska, are not required to collect sales tax.

036.03 Prizes Awarded by Sales Tax Exempt Nonprofits. Sales tax exempt nonprofits may purchase property to be awarded as prizes sales tax exempt. The recipient of the property that is awarded by the sales tax exempt nonprofit does not have to pay sales or use tax upon receiving the property. (Reg-1-090, Nonprofit Organizations, and Reg-1-014, Exempt Sale Certificate)

036.04 Motor Vehicles Awarded as Prizes. If the property awarded is a motor vehicle, sales tax is collected at the time the motor vehicle is purchased, donated, or registered in Nebraska, based on the purchase price, and the location of the nonprofit organization or winner. Reg-35-402 requires the nonprofit to have paid for the motor vehicle in full prior to the date on which the winners will be determined, regardless of whether or not the nonprofit takes title to the motor vehicle. This is shown in the examples in subsections A through C below. Use tax may also be due if there is a later transfer of title without registration. (Reg-1-020, Motor Vehicles)

036.04A For example, if a sales tax exempt nonprofit purchases and takes title to a motor vehicle to be awarded to the winner of a raffle or contest, the winner does not owe sales tax when registering the motor vehicle, because the nonprofit is exempt from sales tax and the winner did not purchase the motor vehicle. The sales tax exempt nonprofit must provide the winner a completed Nebraska Sales/Use Tax and Tire Fee Statement, Form 6, with exemption block 1 or 10 checked, and include its sales tax exemption number. The winner then provides a copy of the Form 6 to the county treasurer showing the tax exempt status of the sales tax exempt nonprofit at the time the winner registers the motor vehicle.

036.04B A nonprofit organization that is not sales tax exempt which purchases and takes title to a motor vehicle that will be awarded to the winner of a raffle or contest must pay the sales tax to the county treasurer based on the business location of the nonprofit organization. The winner does not owe additional sales tax at the time of registration because the winner did not purchase the motor vehicle. The nonprofit organization must provide the winner a completed Nebraska Sales/Use Tax and Tire Fee Statement, Form 6, with exemption block 10 checked. The winner then provides a copy of the Form 6 to the county treasurer at the time the winner registers the motor vehicle.

036.04C If a dealer donates a motor vehicle to a nonprofit which awards the motor vehicle as a prize in a raffle or contest, the dealer must pay sales or use tax to the county treasurer. The tax is calculated based on the dealer’s cost of the motor vehicle and its business address. The winner owes no additional sales tax at the time of registration because the winner paid nothing for the motor vehicle. This applies regardless of whether or not the nonprofit is sales tax exempt.

036.05 Promotional Give-Aways. The sale of property to be given away for advertising or promotional purposes is taxable. If property is purchased for resale and subsequently given away, the purchaser must include the cost of the property on the use tax return and remit the use tax due.

036.06 Pickle Cards, Lottery Tickets, and Raffle Tickets. Sales of pickle cards, lottery tickets, and raffle tickets to individual participants are sales of a chance to win and are exempt from sales and use taxes. The sale of the pickle cards or tickets to an organization is taxable, unless it is a sales tax-exempt organization or a sales tax-exempt governmental unit. (Reg-1-090 Nonprofit Organizations, and Reg-1-093, Governmental Units)

036.07 Nebraska Lottery Tickets. Sales of Nebraska Lottery tickets to individual participants or to Lottery Game Retailers are exempt from sales and use taxes.

(Neb. Rev. Stat. §§ 77-2701.16, 77-2703, 77-2703.01, 77-2704.12, 77-2704.38, 77-2705, and 77-2706(3). June 24, 2017.)

REG-1-037 TRADING STAMPS, COUPONS, CERTIFICATES, VOUCHERS, REIMBURSED PRICE REDUCTIONS, AND GROUP DISCOUNTS

037.01 Redeeming Trading Stamps. When trading stamps are redeemed for merchandise, the transaction is a retail sale and is subject to sales tax. The tax is computed on the fair market value of the merchandise transferred in exchange for the stamps. The retailer may purchase redemption merchandise for resale. No sales tax is due when stamps are redeemed for cash rather than for merchandise.

037.02 Purchasing Trading Stamps. If a retailer purchases trading stamps to distribute to customers, the transaction is not considered a purchase of property and no sales tax is due. The stamp distributor who sells the stamps to the retailer must pay sales or use tax on its purchase of the stamps.

037.03 Coupons, Reimbursed Price Reductions, or Group Discounts When Reimbursed by a Third Party. When coupons, reimbursed price reductions, or group discounts are accepted by a retailer as some or all of the selling price of any taxable item, and the retailer receives services, payment, or reimbursement from a third-party, (for example, the manufacturer, distributor, or an unrelated person), the value of the coupons, reimbursed price reductions, or group discounts cannot be subtracted from the selling price when determining gross receipts.

037.03A Reimbursed Price Reductions or Group Discounts. If the purchaser identifies himself or herself to the retailer as a member of a group or organization entitled to a price reduction or discount, and the retailer receives payment or reimbursement for granting the price reduction or discount from a third party, the amount of the payment or reimbursement is part of the selling price of the item when determining gross receipts.

037.04 Coupons, Price Reductions, or Group Discounts When Not Reimbursed by a Third Party. When coupons or group discounts are issued, granted, or accepted by the retailer as part of the selling price of any taxable property, and the retailer does not receive any services, payment, or reimbursement from a third-party, the coupons, certificates, vouchers, or group discounts are considered cash discounts, and the amount may be subtracted from the selling price of the property when determining gross receipts.

037.05 Certificates or Vouchers. The sale of gift certificates, promotional certificates, or vouchers is not taxable.

037.05A Redemption of Promotional Certificates or Vouchers. When gift certificates, promotional certificates, or vouchers are redeemed in whole or in part, they are treated as if cash were used up to the face value of the certificate or voucher, even if the retailer or a third party originally sold it for less than face value.

037.05B If a retailer contracts with a third party to market promotional certificates or vouchers to the public in exchange for making purchases from the retailer (for example, Groupon, Deal of the Day, or a fundraising group), the face value of the promotional certificate or voucher is consideration for the sale if it is redeemed by the retailer. The gross receipts of the retailer is the full retail value of the property sold regardless of the amount paid by the customer to the third party.

(Neb. Rev. Stat. §§ 77-2701.16 and 77-2701.35. June 24, 2017.)

REG-1-038 FINANCIAL INSTITUTIONS

038.01 The tax applies to the purchase, lease or rental of property or services by financial institutions for its own use or consumption. Financial institutions include national banks as well as state-chartered institutions.

038.02 A financial institution which engages in the sale, lease, or rental of property or services to consumers must register as a retailer, collect, and remit the tax due to the Department of Revenue. Taxable sales by financial institutions include, but are not necessarily limited to, sales of checkbooks, silverware, pictures, savings or piggy banks, and repossessed merchandise. The gross receipts from the lease or rental of property by a financial institution are also taxable. See Reg-1-018, Rent or Lease of Tangible Personal Property, for the taxation of capital or operating leases. Safe-deposit boxes are not considered tangible personal property and accordingly their rental is not taxable.

038.03 Imprinted (personalized) checks sold by banks to customers are taxable. If such checks are furnished to the customers at cost, then the bank may either purchase the checks for resale and collect the applicable tax from its customers or pay the tax to its suppliers. If checks are issued to customers for a fixed charge per check which represents a service charge on the accounts (PAYC), such charge is not taxable to the customer, but the bank is the consumer of such checks and must pay tax upon their purchase price.

(Sections 77-2702.07, 77-2703(2), and 77-2705(3), R.S.Supp., 1993. May 14, 1994.)

REG-1-039 PROMOTING OR ADVERTISING THAT THE TAX IS ABSORBED IS PROHIBITED

039.01 Retailers are required to charge the consumer or user the full amount of the state and local sales tax. The retailer must collect the tax as an item separate and distinct from the selling price, except that:

039.01A The Tax Commissioner by regulation may permit retailers of certain classifications of property to include the tax imposed in the total sales price and state that the tax is included.

039.01A(1) Regulations which authorize retailers to include the tax in the total sales price of the property include: Reg-1-031, Coin-Operated Machines; Reg-1-040, Alcoholic Liquors Consumed on the Premises; Reg-1-044, Admissions; and Reg-1-083, Prepared Food and Beverage Service.

039.01A(2) Regulations which authorize these retailers to include the tax in the price of a specific type of property or service must be adopted prior to advertising that the tax is included in the sales price of the property.

039.01B Public utilities furnishing sewer, water, electricity, and gas may elect to absorb the tax, remit the amount of tax based upon the total charges made to taxable consumers, and include a statement on the bill to the effect that the tax has been absorbed by the utility.

(See Reg-1-066, Sewer and Water; and Reg-1-089, Energy Source Utility Exemption)

039.02 Unless authorized by regulation, it is a Class IV misdemeanor for a retailer, directly or indirectly, to assert, promote, advertise, imply, or represent to the public in any manner that the tax or any part of the tax will be assumed, absorbed, or refunded by the retailer, or that it will not be added to the purchase price.

039.03 The following are examples of prohibited statements that cannot be included in any advertising or other promotional communication:

039.03A Tax-free sale;

039.03B Pay no sales tax;

039.03C Purchases will be discounted by the amount of the sales tax;

039.03D Sales tax stimulus sale;

039.03E We will pay your sales tax; and

039.03F Tax credit sale.

(Neb. Rev. Stat. §§ 77-2701.16, 77-2703(1)(b) and (c), and 77-2713(5). June 24, 2017.)

REG-1-040 ALCOHOLIC LIQUORS CONSUMED ON THE PREMISES

040.01 The sales tax does not have to be separately stated and collected from the customer on sales of beverages and snack foods which are consumed on the premises of the licensed alcoholic liquor retailer. Retailers who do not separately state the sales tax shall determine their taxable receipts in accordance with the procedure set out in paragraph 008.03 of Reg-1-008, Records.

040.01A The tax must be separately stated and collected on the sales of sandwiches, hot foods other than hot beverages, and meals.

040.02 Including the tax in the sales prices does not exempt the retailer from the payment of the applicable tax on the gross receipts from those sales. The retailer is not prohibited from separately stating and collecting the tax if he or she so desires.

(Section 77-2703(1)(c), R.S.Supp., 1993. May 14, 1994.)

REG-1-041 Repealed

REG-1-042 Repealed .

REG-1-043 CONTAINERS

043.01 Container means the materials used to contain, cover, wrap, or package a product for sale, shipment, or delivery. Containers include boxes, bottles, cans, bags, sacks, and wrapping materials, such as paper, tape, string, and labels. Containers designed for use on transportation equipment are discussed in Regulation 1-069, Common and Contract Carriers.

043.02 Containers are either returnable containers or nonreturnable containers.

043.02A Returnable container means a reusable container that is normally returned to the seller by the buyer of the contents of the container. A returnable container includes any container on which there is a deposit that is refunded to the purchaser of the contents when the container is returned.

043.02B Nonreturnable containers are all containers that are not returnable containers.

043.03 Returnable containers are taxable when sold or rented to the person who will place the contents in the container.

043.03A The collecting or refunding of deposits on returnable containers is exempt.

043.04 Empty nonreturnable containers are exempt if purchased by a person who will fill the container and sell the contents and the container together.

043.04A Empty nonreturnable containers are taxed if purchased by a person who will not sell the contents or will remove the contents from the container before sale.

043.05 Any charge for a container, for wrapping an item, or filling a container, is taxable, except if the contents are sold at the same time and the contents are exempt, the charge is exempt.

043.05A The person charging for the container, for wrapping, or for filling may purchase the container or the materials used for resale.

(Sections 77-2704.24 and 77-2704.47, R.R.S. 2003; and Pepsi Cola Bottling Co. v. Peters, 189 Neb. 271, 202 N.W.2d 582 (1972). April 12, 2005.)

REG-1-044 ADMISSIONS

044.01 Definitions.

044.01A Access to a place or location means the right to be in the place or location for purposes of amusement, entertainment, or recreation at a time when the general public is not allowed at that place or location absent the granting of the admission.

044.01B Admission means the right or privilege to have access to or use a place or location where amusement, entertainment, or recreation is provided to an audience, spectators, or the participants in the activity. Admission includes memberships that grant access to a place or location, but do not include all the participation rights of belonging to the organization including, but not limited to the right to: hold office; vote for officers; and change the policies of the organization.

044.01B(1) Admission does not include a membership which grants all the participation rights of belonging to an organization, including, but not limited to: voting for officers; holding an office; and having the ability to change the policies of the organization.

044.01B(2) Admission does not include a charge for leasing or renting a location, facility, or part of a location or facility.

044.01B(3) Admission does not include a charge for practice or instruction.

044.01C Entertainment means amusement or diversion provided to an audience or spectators by performers.

044.01D Instruction means teaching skills necessary to perform a sport or activity proficiently.

044.01E Lease or rental of a location, facility, or part of a location or facility means that the owner or lessor:

044.01E(1) Cedes control of the location, facility, or part of the location or facility for a period of time; and

044.01E(2) Cedes the right to determine who is granted access to the location, facility, or part of a location or facility to the lessee for the period of the lease or rental.

044.01F Practice means an organized time for instruction, training, or rehearsing skills to become proficient in the sport or activity.

044.01G Recreation means a sport or activity engaged in by participants for purposes of refreshment, relaxation, or diversion of the participants. Recreation includes competition unless it is a professional competition. Whether a competition is professional or recreational is determined based on the nature of the event as a whole and not the professional status of any particular competitor.

44.02 Sales of Admissions Subject to Sales Tax. The gross receipts from selling admissions, including surcharges, are subject to sales tax. This includes season or subscription tickets for specific occasions or for multiple occasions, either limited or unlimited, during a period of time.

044.02A Cover charges, minimum charges, charges for reservations, or any similar charges are charges for admissions.

044.02B Charges by an organizer of a recreational sports league or competition to teams or individuals to participate where the games or competitions occur in locations under the control of the organizer at the time the games or competitions occur are admissions subject to sales tax unless an exemption applies.

044.02B(1) Charges to teams to participate in the league or competition include mandatory gate fees charged in lieu of collecting gate admissions to spectators and other mandatory charges to teams or participants.

044.02B(2) Charges by the team to individuals who will be participating are not admissions, unless the charge is by the organizer of the league. For example, amounts charged by a city recreation department to teams to participate in a city-organized adult softball league are taxable admissions, but the amount the teams collect from the individuals to cover team expenses, including the entry fee, are not.

044.02C When an admission to an activity or a membership constituting an admission is combined with soliciting a contribution, the portion or the amount charged representing the fair market price of the admission is subject to sales tax. The fair market value is determined according to Reg-1-090.09, Nonprofit Organizations.

044.02D Charges that are not admissions.

044.02D(1) Charges by an organizer of a recreational sports league or competition where the games or competition occur in locations that are not under the control of the organizer during the competition are not admissions. Examples include running events conducted on public streets and trails.

044.02D(2) Charges for participating in a workshop, seminar, class, convention, business meeting, or similar events primarily for training or educational purposes are not admissions.

044.02D(3) Charges for operating a coat or hat checkroom.

044.02D(4) Charges for operating a summer camp or a day camp are not admissions.

044.03 Places of Amusement, Entertainment, or Recreation. Places where amusement, entertainment, or recreation are typically provided to an audience, spectators, or participants in the activity include, but are not limited to: amusement parks; archery ranges; art exhibits; auditoriums; baseball parks; bowling alleys; cabarets; country clubs; dance halls; driving ranges; fairgrounds; fishing ponds; stadiums; golf courses; gymnasiums; health clubs; miniature golf courses; movie theaters; museums; night clubs; parks; race tracks; racquetball courts; skating rinks; batting cages; skeet ranges; street fairs; swimming pools; superslides; theaters; trap ranges; and toning salons.

044.03A Owners or operators who charge individuals for access to these places are selling admissions subject to sales tax, even if some of the individuals use the facility for practice or instruction.

044.03B If the owner or operator sets aside certain times for practice or instruction, charges to the students during these times are not admissions. Leasing or renting one of these places, in whole or in part, for purposes of practice or instruction conducted by the lessee, is not an admission.

044.03C To be considered practice or instruction, access must be limited to those participating in the practice or instruction.

044.04 Property Purchased by the Owner or Operator. The owner or operator of a place of amusement, entertainment, or recreation is the consumer of any property purchased, leased, or rented for use in the business of providing amusement, entertainment, or recreation. The owner or operator must pay sales or use taxes on these purchases, leases, or rentals.

044.04A If a separate charge, in addition to the admission, is made for renting property such as bowling shoes, roller skates, stadium seat cushions, etc., the gross receipts from the rental of this property are taxable.

044.04B The owner or operator may purchase property to be used solely for rental or lease using a resale certificate.

044.05 Sales Tax May Be Included in the Price Charged. The sales tax may be included in the total admission price. If the sales tax is included in the total admission price, a statement that the sales tax is included in the price must appear on the admission ticket, or on a sign posted in a conspicuous place where the admissions are sold.

044.06 Applicable Rate and Location. The sales tax on admissions is calculated at the rate in effect on the date of the sale at the place where the admission will be granted.

044.06A If a single charge is made to cover admission to more than one attraction under the same management, the sales tax is computed on the basis of a single charge at the rate applicable at the business location of the retailer.

044.06B If the admission to each attraction can be purchased separately, the sales tax is computed on each charge at the rate applicable at the location of each attraction; or on the total of the separate charges at the rate applicable at the business location of the retailer.

044.07 Unused Tickets. No refund or credit of the sales tax is allowed because an admission was not used, unless the selling price of the ticket was also refunded.

044.08 Ticket Resellers. Admissions cannot be resold because the second seller does not have the right to grant or deny access to the place or location. Ticket resellers are providing a nontaxable service.

044.09 Exemptions.

044.09A Admissions charged by elementary or secondary schools are exempt.

044.09B Admissions charged by school districts, student organizations, or parent-teacher associations to an event or activity held in an elementary or secondary school during the regular school day, or at an approved function of the school, are exempt. Admissions charged by the Nebraska School Activities Association, athletic or academic conferences, or similar organizations that have been approved by the elementary or secondary schools, are exempt.

044.09C Admissions to political fund-raising events by ballot question committees, candidate committees, independent committees, or political party committees, as defined in the Political Accountability and Disclosure Act, or committees for candidates for federal office, are exempt.

044.09D Amounts charged by political subdivisions or organizations that are exempt from income taxes under § 501(c)(3) of the Internal Revenue Code of 1986, as amended, (IRC) to participate in youth sports events, youth sports leagues, or youth competitive educational activities are exempt.

044.09D(1) Competitive educational activity means a tournament or a single competition that occurs over a limited period of time annually or intermittently where the participants compete in an activity related to an intellectual field.

044.09D(2) Sports event means a tournament or a single competition that occurs over a limited period of time annually or intermittently where the participants engage in a sport.

044.09D(3) Sports league means an organized series of sports competitions taking place over several weeks or months between teams or individuals that are members of the league.

044.09D(4) Youth sports event, youth sports league, or youth competitive educational activity means an event, league, or activity that is restricted to participants who are less than 19 years of age.

044.09E Charges for participants in any activity provided by a nonprofit organization that is exempt from income tax under IRC § 501(c)(3), which conducts statewide sport events with multiple sports for both adults and youth are exempt.

044.09F Charges for participants in any activity provided by a nonprofit organization that is exempt from income tax under IRC § 501(c)(3), which is affiliated with a national organization, primarily dedicated to youth development and healthy living, and which offers sports instruction and sports leagues or sports events in multiple sports are exempt.

044.09G The exemptions in Reg-1-044.09D through 044.09F include any separately-stated charges to teams or participants that must be paid in order to compete.

044.09G(1) For example, if an organization described in Reg-1-044.09E or 044.09F charges an entry fee to teams to compete in a youth softball or baseball tournament, and also charges each team a separate, mandatory “gate fee” in lieu of charging admissions to spectators, both the entry fee and the gate fee are considered charges to participate and are exempt.

044.09G(2) However, if the organization charges an entry fee, but also allows teams to purchase tournament passes which allow spectators to enter the venue, and the teams may purchase as many passes as they wish or no passes at all, the charges for the tournament passes are not considered charges to participants and are not exempt. The IRC § 501(c)(3) organization must collect, report, and remit sales tax on sales of the tournament passes.

044.09H Beginning January 1, 2016, admissions and memberships to a nationally accredited zoo or aquarium operated by a public or nonprofit corporation primarily for educational, scientific, or tourism purposes are exempt.

044.10 The gift of an admission is exempt. The donor must pay sales tax on any payments made to obtain the admission that was given away.

(Neb. Rev. Stat. §§ 77-2701.16, 77-2701.32, 77-2701.55, 77-2703(1), 77-2704.10 , and 77-2704.63; 26 U.S.C. § 170(l), Berrington Corp. v. Nebraska Department of Revenue, 277 Neb. 765, 765 N.W.2d 448, 2009, The Governors of the Knights of Ak-Sar-Ben v. Department of Revenue, Doc. 352, Pg. 148 (Lancaster Co. Dist. Ct., Dec. 27, 1984); and Attorney General's Opinion No. 88, dated 11/17/69. June 24, 2017.)

REG-1-045 MOTION PICTURE FILM, VIDEOTAPE, AND PROGRAMMING

045.01 Except as provided in paragraph 045.02 and 045.03, sales and use tax applies to the gross receipts from the sale or lease of entertainment properties, including videotape, digital goods, motion picture film, satellite programming, and satellite signal descrambling or decoding devices. Gross receipts includes the total amount charged for entertainment property including but not limited to any license, royalty, franchise, broadcast fee, or other method establishing the charge.

045.02 Sales and use tax is not applicable to leases or rentals of entertainment properties to theaters, or other exhibiting enterprises, where the admission to the showing or the charge to view is taxable.

045.03 Sales and use tax does not apply to the sale, lease, license, rental, or use of property or digital goods containing copyrighted material for rebroadcast by a radio or television station to the general public if the purchaser is operating under a certificate from the Federal Communications Commission.

(Sections 77-2701.16, 77-2701.34, 77-2701.50, 77-2701.51, 77-2701.52, and 77-2701.53, R.R.S, 2009. June 6, 2011.)

REG-1-046 HOTELS, LODGINGS, AND ACCOMMODATIONS

046.01 The sales tax applies to the receipts from any room or rooms, lodgings, or accommodations furnished by any hotel, motel, inn, tourist camp, tourist cabin, or any other place in which rooms, lodgings, or accommodations are regularly furnished for a consideration except licensed hospitals and nursing homes. The terms “rooms, lodgings, or accommodations” do not include camp sites, ballrooms, banquet rooms, reception rooms, meeting rooms, or other rooms which do not constitute a sleeping facility. Recreational vehicle park services are taxable. (Reg-1-103, Recreational Vehicle Park Services)

046.01A Charges to guests or tenants for cable or satellite television are taxable.

046.01A(1) The hotel, etc., may purchase the cable or satellite service, or separate channels without the payment of tax if the channels or the service is only available for an additional charge.

046.01B Charges to guests or tenants for intrastate telephone service are taxable. The hotel cannot buy telephone service for resale, except when the hotel uses no part of the telephone service.

046.02 Rooms, lodging, or accommodations supplied to the same tenant for a period of thirty (30) continuous days or more and the occasional rental for less than thirty (30) days of dormitories or facilities regularly used to house students in a facility operated by an educational institution established or recognized under Chapter 79 or 85 of the Nebraska Revised Statutes, are exempt from the sales and use tax.

046.03 Hotels, etc., must remit sales tax on the gross receipts from the sale of property or services at retail including the sale of meals. All property or services purchased by hotels, etc., are taxable except food, liquor, and like items that are actually resold. Sales to hotels, etc., of furniture, towels, soap, bedding, or other articles of property are regarded as sales for final use or consumption to which the sales tax applies.

046.04 The term accommodations shall include cabin trailers and mobile homes which have been either set up as a dwelling according to the local building codes or are permanently annexed to real estate.

046.05 Employees of exempt organizations or exempt governmental entities are taxable when they personally pay for accommodations, even if the employee is on travel orders and will be reimbursed for expenses incurred by the exempt organization or governmental entity.

(Sections 77-2702.14 and 77-2702.15, R.R.S. 2003. October 1, 2003.)

REG-1-047 BARBER AND BEAUTY SHOPS

047.01 Barber and beauty shop operators are primarily rendering personal services not subject to the sales tax. They are the consumers of the materials used in their business when rendering such personal services and are required to pay the tax on all these purchases.

047.02 When barber and beauty shop operators sell property they are required to register, collect and remit the tax on such sales directly to the Department of Revenue.

047.02A Operators may purchase for resale the items that will be sold.

047.03 Operators will pay the use tax on any of the items purchased for resale that are used in rendering personal services.

047.03A Operators who charge their employees or independent contractors working in their shop for materials will collect sales tax on the amount charged.

(Sections 77-2702.13, and 77-2703(2), R.S.Supp., 1993. May 14, 1994.)

REG-1-048 LAUNDRIES AND DRY CLEANERS

048.01 All property and services purchased by laundries and dry cleaners for use in furnishing laundry and dry cleaning services are taxable. Services rendered by such persons in returning clothing and other items to their original condition are restoration services and are not taxable.

048.02 The sales tax does not apply to receipts from coin-operated laundry and dry cleaning devices. The sales or use tax applies to all property purchased by coin-operated laundries to be used in the furnishing of laundry services, including machinery, equipment, repair parts, materials, and supplies.

048.03 Electricity and other fuels purchased for a laundry or dry cleaner, or for coin-operated laundry and dry cleaning devices is used in restoration and not in processing and is therefore taxable.

048.04 When laundry and dry cleaner operators go beyond the rendition of restoration services and make sales of clothing, bleach, soap, or other property, and alter, repair, or modify garments, they must become licensed to collect and remit the applicable tax.

(Sections 77-2702.13, 77-2703(2), and 77-2704.15, R.R.S. 2003. Uniservice v. State, Doc. 402, Pg. 150 (Lancaster Co. Dist. Ct., 1987).October 1, 2003.)

REG-1-049 LINEN AND CLOTHING SUPPLIERS

049.01 The gross receipts realized from rental of or furnishing of tangible personal property, such as coats, caps, aprons, dresses, uniforms, smocks, towels, linens, rugs, and diapers under an agreement which provides for their periodic cleaning or laundering, are taxable.

049.02 Persons providing this service are retailers and shall issue resale certificates to their suppliers for the clothing or other items which are furnished to their customers under these agreements. Materials, equipment, electricity and other fuels, and supplies consumed by the retailer in providing this service, such as bags or other packaging, bleaches, softeners, and detergents, are taxable.

(Sections 77-2702.14, and 77-2703(1) and (2), R.S.Supp., 1992. January 24, 1993.)

REG-1-050 MEDICINES AND MEDICAL EQUIPMENT

050.01 The following definitions apply to this regulation and Reg-1-051, Physicians and Dentists. The Nebraska Department of Revenue will rely upon determinations of the Nebraska Medical Assistance Program operated by the Nebraska Department of Health and Human Services (Medicaid) to determine if specific equipment, supplies, or devices are eligible for coverage under Medicaid.

050.01A Appropriate for use in the home means the equipment can be used or operated by a person without specialized training.

050.01B Drug means any compounds, substances, or preparations, other than grooming and hygiene products such as soap, toiletries, and cosmetics, food and food ingredients, dietary supplements, or alcoholic beverages which are:

050.01B(1) Recognized in the official U.S. Pharmacopoeia, official U.S. Homeopathic Pharmacopoeia, or official National Formulary;

050.01B(2) Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease; or

050.01B(3) Intended to affect the structure or function of the body.

050.01C Durable medical equipment means equipment, including repair and replacement parts, that:

050.01C(1) Can withstand repeated use;

050.01C(2) Is primarily and customarily used to serve a medical purpose;

050.01C(3) Is not generally useful to a person in the absence of illness or injury; and

050.01C(4) Is appropriate for use in the home.

050.01C(5) Durable medical equipment does not include exercise equipment, recliners, vibrators, hot tubs, or monitoring devices unless the monitoring devices are necessary to use other durable medical equipment.

050.01D Home medical supplies means supplies primarily and customarily used to serve a medical purpose that are appropriate for use in the home and are not generally useful to a person in the absence of illness or injury. Home medical supplies do not include items for personal comfort, hygiene, or cosmetic purposes, or any drugs.

050.01E Mobility enhancing equipment means equipment, including repair and replacement parts, which:

050.01E(1) Is primarily and customarily used to provide or increase the ability to move from one place to another;

050.01E(2) Is not generally used by persons with normal mobility; and

050.01E(3) Is appropriate for use either in a home or a motor vehicle.

050.01E(4) Mobility enhancing equipment does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer, for example, power steering, power brakes, automatic door locks, or running boards.

050.01F Oxygen equipment means oxygen cylinders, cylinder transport devices, including sheaths and carts, cylinder studs and support devices, regulators, flowmeters, tank wrenches, oxygen concentrators, liquid oxygen base dispensers, liquid oxygen portable dispensers, oxygen tubing, nasal cannulas, face masks, oxygen humidifiers, and oxygen fittings and accessories.

050.01G Over-the-counter drug means a drug containing a label as required by 21 C.F.R. 201.66. The over-the-counter drug label includes a drug facts panel or a statement of the active ingredients with a list of those ingredients contained in the compound, substance, or preparation.

050.01H Prescription means an order, formula, or recipe issued in any form of oral, written, electronic, or other means of transmission by a practitioner licensed under the Uniform Credentialing Act.

050.01I Prosthetic device means replacement, corrective, or supportive devices worn on or in the body to replace a missing portion of the body, prevent or correct physical deformity or malfunction, or support a weak or deformed portion of the body. Prosthetic devices include any supplies used with prosthetic devices and any repair or replacement parts.

050.02 Sales of mobility enhancing equipment for human use are exempt from sales and use tax when supported by a prescription issued by a practitioner licensed under the Uniform Credentialing Act. Taxation of mobility enhancing equipment that is annexed to real estate will be governed by the selected option of the contractor annexing the mobility enhancing equipment. (Reg-1-017, Contractors).

050.02A Option 1 contractors may accept a Nebraska Resale or Exempt Sale Certificate, Form 13, and a copy of the prescription to exempt the equipment or materials from sales tax.

050.02B Option 2 and Option 3 contractors are the consumers of all mobility enhancing equipment that is purchased and annexed to real estate. Option 2 and Option 3 contractors must pay tax on this equipment and materials, and do not collect sales tax from their customers. Option 2 and Option 3 contractors cannot accept a Form 13 or a prescription from their customer to exempt the equipment or materials from tax.

050.03 Sales of home medical supplies, oxygen, oxygen equipment, prosthetic devices, and durable medical equipment are exempt from sales and use tax if the home medical supplies, oxygen, oxygen equipment, prosthetic devices, or durable medical equipment are:

050.03A Sold for a human patient’s use;

050.03B Sold pursuant to a prescription issued by a practitioner licensed under the Uniform Credentialing Act for the treatment of a medical condition; and

050.03C Either;

050.03C(1) Paid for or eligible for coverage under Medicaid, or

050.03C(2) Transferred to the patient during a procedure which is paid for or eligible for coverage under Medicaid, regardless of whether or not the patient is eligible for assistance.

050.04 Sales of drugs for human use, except over-the-counter drugs, are exempt from sales and use tax when supported by a prescription issued by a practitioner licensed under the Uniform Credentialing Act.

050.04A Over-the-counter drugs that can be purchased without a prescription are taxable even if they are prescribed by a practitioner licensed under the Uniform Credentialing Act.

050.04B All illegal drugs are taxable.

050.05 Sales of insulin for human use with or without a prescription are exempt from sales tax.

050.06 Purchases by physicians and dentists are discussed in Reg-1-051, Physicians and Dentists.

050.07 Purchases by hospitals, clinics, or health care practitioner facilities that are not sales tax-exempt are taxed in the same manner as purchases by physicians and dentists. Hospitals, clinics, or health care practitioner facilities must maintain records showing that prescriptions were issued for items transferred without any tax paid or collected.

050.08 Retailers making sales of drugs, other than over-the-counter drugs, durable medical equipment, home medical supplies, prosthetic devices, or mobility enhancing equipment, must keep the prescription sales records segregated from other sales records.

050.09 Charges which are billed under the Nebraska Medical Assistance Program operated by the Nebraska Department of Health and Human Services and are paid by the State of Nebraska, are deemed to be purchases by the state and are exempt from sales tax.

(Neb. Rev. Stat. §§ 77-2704.02, 77-2704.09, 77-2704.12 and 77-2704.15. June 24, 2017.)

REG-1-051 PHYSICIANS AND DENTISTS

051.01 Charges for professional services rendered by physicians and dentists are not taxable.

051.02 Physicians and dentists are considered consumers of property and services they purchase for use in the practice of their professions.

051.02A Sales of drugs, except over-the-counter drugs, prosthetic devices, durable medical equipment, mobility enhancing equipment, and home medical supplies, are exempt from sales tax if purchased by a physician or dentist to be prescribed, dispensed, administered, or transferred to an individual human patient during the treatment of the patient, if the purchase by the patient would be exempt under Reg-1-050, Medicines and Medical Equipment.

051.02B Sales of supplies that are used in examinations or diagnosis, and test or diagnostic equipment, are taxable when purchased or leased by the physician or dentist for use in his or her practice or for use by more than one patient.

051.02C Sales of durable medical equipment, mobility enhancing equipment, and home medical supplies that are not transferred to a specific patient are taxable when purchased by the physician or dentist.

051.02D Sales of equipment, tools, supplies, software, or other technology necessary to use durable medical equipment, prosthetic devices, supplies, mobility enhancing equipment, or home medical supplies are taxable.

051.03 When physicians or dentists sell property separately from treating patients, they are required to collect the tax on these sales or maintain records in a location separate from confidential patient records, showing the sales were exempt from sales tax.

051.04 Under Nebraska law, procuring, furnishing, donating, processing, distributing, or using human whole blood, plasma, blood products, blood derivatives, and other human tissues such as corneas, bones, or organs for the purpose of injecting, transfusing, or transplanting any of them in the human body is providing a service and not a sale of property subject to sales or use taxes; whether or not any payment is received.

051.05 Charges for copies of medical records are taxable except for:

051.05A Medical records provided to the patient or a person holding that patient’s power of attorney for health care, defined in Neb Rev. Stat. §§ 30-3401 through 30-3432; or

051.05B Medical records sold to Medicare, Medicaid, or an entity that is exempt from sales and use tax.

051.06 The definitions found in Reg-1-050.01 apply to this regulation.

REG-1-052 FLORISTS

052.01 Charges by a florist to his or her customers for the sale and delivery of flowers, wreaths, or other floral products are taxable when the items sold are delivered by the florist to points within the State of Nebraska, or when the florist receiving the order instructs another florist to make the delivery.

052.01A When the florist receiving the order makes the delivery, the tax shall be collected at the appropriate rate, including local option sales tax, for the delivery location.

052.01B When another florist makes the delivery, the florist receiving the order from the customer will collect the tax at the rate, including local option tax, for the location where the order was taken.

052.02 The sales tax applies to amounts charged by florists who receive orders for the delivery of flowers, wreaths, etc., and instruct other florists to make the delivery. The sales tax does not apply to separate charges made by the florist for transmitting the instructions.

052.03 The tax does not apply to amounts received by Nebraska florists who make deliveries in this state pursuant to instructions received from other florists.

052.04 Wires, stems, vases, or other property which become a component part of a finished “arrangement” are not taxable when purchased by the florist.

(Section 77-2704.11, R.S.Supp., 1992. January 24, 1993.)

REG-1-053 FUNERAL DIRECTORS AND UNDERTAKERS

053.01 Funeral directors and undertakers are considered to be in the dual capacity of rendering services and selling property. Sales tax attaches to such sales of property and shall apply as set out in this regulation.

053.02 Funeral directors or undertakers are considered to be purchasing for resale such items as caskets, vaults, and clothing, and accordingly should furnish their suppliers of such items with a resale certificate. However, funeral directors or undertakers are considered consumers of embalming fluid, cosmetics, chemicals, office equipment, funeral home furnishings, advertising calendars, booklets, motor vehicles, embalming instruments, grave equipment, stretchers, and baskets. The applicable tax must be collected by the supplier and remitted to the Department of Revenue.

053.02A When a funeral director or undertaker is employed to prepare the remains and place it in a casket for subsequent shipment outside of this state, sales of caskets, clothing, and similar items, are taxable as the delivery has taken place when the remains were placed in the casket.

053.02B When remains are shipped into this state for burial purposes and a vault is purchased from the Nebraska funeral director, sales tax applies on the charge for the vault.

053.03 No sales tax shall be charged on burials for which payment is made directly to the funeral director or undertaker by the State of Nebraska or any county.

053.04 If separate charges are made for the sale of property and for required services, sales tax shall be collected only on the sale of property. In such cases, tax would not apply to charges such as embalming and care of the remains, use of the hearse, limousine, grave opening, purchase of a lot, remuneration to the minister and musicians, use of the church, or press notices.

053.04A Where the funeral director or undertaker purchases flowers, sales tax must be paid by the funeral director or undertaker to the florist unless the funeral director or undertaker separately charges for the flowers. When the separate charge is made, the charge is taxable and the funeral director or undertaker can purchase the flowers for resale.

053.05 Where funeral directors and undertakers do not segregate the charges for the sale of property from the sale of required services, they shall collect and report the tax based on fifty percent (50%) of the total charges. The sale of outside vaults and clothing are not considered a part of required services and sales tax shall apply with respect to 100% of the total from such sales. Charges for all other nonrequired taxable services are excludable from the tax base prior to computation on the 50% basis. Charges for grave openings, purchases of a lot, payments to the minister and musicians, use of the church, and press notices are examples of charges for nonrequired services.

(Section 77-2703(1)(k), R.S.Supp., 1993. May 14, 1994.)

REG-1-054 NEWSPAPERS

054.01 Sales of newspapers, published at least 52 times a year and containing matters of general interest and reports of current events, are exempt from the sales tax whether sold by subscription or for cash.

054.02 Purchases of preprints such as advertising supplements, newspaper supplements, or similar items, for distribution with newspapers are exempt when delivered directly to the newspaper by the printer or by a common or contract carrier. Any of the preprints that are not actually distributed with a newspaper, or that are not delivered directly to the newspaper, are taxable.

054.03 Publishers of newspapers are exempt from payment of sales tax on their purchases of paper, ink, preprints, and other component parts of newspapers. Purchases which do not become a component part of the finished newspaper, such as presses, photography equipment, office furnishings, and supplies are taxable.

(Sections 77-2702.13 and 77-2704.07, R.R.S. 2003. October 1, 2003.)

REG-1-055 MAGAZINES AND JOURNALS

055.01 Receipts from any sale, whether or not by subscription, for magazines and journals are taxable.

055.02 Journals include professional publications and information service publications that are updated periodically.

055.03 Publishers of magazines and journals are purchasing the property actually incorporated as a component part of the finished product as a “sale for resale”. Purchases by publishers which do not become a component part of the finished magazine or journal, such as presses, photography equipment, office furnishings, and supplies are taxable.

(Sections 77-2702.13 and 77-2704.22, R.R.S. 2003. October 1, 2003.)

REG-1-056 ADVERTISING AND ADVERTISING AGENCIES

056.01 An advertising agency performs advertising services and develops advertising materials for its clients.

056.02 The taxation of purchases by and sales of an advertising agency depend upon the written agreement between the agency and the client. The client and the agency may agree on two different provisions that affect taxation.

056.02A The client can designate the agency to operate as an agent of the client for purchases.

056.02A(1) If the client does not designate the agency to operate as their agent, the advertising agency must operate as a retailer under paragraph 056.05 of this regulation for that client.

056.02B If the client has agreed the agency is operating as their agent, the client and the agency may also agree the agency owns the materials used in producing and developing the advertising.

056.02B(1) The agreement covers the ownership of materials that are not transferred to the client or delivered to customers or potential customers within one year of the completion of the project.

056.02B(2) All materials that are physically delivered less than one year after the completion of the project to the client, to the client’s customers or potential customers belong to the client regardless of the terms of the agreement.

056.02B(3) If the agency owns the materials under the agreement, the agency must operate under paragraph 056.03 of this regulation for that agreement.

056.02B(4) If the client and agency do not agree that the agency owns the materials, then the client is presumed to own the materials and the agency must operate under paragraph 056.04 of this regulation.

056.02C The agency may have one agreement with a client that covers all of the projects for that client. The agency may also have different agreements with the same client at different times or on different projects, or the agency may have different agreements with different clients.

056.02D When the agency is required to operate under different paragraphs of this regulation, the agency must have different procedures for such things as record keeping, storage or disposition of materials, and licensing of work from other persons.

056.02D(1) If the same procedures are used for all clients regardless of the terms of the agreement, the agreements will be disregarded as being intended to avoid the tax.

056.03 This section of this regulation applies when the client has designated the advertising agency as its agent for sales and use tax purposes, and has agreed in writing that the advertising agency owns the materials.

056.03A The agency must pay tax on labor or creative talent purchased from third-parties for the development or production of the ideas or for work on advertising materials.

056.03A(1) The agency must pay tax on the total amount paid to third-party artists, photographers, printers, and music producers for drawings, pictures, photographs, audio or video tapes, or for the right to use their work. The entire amount is taxable even if it is itemized as consulting, modeling fees, studio rental, or copyright license.

056.03A(2) The agency will not pay tax on salaries to its employees or fees paid to models, musicians, or voice talent hired by the agency.

056.03B The agency must pay tax on all purchases of equipment, supplies, and tools for the development or production of ideas for either advertising services or advertising materials. Items used by the agency include computers, computer software, typewriters, paper supplies, photographs, chemicals, and drawing or printing materials.

056.03C An advertising agency must pay tax on all purchases of advertising materials.

056.03C(1) Advertising materials include all types of printed material, audio tapes, video tapes, signs, posters, pictures, drawings, computer graphics, computer music, paste-ups, mechanicals, or other artwork.

056.03D The agency will not collect tax from its client on charges for projects that result in the advertising services listed below. The agency will pay tax on its purchases as otherwise required in this paragraph.

056.03D(1) Writing original manuscripts and news releases;

056.03D(2) Writing copy or preparing artwork for use in newspapers, magazines, television, or radio;

056.03D(3) Providing consultation or market research;

056.03D(4) Compiling statistical or other information; or

056.03D(5) Placing or arranging for advertisements in newspapers, magazines, television, or radio.

056.03E Advertising materials are transferred to the client if title or possession are transferred to the client or if the materials are delivered to customers or potential customers of the client.

056.03E(1) The agency will not collect tax on the amounts billed to the client for reimbursement of payments by the agency to third-parties for the materials, labor, or talent.

056.03E(2) The agency will collect tax on any amounts billed for work performed by the agency or its employees directly on materials transferred to the client.

056.03F The agency and the client are both responsible for any tax that was not paid on purchases made by the agency as an agent of the client. Only the agency is responsible for the tax on purchases of materials that will be retained by the agency.

056.04 This section of this regulation applies when the client has designated the advertising agency as its agent for tax purposes, but has not agreed in writing that the advertising agency owns all advertising materials that are not transferred. The client is presumed to own the materials for the project, including those in the possession of the advertising agency.

056.04A The agency must pay tax on any labor or creative talent purchased from third-parties for the development or production of the ideas or for work on advertising materials.

056.04A(1) The agency must pay tax on the total amount paid to third-party artists, photographers, printers, and music producers for drawings, pictures, photographs, audio or video tapes, or for the right to use their work. The entire amount is taxable even if it is itemized as consulting, modeling fees, studio rental, or copyright license.

056.04A(2) The agency will not pay tax on salaries to its employees or fees paid to models, musicians, or voice talent hired by the agency.

056.04B The agency must pay tax on all purchases of equipment, supplies, and tools for the development or production of ideas for either advertising services or advertising materials. Items used by the agency include computers, computer software, typewriters, paper supplies, photographs, chemicals, and drawing or printing materials.

056.04C The agency must pay tax on all advertising materials that will be transferred to the client, unless the client is an exempt organization.

056.04C(1) If the client is an exempt organization or exempt governmental unit, the advertising agency may give the seller an exempt sale certificate with the name and exemption number of the exempt organization.

056.04C(2) Advertising materials include all types of printed material, audio tapes, video tapes, signs, posters, pictures, drawings, computer graphics, computer music, paste-ups, mechanicals, or other artwork.

056.04D The agency will not collect tax from its client on charges for projects that result in the advertising services listed below.

056.04D(1) Writing original manuscripts and news releases;

056.04D(2) Writing copy or preparing artwork for use in newspapers, magazines, television, or radio;

056.04D(3) Providing consultation or market research;

056.04D(4) Compiling statistical or other information; or

056.04D(5) Placing or arranging for advertisements in newspapers, magazines, television, or radio.

056.04E All advertising materials are transferred to the client. This includes materials such as mechanicals or paste-ups kept at the agency, materials delivered to the client or materials delivered to customers or potential customers of the client.

056.04E(1) The agency will not collect tax on the amounts billed to the client for reimbursement of payments by the agency to third parties for materials, labor, or talent.

056.04E(2) The agency will collect tax on any amounts billed for work performed by the agency on materials.

056.04F The agency and the client are both responsible for any tax that was not paid on purchases made by the agency as an agent of the client and on all purchases of advertising materials used for the client.

056.05 This section of this regulation applies when the client has not designated the advertising agency as its agent for tax purposes. The agency must operate as a retailer and the agency is presumed to be the owner of all advertising materials not transferred to the client.

056.05A The agency must pay tax on labor or creative talent purchased from third-parties for the development or production of the ideas or for work on advertising materials. The agency may purchase from third-parties the labor used directly on the actual final product for resale.

056.05A(1) The agency must pay tax on the total amount paid to third-party artists, photographers, printers, and music producers for drawings, pictures, photographs, audio or video tapes, or for the right to use their work. The entire amount is taxable even if it is itemized as consulting, modeling fees, studio rental, or copyright license.

056.05A(2) The agency will not pay tax on salaries to its employees or fees paid to models, musicians, or voice talent hired by the agency.

056.05B The agency must pay tax on all purchases of equipment, supplies, and tools for the development or production of ideas for either advertising services or advertising materials. Items used by the agency include computers, computer software, typewriters, paper supplies, photographs, chemicals, and drawing or printing materials.

056.05C An advertising agency must pay tax on all purchases of advertising materials, except the agency will not pay tax on advertising materials that will be transferred to the client or to a customer or potential customer of the client. The materials to be transferred can be purchased for resale.

056.05C(1) Advertising materials include all types of printed material, audio tapes, video tapes, signs, posters, pictures, drawings, computer graphics, computer music, paste-ups, mechanicals, or other artwork.

056.05D The agency will not collect tax on charges for projects that result in the advertising services listed below.

056.05D(1) Writing original manuscripts and news releases;

056.05D(2) Writing copy or preparing artwork for use in newspapers, magazines, television, or radio;

056.05D(3) Providing consultation or market research;

056.05D(4) Compiling statistical or other information; or

056.05D(5) Placing or arranging for advertisements in newspapers, magazines, television, or radio.

056.05E Advertising materials are transferred to the client if they are delivered to the client or if the materials are delivered to customers or potential customers of the client.

056.05E(1) The agency must collect tax from the client on the total amounts billed to the client for advertising materials.

056.05E(2) The agency must collect tax on any amounts billed for work performed by the agency on materials transferred to the client.

056.05E(3) The agency must collect tax from the client on the total amount billed for the project including any commissions, surcharges, or agency fees connected with an advertising project that results in materials transferred to the client.

056.05E(4) When a project results in both the services listed in paragraph 056.05D and the transfer of materials, the service fees and commissions are partially taxed. The division will be based on the comparative charges for the services and the materials.

056.05E(5) If the client is an exempt organization or exempt governmental unit, the advertising agency may accept an exempt sale certificate from the exempt organization. The agency is then not required to collect the tax from the client. The agency must pay tax on all purchases of advertising materials that are not transferred as required in paragraph 056.05A.

056.05F The agency and the client are both responsible for any tax that was not paid on the total amount billed by the agency for advertising materials.

056.06 The type of display determines if charges for outdoor advertising are taxable. Charges for displays that are fixed are exempt. Fixed displays include signs and billboards attached to real estate. Charges for displays that are temporary, portable, or mobile are taxable. These displays include signs and billboards on trailers. Charges for preparing messages for such displays are taxable.

(Section 77-2702.07, 77-2702.13, 77-2702.15, and 77-2702.17, R.S.Supp., 1993. May 14, 1994.)

REG-1-057 PRINTING AND RELATED INDUSTRIES

057.01 Printing includes all printing, lithography, photolithography, typography, color separation, rotogravure, gravure, silk screen printing, imprinting, laser printing, multilithing, mimeographing, photocopying, die cutting, binding, folding, and similar operations.

057.02 The printer must collect tax on the gross receipts for printing. The gross receipts are taxable whether the printer or the customer provides the materials. Charges for delivery, postage, or shipping paid to a printer or paid directly to the U.S. Postal service or a common carrier on behalf of the printer are taxable.

057.02A Set up charges, type setting and similar charges, and charges for die cutting, embossing, folding, and other binding operations are taxable.

057.02B The gross receipts from the sale of preprints, such as advertising supplements, newspaper inserts, or similar items, are taxable except when sold for distribution with the newspaper and delivered directly to the newspaper by the printer or a common or contract carrier.

057.03 The printer must collect tax on charges for printing aids or for the preparation of printing aids. The tax must be collected whether they are sold to a client or to another printer. Printing aids are those plates or other materials that physically transfer the image to the paper or other materials.

057.04 The printer may accept a resale or exempt sale certificate or a certificate of exemption for direct mail from a customer. When the resale or exempt sale certificate or certificate of exemption for direct mail is accepted, the printer does not have to collect the tax.

057.04A The printer may accept a resale certificate from an advertising agency acting as a retailer;

057.04B The printer may accept an exempt sale certificate from an exempt organization or governmental unit that is exempt;

057.04C The printer may accept a certificate of exemption for direct mail. The purchaser is responsible for the tax associated with the direct mail certificate. A certificate of exemption for direct mail remains in effect until it is revoked in writing by the purchaser, (See Reg-1-105, Direct Mail); or

057.04D The printer may accept delivery information for direct mail. The printer will collect tax based on the jurisdictions into which the direct mail will be delivered. (See Reg-1-105, Direct Mail.)

057.05 The printer must pay tax on all machinery and equipment and on all tools, supplies, cleaning materials, and other consumables.

057.05A Consumables include printing plates that are not suitable for reuse and printing plate materials used to make printing plates which are not suitable for reuse. Such plates and plate materials are not resold to the printer’s customers and therefore, cannot be purchased by the printer tax-free for resale.

057.06 The printer must pay the tax on printing aids it purchases to use. When the printing aids are sold to the customer before they are used, the printer may purchase the printing aids for resale. Unless there is a written agreement to the contrary, the printing aids will be considered sold before use when the printing aids are separately listed and priced on the printer’s invoice to the customer.

057.06A When the printing aids are sold to the customer after they are used, the printer must pay tax to his or her supplier and the printer must also collect tax on the sale to the customer.

057.06B The printer must pay tax on materials and artwork that are purchased to make printing aids. These materials and artwork include photographs, drawings, paintings, hand lettering, other artwork, photographic reproductions of such material, pasteups, mechanicals, or camera-ready copy.

057.07 The printer may purchase paper, ink, and bindery materials that will be part of the product sold to the customer for resale. Similar materials that are a part of the product delivered may also be purchased for resale.

057.08 If mats for comic strip drawings, syndicated columns, syndicated photos, or publicity photos are furnished to the publisher, then the columnist, syndicate, or the person who purchases the mat must pay the tax to the person who makes the mat.

057.09 Charges for duplicating by means of a computer, word processor, or memory typewriter are taxable. The taxable amount includes any amount for the original typing of the letter to be duplicated, and any customized information that will be automatically inserted into the letter.

057.10 Charges for individually typing by hand the salutation or inside address or a personalized reference on mechanically duplicated letters are exempt. Charges for addressing for mailing by hand are exempt.

057.11 Sales of signs, show cards, and posters are taxable. Charges for painting signs, show cards, and posters are taxable whether the materials are furnished by the painter or by the customer.

057.12 Charges for painting or lettering on real property, such as a building or a window, are not taxable. Paint is a building material and is taxed based on the contractor option selected by the painter. (Reg-1-017, Contractors.)

(Sections 77-2701.12, 77-2701.31, and 77-2701.33, R.R.S. 2003, and section 77-2701.16, 77-2701.32, 77-2701.35, and 77-2703.03, R.S.Supp., 2008. February 22, 2009.)

REG-1-058 PHOTOGRAPHERS AND PHOTOSTATIC MATERIALS

058.01 Sales and use tax applies to sales of photographs and photostatic copies. Taxable transactions include sales of photographs or photostatic copies produced to special order for the customer, and also to charges for the making of photographs or photostatic copies when the materials used are furnished by the customer.

058.01A Tax must be collected on the total selling price without deduction for the cost of the product sold, labor, professional expertise, or any other expenses of the photographer such as travel time, rental of equipment, or salaries or wages paid to assistants or models, whether or not such expenses are itemized on the billing to customers.

058.02 Photofinishers, photographers and photostat producers may purchase for resale property such as mounts, frames, and sensitized paper, which becomes an ingredient or component part of photographs or photostats which are sold. Sales to the photographer, photofinisher, or producer of materials used or consumed in the process of making the photographs or photostatic copies, such as chemicals, trays, films, plates, proof paper, and cameras, which do not become an ingredient or component part of the item sold are taxable.

058.03 Charges for printing pictures or making enlargements from negatives furnished by the customer including charges for developing the negatives are taxable. The tax also applies to charges by a photofinisher for tinting or coloring pictures.

(Sections 77-2702.07, 77-2702.13, 77-2702.15, and 77-2702.17 R.S.Supp., 1993. May 14, 1994.)

REG-1-059 TIRE RETREADING, RECAPPING AND REPAIRING

059.01 Persons engaged in the retreading, recapping and relugging of tires for customers are deemed to be producing property for sale and the sales tax attaches thereto. The sales tax shall be collected on the full amount charged the customer, which includes both materials and labor, regardless of the manner in which the customer is billed for such charges.

059.02 Where recapped, relugged or retreaded tires are sold to or processed for dealers for resale purposes, such dealers shall collect the tax on the full amount, which includes both materials and labor, when the recaps, relugs or retreads are sold at retail.

059.03 Sales tax is imposed upon the charge made for tire and tube repairing other than tires for motor vehicles, trailers or semitrailers, or agricultural machinery used in commercial agriculture. Sales to the person repairing tires and tubes of articles, equipment and supplies used in performing such repair service are sales for final use or consumption and are taxable to the repairperson at the time of purchase.

(Section 77-2702(4), (13) and (15), R.R.S. 2003. October 1, 2003.)

REG-1-060 SEEDS AND PLANTS

060.01 Sales of seeds, plants, shrubs, and trees, when sold to persons for growing or improving home lawns, ornamental gardens, parks, boulevards, and golf courses, are taxable.

060.02 Sales of garden seeds, bulbs, and plants, the products of which ordinarily constitute food for human consumption, are taxable, except that:

060.02A Sales of these seeds, bulbs, and plants are exempt if purchased with payments from the Supplemental Nutrition Assistance Program (SNAP), (Reg-1-087, Food or Food Ingredients); or

060.02B Sales of these seeds, bulbs, and plants are exempt if sold for use in commercial agriculture. (Reg-1-087, Food or Food Ingredients).

060.03 Seed legumes, seed grasses, and seed grains that are sold exclusively for use in commercial agriculture are exempt from sales tax. Tax exempt purchases of seed legumes, seed grasses, and seed grains for use in commercial agriculture do not need to be supported by a Nebraska Resale or Exempt Sale Certificate, Form 13, when the seller has other documentation to adequately support the exempt use of the products.

060.04 Commercial agriculture means the business of producing food products or other crops that are either sold or used by the grower. Commercial agriculture includes commercial production in greenhouses, nurseries, tree farms, and sod farms.

(Neb. Rev. Stat. §§ 77-2704.46 and 77-2704.54. July 3, 2013.)

REG-1-061 AGRICULTURAL CHEMICALS

061.01 Agricultural chemicals to be applied to land or crops in commercial agriculture are exempt.

061.01A Agricultural chemicals as used in this regulation includes adjuvants, surfactants, bonding agents, clays, oils, and any other additives or compatibility agents, fertilizers, anhydrous ammonia, minerals, insecticides, fungicides, rodenticides, herbicides, defoliants, soil fumigants, plant growth regulating chemicals, plant desiccants, seed inoculants, and plant hormones.

061.01B Commercial agriculture as used in this regulation is the business of producing food products or other useful and valuable crops. The crops can either be sold or used by the grower. Commercial agriculture includes commercial production in greenhouses, nurseries, tree farms, and sod farms. Commercial agriculture does not include storage of crops off the farm or in commercial elevators.

061.02 The term fertilizers as used in this regulation shall mean a substance which increases the plant food content of the soil and as a result becomes a part of the products grown or assists in the growth of the plants.

061.03 Oxygen for use in aquaculture is exempt.

061.03A Aquaculture shall mean the agricultural practice of controlled propagation and cultivation of aquatic plants or animals for commercial purposes.

061.04 Sales of agricultural chemicals for use in maintaining home lawns, home gardens, parks, boulevards, golf courses, and other nonagricultural production are taxable.

061.05 Sales of agricultural chemicals labeled by the manufacturer as solely to be applied to land or crops in commercial agriculture do not need to be supported by a Nebraska Resale or Exempt Sale Certificate, Form 13, when the seller has other documentation to support the exempt sale.

(Section 77-2702.13, R.S.Supp., 1998, and sections 2-3804.01, and 77-2704.41, R.R.S. 1996. November 11, 1998.)

REG-1-062 ANIMAL LIFE

062.01 Sales of any form of animal life, the products of which ordinarily constitute food for human consumption, are exempt from the sales tax. Cattle, domestic sheep, swine, poultry, domestic goats, and bees are examples of exempt forms of animal life. Sales of game birds subject to permit and regulation by the Game and Parks Commission are also exempt from the sales tax.

062.01A Game birds means coots, cranes, curlew, doves, grouse, partridges, pheasants, plovers, prairie chickens, quail, rails, snipes, swans, woodcocks, wild turkeys, and all migratory waterfowl.

062.01B Migratory waterfowl means ducks, geese, brant, or other migratory waterfowl subject to regulation by the Game and Parks Commission.

062.02 Purchases of animal life, the products of which do not ordinarily constitute food for human consumption, for example, zoo animals, parakeets, canaries, chinchillas, horses, donkeys, mules, elk and deer, ostriches, emus, and pets, such as cats, dogs, and birds, or breeding stock of any of these animals are examples of taxable forms of animal life. Purchases of these forms of animal life are taxable to the purchaser even when purchased for breeding purposes.

062.03 Certain animal specialty services provided to animal life may be taxable. See Reg-1-102, Animal Specialty Services, regarding the taxation of animal specialty services.

(Neb. Rev. Stat. § 77-2704.46. June 24, 2017.)

REG-1-063 FEED, WATER, AGRICULTURAL CHEMICALS, AND VETERINARY MEDICINES FOR ANIMAL LIFE

063.01 Feed, agricultural chemicals, veterinary medicines, feed supplements, and water are exempt from sales tax when consumed by, used on, or used in caring for animal life.

063.01A For purposes of this regulation, animal life is limited to animals, the products of which ordinarily constitute food for human consumption, the pelts of which ordinarily are used for human apparel.

063.01B Cattle, domestic sheep, swine, mink, chinchillas, poultry, domestic goats, game birds subject to permit and regulation by the Nebraska Game and Parks Commission, and bees are examples of food-producing or pelt-producing animal life.

063.02 Feed and feed supplements include whole and processed grains or mixtures of grains, silage, hay, and forages or meals made from these products, mill feeds and commercial feeds, minerals, salt, proteins, fats, fibers, vitamins, bone meal, cod liver oil, limestone, calcium carbonate, grit, and oyster shell. The sale of these items to be used either separately or mixed as a feed or a feed supplement is exempt from sales tax whether sold as a premix, concentrate, top dressing, or in raw form.

063.03 Water supplied for the care of animal life includes water purchased to be applied on animal life for cooling or cleaning purposes.

063.04 Water is exempt from sales tax only if any incidental use of the water for other than care of or consumption by animal life is less than 10% of the water purchased. Each purchaser claiming an exemption for water usage must provide the seller with a Nebraska Resale or Exempt Sale Certificate, Form 13, unless the water company has a formal classification of useage, as provided in Reg-1-066 that is restricted to exempt uses and the useage by the purchaser is within the classification. Reg-1-066 (Sewer and Water)

063.05 Veterinary medicines include medicines for the prevention or treatment of disease or injury in animals and include all drugs, antibiotics, viruses, serums, toxins, antitoxins, or analogous products of natural or synthetic origin. (Reg-1-078, Veterinarians and Veterinary Medicines)

063.06 Agricultural chemicals include pesticides, insecticides, fungicides, growth-regulating chemicals, hormones, rodenticides, or any other substance or mixture intended for preventing, destroying, repelling, or mitigating pests of animals or to affect the structure or function of animals. (Reg-1-078, Veterinarians and Veterinary Medicines)

063.07 Sales of feed, feed supplements, veterinary medicines, and agricultural chemicals labeled by the manufacturer as solely for treatment or care of food-producing animals do not require a Nebraska Resale or Exempt Sale Certificate, Form 13, when the seller has other documentation to support the exempt sale. Sales of feed, feed supplements, veterinary medicines, and agricultural chemicals that can be used in the treatment or care of both food-producing animals and nonfood-producing animals are taxable unless supported by an exempt sale certificate.

063.08 Sales of feed, feed supplements, veterinary medicines, agricultural chemicals, or water for non-food producing and non-pelt producing animals, for example, zoo animals, parakeets, canaries, donkeys, horses, mules, elk and deer, ostriches, emus, work animals, and pets, such as cats, dogs, and birds, or breeding stock of these animals are taxable.

(Neb. Rev. Stat. §§ 77-2701.16 and 77-2704.41. June 24, 2017.)

REG-1-064 INTERSTATE COMMERCE

064.01 Delivery into Nebraska. If property or services are purchased from a retailer in another state for use or consumption in the state of Nebraska and delivery is made in this state, such sale is taxable. It is taxable even if the purchaser’s order may specify that the goods are to be manufactured or procured by the seller at a point outside this state and shipped directly to the purchaser from the point of origin.

064.01A Delivery in this state means that physical possession of the tangible personal property is actually transferred to the buyer within this state, or that the tangible personal property is placed in the mails or given to a common or contract carrier at a point outside this state and directed to the buyer in this state.

064.01B For property or services other than tangible personal property, delivery in this state means, for utilities, the utility service is provided in this state; for maintenance agreements, the property covered is in this state or the place at which the maintenance must be performed is in this state; for satellite programming, the receiver is located in this state; and for admissions, the location to which access is granted is in this state.

064.01C See Reg-1-002, Consumer’s Use Tax, concerning the consumer’s responsibility to pay the use tax directly to the Department of Revenue.

064.01D Printed material purchased with delivery information provided by the purchaser but without a certificate of exemption for direct mail is taxable on the portion of the direct mail material delivered to Nebraska locations. (See Reg-1-105, Direct Mail.)

064.02 Delivery from Nebraska. When property or services are sold within this state and the seller is required as a condition of the sale to deliver it to a point outside the state, or to deliver it to a common or contract carrier for transportation to a point outside the state, the sales tax does not apply; provided, the property is not returned to a point within this state. However, where property or services are delivered in this state, the sales tax applies, even if the buyer intends to transport the property out of this state.

064.03 Acceptable proof of transportation outside the state will be:

064.03A A waybill or bill of lading made out to the order of the buyer calling for delivery;

064.03B An insurance, registry receipt, or other receipt issued by the United States Postal Service;

064.03C A trip sheet signed by the seller’s delivery agent and showing the signature and address of the person outside the state who received the delivered goods; or

064.03D Direct mail information indicating delivery locations outside Nebraska.

(Sections 77-2704.11 and 77-2703.03, R.R.S. 2003, and sections 77-2703(2) and 77-2703.02, R.S.Supp., 2004. April 12, 2005.)

REG-1-065 TELECOMMUNICATIONS SERVICES

065.01 Intrastate telephone communication service and telegraph service, mobile telecommunications service, wireless paging service, and wireless radio service are taxable whether furnished by public or private corporations or enterprises. This includes those services which are sold by mutual companies.

065.01A Intrastate telephone communications services which are taxable include mobile telecommunications services, ancillary services, except for conference bridging services, and intrastate telecommunications services, except for value-added nonvoice data service, wireless paging service, wireless radio service, and the gross receipts from coin-operated telephones, 800 service, and 900 service, when the receipts are for intrastate service.

065.01A(1) Mobile telecommunications services are intrastate if the service originates and terminates in the same state. If the customer has a place of primary use in Nebraska, intrastate telecommunications services are taxable in Nebraska.

065.01B Charges made to hotels, motels, similar lodging accommodations, or any other company by telephone communication service companies for telephone communication service, including telephone communication service that may be rebilled by the telephone communication service company customer to another party, are taxable. (Reg-1-046, Hotels, Lodgings, and Accommodations)

065.01C Sales of telephone directories or directory covers to Nebraska customers by telephone service providers are taxable.

065.01D Gross receipts does not include any surcharges imposed under the Emergency Telephone Communications Systems Act, the Enhanced Wireless 911 Services Act, the Telecommunications Relay System Act, the Nebraska Telecommunications Universal Service Fund Act, or payments between telephone service providers, as defined in federal law, for division of revenue, settlements, carrier access charges, or provision of telephone communication service.

065.01E Gross receipts includes the sale of a prepaid calling service, but does not include the payments to a telephone service provider attributable to services rendered using a prepaid calling service. A prepaid calling service means the right to exclusively purchase telecommunications service that is paid for in advance that enables the origination of calls using an access number or authorization code, whether manually or electronically dialed, and whether delivered wireless or wireline.

065.01F When the purchaser is not using any portion of the purchased telephone communication services, the services may be purchased for resale.

065.02 The tax on intrastate long distance charges is computed on the gross amount of the total charge for long distance, less any interstate telephone and telegram charges. The amount of the tax computed on the intrastate long distance charges must be indicated separately on the billing statement. The federal telecommunications excise tax, the Nebraska 911 service surcharge, the enhanced wireless 911 service surcharge, the Nebraska telecommunications relay system surcharge, and the Nebraska Universal Service Fund surcharge are excluded from gross receipts for purposes of computing the sales tax.

065.02A The tax on intrastate telephone communication service, whether on a flat or measured basis, is computed on the total amount billed by the telephone service provider for this service.

065.02B Telegrams charged to the account of a telephone subscriber and billed by the telephone service provider must include the tax as computed by the telegraph company and must appear on the billing statement in an amount equal to the regular charge for the telegrams plus the sales tax. The tax on these telegrams must be remitted by the telegraph company.

065.02C Intrastate long distance calls provided by a different service provider that are charged to the account of a telephone subscriber and billed by the telephone company must include the tax as computed by the telephone company and must appear on the billing statement in an amount equal to the regular charge for the phone call plus the sales tax. The tax on these telephone calls must be remitted by the telephone company.

065.03 Any company furnishing telephone communication service or telegraph service is required to bill the sales tax to the customer. A retailer of bundled transactions that include any telecommunications services, ancillary services, Internet access, or audio or video programming services may identify in its books and records the sales price of any nontaxable products and collect and remit tax on only the sales price of the taxable products in the bundle. If the price attributable to the nontaxable products is not reasonably identifiable and verifiable, the entire charge for the bundled transaction is taxable. (Reg-1-108, Bundled Transactions)

065.04 Persons engaged in providing telecommunications services are the consumers of materials, supplies, and other items that they use in providing their services and they must pay the sales and use tax on their purchases.

065.05 Charges made by a telephone company to the customer for nonrecurring telecommunications charges, such as installations, service connections, move and change charges, service upgrades, optional features like call waiting or voice mail, and construction costs constitute gross receipts for telephone communication service and are taxable.

065.06 All interstate long distance charges are exempt from the sales tax, as are gross receipts from coin-operated telephones that are for interstate long distance services.

065.07 Services rendered to the United States government and to federal agencies and instrumentalities, including those federal corporations listed in Reg-1-072, United States Government and Federal Corporations, are exempt. Sales to purchasers listed in Reg-1-012.02C are exempt.

(Sections 77-2701.16, and 77-2701.48, R.R.S. 2009. November 6, 2010.)

REG-1-066 SEWER AND WATER

066.01 The sales or use tax applies to all retail sales of sewer and water services.

066.02 Sales tax applies to all amounts paid for sewer and water, irrespective of whether there is an actual consumption or not. Thus, there is tax due on all payments whether in the form of a minimum charge, a flat rate, or other billing method.

066.03 The gross receipts from furnishing sewer service are taxable regardless of the nature of the use.

066.04 Rental charges made to the customer for meters, bottles, and related equipment are rentals of property and are taxable.

066.05 Water used for irrigation of agricultural lands, manufacturing purposes, or for the care of or consumption by animal life, the products of which ordinarily constitute food for human consumption or the pelts of which are ordinarily used for human apparel, is not taxable.

066.06 For the purpose of proper administration of the tax on sewer and water services and to insure that the full amount of any applicable tax is collected and remitted, the entire amount of sewer or water service sold or billed through one meter shall be taxable if any portion, other than incidental use, of such service is taxable.

066.07 Incidental use of water shall include uses that are connected with the exempt use, but are not themselves exempt, such as water for employees for drinking, hand washing, or restrooms. Such usage cannot exceed ten percent of the total usage through the meter.

066.08 Amounts received from installation, service connection, move and change charges, and construction are not gross receipts of providers of sewer and water service and are not taxable.

066.08A If there is no tangible personal property installed, annexed, or repaired and the charge is merely for activating a connected service, such charge is not taxable.

066.09 An amount added for failure to make payment within a prescribed period shall be considered as a penalty or interest to which no tax attaches; provided, the additional charge is separately billed to the customer.

066.10 Services rendered to the United States Government and to federal agencies and instrumentalities, including those federal corporations enumerated in Reg-1-072, United States Government and Federal Corporations, are exempt. Sales to those purchasers enumerated in Reg-1-012.02C are exempt.

066.11 A water or sewer company with a formal classification of usage that reasonably reflects the actual use by the customer, and such usage is for an exempt purpose, does not need to accept an exempt sale certificate from each customer account in the classification. This provision is not to be construed as relieving the consumer of liability for the applicable tax on any such usage.

066.11A Acceptance of a blanket exempt sale certificate by a sewer or water company relieves the company of any further tax liability until such time as the sewer or water company is notified of a change in use.

066.12 Persons furnishing sewer and water services may elect to assume or absorb the applicable sales tax or may elect to pass the tax to the final consumer in the same manner as all other retailers. If the election is made to assume or absorb the tax, the vendor will remit the applicable tax directly to the Department of Revenue based upon the total charges made to the ultimate consumer. The receipts will not be factored to determine the proper amount of tax. All billings to the ultimate consumer shall contain a statement to the effect that no tax is being collected from customers who are exempt or that the tax has been assumed or absorbed by the vendor for taxable customers.

066.13 If the vendor of sewer and water services elects to pass the applicable tax to the final customer, the tax shall be separately stated on all billings; provided, that in lieu of separately stating the tax, the Department of Revenue hereby authorizes the vendor to include a statement on all billings to the effect that the total charge includes sales tax. The total receipts will be factored to determine the proper amount of tax. (Reg-1-008, Records)

066.14 Persons engaged in providing water and sewer service are considered the consumers of materials, supplies, and other property or services used by them in providing their services and must pay tax on their purchases.

066.14A Exempt governmental units providing water service must also pay tax on all purchases of materials, supplies, and other property or services used in providing water service. (See Reg-1-093.04.)

066.14B Exempt governmental units providing sewer service are exempt on all purchases of materials, supplies and other property or services used exclusively in providing sewer service. (See Reg-1-093.04 and Reg-1-093.05.)

066.14C Exempt governmental units providing water service for fire protection are exempt on all purchases of materials, supplies and other property or services used exclusively in providing water service for fire protection. (See Reg-1-093.04 and Reg-1-093.05.)

066.15 Charges made between sewer and water companies for joint control and use of facilities, duct space, pole or pin space, or other joint use of facilities in connection with furnishing sewer and water services are exempt.

(Sections 77-2701.31, R.R.S. 2003, and sections77-2701.16, 77-2701.32, and 77-2703(1)(b), R.S.Supp., 2008. February 22, 2009.)

REG-1-067 AIRCRAFT AND RELATED SERVICES

067.01 Sales of property to and by any airline engaged in the transportation of persons or property as a common or contract carrier are taxable in the same manner as are sales to and by other firms, persons, or corporations except as set out in this regulation.

067.02 Sales of aircraft, and aircraft repair and replacement parts for such aircraft, operated by air carriers authorized and certified by the United States Department of Transportation or another federal authority or a foreign authority to engage in the carriage of persons or property in interstate or foreign commerce are exempt from the sales or use tax.

067.03 Aircraft and repair parts sold for private use or business use other than as a common or contract carrier are taxable.

067.03A A nonresident individual, or other person with a business location outside this state may purchase an aircraft in this state without the payment of tax if the aircraft will not be based or registered in this state and is removed from the state within ten days of its purchase.

067.03B A nonresident individual, or other person with a business location outside this state may purchase repair parts or repair services for an aircraft in this state without the payment of tax if the aircraft will not be based or registered in this state, the parts or services are delivered at an airport, and the airplane is removed from the state within ten days.

067.03C Equipment owned by persons holding an authority described in 067.02, but who operate such equipment primarily as a private carrier does not qualify for the exemption on the purchase of aircraft, repair, and replacement parts. (Reg-1-069, Common and Contract Carrier Vehicles.)

067.04 Charges for flying lessons to obtain a private pilot’s license and all dual instruction, banner towing, crop-dusting, patrols, air ambulance, search and rescue, livestock feeding, sky diving and parachuting, and charter services, when the pilot or instructor is the owner of the aircraft or employed by the aircraft owner, are exempt. Except as provided in 067.02, the purchase or use of an aircraft in providing such services is taxable based on the sales price to the purchaser.

067.05 If a customer, rather than the aircraft owner, furnishes the pilot, the use of the airplane is a rental which is taxable. See Reg-1-018, Rent or Lease of Tangible Personal Property, for sourcing of rentals or leases.

67.06 Retailers engaged in the business of selling aircraft, including retailers in the business of renting aircraft, who take aircraft originally purchased tax free through a resale certificate or from inventory (stock) for personal or business use, consumption, or gift, must report and pay a use tax on such aircraft. Such retailers must enter on their books the cost of all such aircraft and pay the applicable tax on their purchase price of the aircraft. The cost of those aircraft taken from stock is to be reported on the applicable line of the Nebraska and Local Sales and Use Tax Return, Form 10.

067.07 A retailer of aircraft as provided in 067.06 may, in lieu of paying tax on the sales price of the aircraft, elect to pay use tax on the gross receipts realized from the use of such aircraft. Gross receipts shall mean the total amount valued in money, whether received in money or otherwise, realized by retailers from the use of aircraft for any purpose, including but not necessarily limited to, those purposes enumerated in 067.04 above, except the receipts realized from the transportation of persons or property for hire as a common or contract carrier shall not be included in the gross receipts.

067.08 If such an election is made, it shall be pursuant to the following conditions:

067.08A Notice shall be filed with the Department of Revenue and such election shall be effective only upon approval;

067.08B The election, when made and approved by the Department of Revenue, shall remain in force and effect for a period of not less than two years and thereafter until such time as the retailer notifies the Department in writing of its intention to terminate the election and such termination is acknowledged by the Department;

067.08C The election shall apply to all aircraft in inventory;

067.08D When an aircraft is sold, destroyed, or otherwise removed from inventory, the appropriate tax shall be computed without any deduction, credit, or refund of use tax on gross receipts paid pursuant to this election; and

067.08E Retailers making the election must account for the gross receipts realized (as defined in 067.07) each time an aircraft is used and report the use tax on the applicable line of the Nebraska and Local Sales and Use Tax Return, Form 10.

067.09 The election shall be requested in writing and, in addition to general information, shall contain a list of all aircraft in inventory by name, model, year, and registration number.

067.10 If an aircraft is brought into Nebraska within one year of purchase and is either regularly based within this state or more than one-half of the aircraft’s operating hours are within this state, such aircraft is taxable in this state.

067.10A Operating hours shall not include the operation of the aircraft for purpose of maintenance, repair, or fabrication if the aircraft is subsequently removed from the state upon the completion of the maintenance, repair, or fabrication.

(Sections 77-2701.32, 77-2704.11, 77-2704.26, 77-2704.30, 77-2704.44, 77-2704.50, and 77-2706.01, R.R.S. 2003, and section 77-2703.01, R.S.Supp., 2004. April 12, 2005. )

REG-1-068 RAILROADS

068.01 The sale of rolling stock to any railroad or any other person, whether a common or contract carrier or otherwise, is exempt. In addition, the sale of repair parts or replacement materials for use on such rolling stock is not taxable.

068.02 See Reg-1-015, Common and Contract Carriers (Multistate Operations) - Tax Deferral for the taxation of items that may be used in another state.

068.03 Sales of other types of property to and by railroads are taxable in the same manner as are sales to and by other firms, persons, or corporations.

068.04 Examples of such taxable purchases by railroads for use in this state include but are not limited to the following:

068.04A Water, sewer, and telephone service at depots;

068.04B Ties, rails, rock, and the like for track maintenance;

068.04C Office furniture and supplies; and

068.04D Motor vehicles not utilized as common carriers.

068.05 Sales of special fuel, as defined in Chapter 66, article 6, used to provide motive power for railroad rolling stock, are exempt from the sales and use tax.

(Section 77-2704.27, R.S.Supp., 1992, and sections 77-2702.13, 77-2704.05, 77-2704.11, 77-2704.30, and 77-2706(6) R.S.Supp., 1993. May 14, 1994.)

REG-1-069 COMMON AND CONTRACT CARRIERS

069.01 The purchase and use of motor vehicles, watercraft, and aircraft which are used predominantly as common or contract carriers, as well as repair and replacement parts for such equipment, are exempt from sales and use tax.

069.02 In order for a motor vehicle, watercraft, or aircraft to qualify as a common or contract carrier for sales or use tax exemption purposes, the owner of such items must submit an application on forms provided by the Nebraska Department of Revenue. Unless the motor vehicle, watercraft, or aircraft has been so qualified with the Nebraska Department of Revenue, it shall be presumed that such equipment is not a common or contract carrier for purposes of the sales and use tax exemption. This presumption may be overcome by evidence that the equipment is predominantly used as a common or contract carrier.

069.02A Only those motor vehicles, watercraft, or aircraft that are predominantly used for transporting persons or property for hire may qualify for common or contract carrier status.

069.02A(1) A common carrier is any motor vehicle, watercraft, or aircraft which is predominantly used by its owner to offer to transport the general public and the goods of the general public from place to place for compensation.

069.02A(2) A contract carrier is any motor vehicle, watercraft, or aircraft which is predominantly used by its owner to offer to transport specific persons and the goods of specific persons, on a contractual basis with such persons, from place to place for compensation.

069.02A(3) Predominantly used shall mean the total measure of use of any motor vehicle, aircraft, or watercraft (e.g., miles or hours) used to haul property as a common or contract carrier, divided by the total measure of use of the motor vehicle, aircraft, or watercraft, for all purposes, is greater than 50%. For purposes of determining this percentage, a one (1) year period of operation should be used.

EXAMPLE: Motor Vehicle #106 Odometer reading 1/1 73,146 Odometer reading 12/31 160,409 Common/contract carrier miles from customer billing records 75,919 Total miles (160,409-73,146) 87,263 % common/contract carrier usage (75,919:87,263) 87%

069.02B Any motor vehicle, watercraft, or aircraft which is used predominantly to haul the owner’s goods is a private carrier and does not qualify for the exemption.

069.02C The fact that a person may have been granted a certificate of public convenience and necessity or a permit by either the Interstate Commerce Commission or the Public Service Commission does not, in itself, qualify such person’s equipment as a common or contract carrier for sales and use tax purposes.

069.03 If, based on the information provided in the application, it is found that a person operates such equipment as a common or contract carrier, a Common or Contract Carrier Certificate of Exemption will be issued. All certificates expire on October 31, 1986, and every three years thereafter. The renewal process is initiated by the Nebraska Department of Revenue. The certificate contains an exemption number assigned by the Nebraska Department of Revenue which must be used when making authorized exempt purchases. A person holding a Common or Contract Carrier Certificate of Exemption is authorized to make exempt purchases under that certificate only as hereinafter set out:

069.03A The purchase or lease of motor vehicles, trailers and/or semitrailers, watercraft, or aircraft engaged predominantly as, or to be used predominantly as, common or contract carriers of persons or property and all accessories included in the purchase price of such vehicles.

069.03B The purchase of repair and maintenance parts which become a physical part of such motor vehicles, trailers and/or semitrailers, watercraft, or aircraft engaged predominantly as common or contract carriers of persons or property.

069.03C Accessories purchased for use with the common or contract carrier vehicle which could have been included in the list price of the vehicle at the time of purchase.

069.03D Containers designed for use on transportation equipment.

069.03D(1) Containers and accessories do not include boxes, pads, and packing materials used by transportation companies.

069.03E Equipment required by a federal or state regulatory agency to be included on a common or contract carrier vehicle operating in or through the State of Nebraska for the health or safety of passengers or cargo.

069.04 An exempt sale certificate shall be completed by the person owning such common or contract carriers and furnished to the supplier when purchasing repair and maintenance parts for the common or contract carrier vehicles.

069.05 Each purchase or lease of a common or contract carrier and repair and replacement parts will be considered individually to determine if, in fact, the purchase or lease of that tangible personal property was for use predominantly as a qualified common or contract carrier or was used as a repair and maintenance part for a qualified common or contract carrier.

069.06 The exemption allowed extends only to those qualified vehicles and does not extend to purchases other than the previously described tangible personal property nor to that tangible personal property when used predominantly for other than common or contract carrier purposes.

EXAMPLE: The holder of a Common or Contract Carrier Certificate of Exemption is required to pay sales or use tax when purchasing office furnishings or when purchasing motor vehicles for use in delivering or picking up tangible personal property owned by that person or for transporting that person’s personnel.

069.07 The Nebraska Department of Revenue may examine the books, papers, and records of any person issued a Common or Contract Carrier Certificate of Exemption in order to determine the propriety of purchases made without the payment of Nebraska sales or use tax. The burden of proving that sales or use tax is not due is upon the purchaser.

(Sections 77-2704.30, 77-2704.50, and 77-2705(7), R.R.S. 2003; and A-1 Metro Movers, Inc. v. Egr, 264 Neb. 291 (2002). April 12, 2005.)

REG-1-070 PRESUMPTION OF TAXABILITY

070.01 All gross receipts are taxable unless they are shown to be tax exempt. The retailer (seller) has the burden of proving that a sale of tangible personal property (or other transaction of a type subject to sales tax) is an exempt transaction, unless the purchaser presents a signed certificate demonstrating that the purchase is by an exempt organization, for an exempt purpose, pursuant to a direct payment permit, or a certificate of exemption for direct mail. See Reg-1-014, Exempt Sale Certificate.

070.02 The Tax Commissioner will make available a taxability matrix that is in a format in compliance with the Streamlined Sales and Use Tax Agreement.

070.02A Sellers, Model 2 sellers, or certified service providers (CSPs) relying on information contained in the taxability matrix are relieved from liability for tax, penalty, or interest resulting from incorrect data in the matrix.

070.02B Purchasers or a purchaser’s CSP relying on erroneous information in the taxability matrix or the rates and boundaries database are relieved from liability for any penalty resulting from a failure to pay the tax, but remain liable for any tax and interest.

070.02C CSPs or Model 2 sellers are allowed 10 days after notification by the Department that an item or transaction has been incorrectly classified, to correct the erroneous classification contained within approved system software before the CSP or Model 2 seller is held liable for failure to collect the correct amount of tax due.

070.03 Sellers may not structure transactions or billing of charges as a means of avoiding the imposition of tax on the gross receipts of the sale. For example, understating charges for the taxable parts of a transaction while overstating charges for the nontaxable parts of the transaction will be ignored for purposes of the sales tax.

070.04 For use tax purposes, it is presumed that any property or service sold, leased, or rented by any person for delivery in this state is sold, leased, or rented for storage, use, or other consumption in this state. The purchaser carries the burden of proving the contrary.

070.05 Acceptance of a Resale Certificate, Exempt Sale Certificate, direct payment permit, certificate of exemption for direct mail, or Common or Contract Carrier Certificate of Exemption relieves the retailer from any further tax liability.

070.06 The person who presents a Resale Certificate, Exempt Sale Certificate, direct payment permit, certificate of exemption for direct mail, or Common or Contract Carrier Certificate of Exemption which the person knows, at the time of purchase, to be an improper use of the certificate or permit, is guilty of a misdemeanor.

(Neb. Rev. Stat. §§ 77-2703, 77-2705, 77-2705.01, 77-2705.02, 77-2705.03, and 77-2706. June 24, 2017.)

REG-1-071 CREDIT FOR TAX PAID TO ANOTHER STATE

071.01 If a person brings property or services into Nebraska for storage, use, or other consumption and has properly paid a sales, use, excise, or similar tax to a foreign state or any of its political subdivisions, in connection with the sale of the property or services, then a credit is allowed for the payment of that tax. The credit is applied first against the amount of any use tax due this state. Any unused portion of the credit is then applied against the amount of any use tax due a Nebraska municipality or county that levies a local sales tax.

071.02 If the tax paid to the foreign state and its political subdivisions is less than the use tax imposed by Nebraska and its subdivisions, the difference is due. If the sales, use, excise, or similar tax properly paid to the foreign state or any of its political subdivisions, is equal to or exceeds the use tax imposed by Nebraska and its political subdivisions, use tax is not due Nebraska. Any excess is not refundable nor may it be used as a credit against the use tax due on purchases of any other property or service.

071.03 The credit allowed is limited to a credit for the amount of foreign state or political subdivision tax actually paid, and does not include the amount of any credits allowed in the other state. Use tax due in Nebraska cannot be extinguished through a tax exemption afforded on the same transaction by a foreign state.

071.04 Sales tax is properly paid to a foreign state or its political subdivision if the tax is legally due to the foreign state or its political subdivision.

071.04A Sales tax is NOT considered legally due to the foreign state or its political subdivision if:

071.04A(1) The purchaser is entitled to a refund of the tax paid to the foreign state or its political subdivision for any reason;

071.04A(2) The delivery neither originates nor terminates in the foreign state;

071.04A(3) The property was never stored, used, or consumed in the foreign state; or

071.04A(4) The sale was not properly sourced to the foreign state.

071.04B If the sales tax is not legally due the foreign state, the tax is not considered properly paid and no credit will be allowed in Nebraska.

071.05 Tax paid to the seller of advertising and promotional direct mail based upon the shipping point, or tax paid to the seller of other direct mail based upon the purchaser’s address, pursuant to Regulations 1-105.04 and 1-105.05, respectively, does not constitute a properly-paid tax for purposes of allowing credit against the use tax due to the state or locality based upon the delivery address.

(Neb. Rev. Stat. §§ 77-2703.03 and 77-2704.31. June 24, 2017.)

REG-1-072 UNITED STATES GOVERNMENT AND FEDERAL CORPORATIONS

072.01 Sales to the United States (U.S.) government, its agencies, instrumentalities, and corporations wholly owned by the U.S. government are exempt from sales and use tax. However, sales to institutions chartered or created under federal authority, but which are not directly operated and controlled by the U.S. government for the benefit of the public, are generally taxable.

072.02 Absent an express waiver of intergovernmental immunity by statute, federal corporations that are performing a federal function are instrumentalities of the U.S. and are exempt from sales and use tax. Examples include, but are not limited to:

072.02A Farm Credit Banks, (previously Federal Land Banks) and other national or local operating entities chartered or administered by the Farm Credit System, including Federal Land Credit Associations, the Central Bank for Cooperatives, the Regional Banks for Cooperatives, the Federal Farm Mortgage Corporation, Production Credit Associations, and Agricultural Credit Associations;

072.02B The Federal Deposit Insurance Corporation;

072.02C Corporations administered by the U.S. Department of Agriculture to support agriculture, including Commodity Credit Corporations and the Federal Crop Insurance Corporation;

072.02D A Federal Reserve Bank;

072.02E Corporations chartered by the U.S. government to issue, subsidize, or guarantee home loans, including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Government National Mortgage Association (Ginnie Mae);

072.02F The Student Loan Marketing Association (Sallie Mae);

072.02G A Federal Credit Union;

072.02H The National Railroad Passenger Corporation, and the Amtrak Commuter Services Corporation (Amtrak); and

072.02I The American National Red Cross and all its chartered units.

072.03 Any federal corporation not listed above that claims a sales tax exemption has the burden of proving the exemption to the Nebraska Department of Revenue (Department).

072.04 A federal corporation is presumed to be sales tax exempt if the purchases are ordered on prescribed U.S. government forms and payment is made by issuing U.S. government warrants.

072.05 Sales by agencies and corporations of the U.S. government are taxable, but the obligation to collect and remit the sales tax cannot be imposed on the agency or corporation, unless collection is specifically permitted by federal law.

072.05A If the agency or corporation does not collect the sales tax, the purchaser must remit use tax directly to the Department.

072.05B No sales or use tax is owed for purchases made from commissaries, base exchanges, ships’ stores, or voluntary, unincorporated organizations of personnel of any branch of the Armed Forces of the U. S. by any person authorized to make these purchases.

072.06 Certain foreign diplomatic personnel have been granted sales tax exemptions by federal treaty. These diplomatic personnel are issued tax exemption identification cards by the U.S. Department of State or the American Institute in Taiwan that indicate the specific taxes from which the person is exempt, and the monetary or other limits imposed on the use of the exemption. Diplomatic personnel with tax exemption identification cards must pay sales tax on all purchases that are beyond the scope of the tax exemption card or that are beyond the monetary or other limits of the card. Diplomatic personnel without the identification card must pay sales or use tax on all purchases.

(Neb. Rev. Stat. § 77-2704.02, Department of Employment v. United States, 385 U.S. 355, 17 L Ed 2d 414, 87 S Ct 464 (1966), United States v. District of Columbia, 558 F.Supp.213, 218 (1982), reversed as moot, 709 F.2d 1521, U.S.App.D.C. 295(1983), and 4 U.S.C. § 107. July 3, 2013.)

REG-1-073 DISCONTINUATION OF BUSINESS

073.01 If any person liable for any sales or use tax sells his or her business or stock of goods or quits the business, the purchaser as his or her successor or assignee, shall withhold a sufficient amount of the purchase price to cover the tax liability until a receipt from the Tax Commissioner showing that the liability has been paid or a certificate stating that no amount is due is produced.

073.02 If the purchaser of a business or stock of goods fails to withhold a portion of the purchase price as required, then he or she shall become personally liable for the payment of the amount required to be withheld by him or her to the extent of the purchase price.

073.03 Either the seller of a business or stock of goods or the purchaser as his or her successor or assignee, may request in writing that the Tax Commissioner issue either a certificate stating that no tax is due, or a notice stating the amount of tax due. This request shall state the purchaser’s address and Nebraska identification number and the seller’s address and Nebraska identification number and indicate when and where the seller’s records are available for audit. The certificate or notice of tax due shall be mailed to the purchaser at his or her address as it appears in the letter requesting such certificate or notice.

073.04 Any person discontinuing business is required to:

073.04A Notify the Department of Revenue;

073.04B Return his or her Sales Tax Permit for cancellation; and

073.04C Preserve all business records pertaining to the sales tax until the Department of Revenue issues the certificate referred to above, or for the period required in Reg-1-008, Records, whichever is longer.

073.05 Any person desiring to engage in the operation of a business as successor to a former owner shall apply for a Sales Tax Permit. Each successor to another retailer, when applying for a Sales Tax Permit, shall inform the Department of Revenue of the name and permit number of the previous owner.

(Section 77-2707, R.R.S. 1943. January 24, 1993.)

REG-1-074 WARRANTIES AND GUARANTEES

074.01 A charge for the purchase of a warranty, guarantee, service agreement, service contract, or maintenance agreement, is taxable, whenever the item covered or the services to be provided are taxable.

074.01A Neither sales nor use tax applies with respect to property used, or any repair labor or services performed in fulfilling the obligations for repair under such a warranty or guarantee.

074.01B If the maintenance agreement does not provide full coverage, the amount charged for parts used in the repair is taxable and the amount charged for labor in the repair is taxable if repair labor for the covered item is taxable.

074.01C A deductible amount that is due, except for a deductible required under an agreement covering a motor vehicle, is taxable.

074.02 If the item covered must be annexed to real estate in order to function, the charge for the agreement is exempt.

074.02A Sales or use tax applies to parts or other property used in fulfilling the obligations under such a warranty or guarantee regardless of the contractor option elected. (See Reg-1-017, Contractors)

074.02B If the maintenance agreement does not provide full coverage, the amount charged by an Option 2 or Option 3 contractor for either parts or labor is not taxable. The amount charged for parts by an Option 1 contractor, or the total amount charged by an Option 1 contractor if charges for parts and labor are not separated, is taxable.

07401C A deductible amount that is due is not taxable.

074.03 If an agreement covers both taxable and nontaxable items or services, the entire amount charged for the agreement is taxable. Parts, labor, additional charges, and deductibles will be taxed as described above in paragraphs 074.01 or 074.02 depending upon whether a maintenance agreement on the single item currently being serviced would be taxable or exempt.

074.04 Maintenance agreement shall mean any contract or agreement to provide or pay for the maintenance, repair, or refurbishing of an item, the sale of which is subject to tax, for a stated period of time or interval of use. Maintenance agreement shall include any such agreement whether or not the agreement requires additional payments for some or all of the parts or services provided under the agreement. Maintenance agreement shall include contracts or agreements designated as warranties, extended warranties, guarantees, service agreements, maintenance agreements, or any similar term.

074.04A Maintenance agreement includes any service contract that provides repair labor or building cleaning services.

074.04B Maintenance agreement shall not include any contract or agreement subject to the premium tax under Chapter 77, article 9 of the Nebraska Revised Statutes, from a service contract business operating with a certificate of authority from the Department of Insurance.

(Sections 77-2701.10 and 77-2701.16, R.R.S. 2003. February 22, 2009.)

REG-1-075 CONFIDENTIAL INFORMATION

075.01 Except as provided in Neb. Rev. Stat. § 77-2711 or the regulations of the Nebraska Department of Revenue (Department), it is a misdemeanor for the Tax Commissioner, any employees, legal representatives, or agents of the Department, any employee of the State Treasurer or the Department of Administrative Services, or any person receiving information from any of them, to:

075.01A Divulge or make known in any manner, the business affairs, operations, or information obtained by an investigation of records and equipment of any person visited or examined in the discharge of official duty;

075.01B Divulge the amount or source of income, profits, losses, expenditures, or any related items disclosed in any return; or

075.01C Permit any return, copy of a return, or any book containing any abstract or items from the return to be seen or examined by any person not connected with the Department.

075.02 Information as to whether or not a taxpayer has a valid Sales Tax Permit, has been granted an exemption, or regarding which option has been elected by a contractor may be released to any person upon request.

075.03 The Department will comply with the provisions of the Streamlined Sales and Use Tax Agreement for the protection and retention of personally-identifiable information of taxpayers.

(Neb. Rev. Stat. § 77-2711. June 24, 2017.)

REG-1-076 JEOPARDY DETERMINATIONS AND ASSESSMENTS

076.01 The Department of Revenue may initiate jeopardy determination and assessment proceedings if it determines that any of the following conditions exist:

076.01A The taxpayer is about to leave the State of Nebraska.

076.01B The taxpayer is about to remove his or her property from the State of Nebraska.

076.01C The taxpayer is about to conceal himself or herself or his or her property.

076.01D The taxpayer is about to do any act which tends to delay, prejudice, or make ineffective any proceedings to collect sales or use tax from preceding or current years, unless jeopardy proceedings are immediately initiated. In any subsequent court proceedings, the finding by the Department of Revenue that one or more of these conditions existed shall be for all purposes prima facie evidence of the taxpayer’s intentions.

076.02 The Department of Revenue may declare that the tax period for the taxpayer is terminated, regardless of when the period would normally end; by sending a written notice to the taxpayer; and demanding immediate payment of tax due for the period. If the taxpayer desires to petition the Department of Revenue for a redetermination, he or she must do so in writing within ten (10) days after the service of notice in accordance with Reg-33-004.02B. Failure to file a petition for redetermination within ten (10) days shall cause the determination to become final. In addition, the Department of Revenue need not reconsider the determination unless the taxpayer within the ten-day period provides security, in an amount determined by the Department of Revenue, to insure compliance with the law. If the taxpayer has not been in default in filing returns or in making payments in the past, he or she may furnish security to insure that he or she will file a return and pay the tax at the next regular filing date. If the security is approved by the Department of Revenue, the payment of taxes will not be enforced until the expiration of the usual time period.

076.03 If the taxpayer is outside of this state or leaves this state and ignores all demands for payment, the Department of Revenue may make use of collection agencies or attorneys located outside the state to enforce collection.

076.04 If a taxpayer violates, or attempts to violate the rules and regulations regarding a jeopardy determination and assessment, an additional penalty of 25% of the total of the tax due, the interest owed thereon, and all other penalties resulting therefrom, or fifty dollars ($50.00), whichever is the greater amount shall be assessed.

(Section 77-2710, R.R.S. 1943. January 24, 1993.)

REG-1-077 COMBINED SALES TAX RETURNS

077.01 If any retailer conducts business operations and makes sales subject to sales tax at more than one location, the retailer may apply for permission to file a combined sales tax return covering the business operations of two or more locations. The Department of Revenue (Department) will approve the application if: each sales location holds a sales tax permit; the same person or persons own 80% or more of each licensed location; and the books, records, and accounts of these locations are kept at a single address.

077.01A The application for permission to file a combined sales tax return must be submitted on forms provided by the Department and, in addition to other information, must identify the business locations to be included in the combined sales tax return.

077.01B If the application is approved, the identified business locations must be reported on a combined sales tax return until the Department grants permission to change. Business locations may not be added to or deleted from the combined sales tax return without written application and the prior approval of the Department.

077.01C The Tax Commissioner may also permit combined sales tax returns as allowed by the Streamlined Sales and Use Tax Agreement.

077.02 A Combined sales tax return must be filed monthly, reporting the information required by the Department for each business location included on the combined return.

077.02A All information requested on the return must be completed for each business location. Failure to comply will cause the retailer to be subject to penalties.

077.02B The combined return and the information for each business location must be filed electronically. Payments must also be made electronically.

077.03 The collection fee allowed on the combined return will be the aggregate of the collection fees calculated for each individual business location.

077.04 Retailers that do not have the same ownership but operate within a business location cannot be included on a combined sales tax report.

(Neb. Rev. Stat. §§ 77-1784 and 77-2708(1). July 3, 2013.)

REG-1-078 VETERINARIANS AND VETERINARY MEDICINES

078.01 The following definitions apply to this regulation.

078.01A Veterinary medicines include medicines for the prevention or treatment of disease or injury in animals and include all drugs, antibiotics, viruses, serums, toxins, antitoxins, or analogous products of natural or synthetic origin.

078.01B Agricultural chemicals include pesticides, insecticides, fungicides, growth-regulating chemicals, hormones, and rodenticides or any other substance or mixture intended for use in preventing, destroying, repelling, or mitigating pests of animals, or to affect the structure or function of animals.

078.01C Food-producing or pelt-producing animals include animal life, the products of which ordinarily constitute food for human consumption; or the pelts of which are ordinarily used for human apparel. Cattle, sheep, swine, mink, chinchillas, poultry, goats, game birds subject to permit and regulation by the Game and Parks Commission, and bees are examples of food-producing or pelt-producing animal life.

078.01D Non-food producing animals include zoo animals, parakeets, canaries, horses, donkeys, mules, domesticated elk and deer, ostriches, emus, and pets, such as cats, dogs, and birds, or breeding stock of any of these animals.

078.01E Providing professional services means the veterinarian has established a doctor-patient, or doctor-client relationship with the client.

078.01F Livestock means any domestic cattle, horses, mules, donkeys, sheep, or swine.

078.02 Veterinarians are engaged in the business of providing professional services to owners of domestic animals through care, medication, and treatment of their animals. Charges for professional services provided by veterinarians and veterinary clinics are not taxable.

078.03 Veterinarians and veterinary clinics are consumers of all property and services they purchase for use in providing professional services and they are required to pay sales or use tax on all purchases except:

078.03A Purchases of veterinary medicines and agricultural chemicals to be used in the treatment or care of food-producing or pelt-producing animals;

078.03B Purchases of feed and feed supplements to be fed to food-producing or pelt-producing animals;

078.03C Purchases of veterinary medicines, agricultural chemicals, and other products that are not used to provide professional services but are sold at retail; and

078.03D Purchases of animal specialty services for livestock.

078.04 Veterinarians and veterinary clinics that purchase items without paying sales or use taxes and use these items when providing professional services must remit use tax on the cost of the item, unless the item is otherwise exempt.

078.05 Veterinarians or veterinary clinics that sell veterinary medicines, agricultural chemicals, feed, feed supplements, veterinary supplies, equipment, or other products, or provide animal specialty services, separate from providing professional services, are required to collect sales tax from their customers, unless the sales are otherwise exempt.

078.05A See Reg-1-063, Feed, Water, Agricultural Chemicals, And Veterinary Medicines for Animal Life, for details regarding documentation required to support certain exempt sales.

078.05B See Reg-1-102, Animal Specialty Services, for details regarding taxability of animal specialty services.

078.05C If a veterinarian or veterinary clinic paid sales tax at the time of purchase on the items sold, sales tax must be collected from the customer on the full retail price. The veterinarian or veterinary clinic will remit to the state the difference between the sales tax collected from the customer and the sales tax previously paid by the veterinarian or veterinary clinic on those items.

078.06 Items used in providing professional services are not retail sales regardless of how the charges are itemized on the billing invoice.

078.07 The practice of veterinary medicine is not commercial agriculture. Therefore, machinery and equipment purchased by veterinarians and veterinary clinics to be used in their veterinary practice are not exempt under Reg-1-094, Agricultural Machinery and Equipment Refund.

REG-1-079 DELIVERY CHARGES

079.01 Charges for delivery, freight, postage, shipping, handling, crating, packing, or transportation of an item are taxable whenever the item is taxable and the charges are paid to the retailer of the item.

079.02 A single delivery charge for the shipment of exempt property and taxable property should be allocated using a percentage that is:

079.02A Based on the total sales price of the taxable property compared to the total sales prices of all property in the shipment; or

079.02B Based on the total weight of the taxable property compared to the total weight of all the property in the shipment.

079.02C The seller must collect tax on the percentage of the delivery charge allocated to the taxable property but does not have to collect tax on the percentage of the delivery charge allocated to the exempt property.

079.03 Charges for delivery, freight, postage, shipping, or transportation that are paid to a person other than the retailer are exempt.

(Sections 77-2701.11 and 77-2701.35, R.R.S. 2003, and section 77-2701.16, R.S.Supp., 2004. April 12, 2005.)

REG-1-080 SALES OF LEGAL, MEDICAL, AND COMMERCIAL DOCUMENTS AND RECORDS

080.01 Charges for providing documents are exempt as a governmental service if the law or ordinance requires the furnishing of documents or copies of documents, such as permits or licenses, by a governmental agency, or if the documents are public records.

080.01A Public records mean public records as defined in section 84-712.01.

080.01B Documents which are developed, produced, or acquired and made available for commercial sale to the general public are taxable, unless the price for the document is fixed by state law, rule, or regulation.

080.02 Charges for originals or copies of depositions, bills of exceptions, and transcripts prepared and sold by a court reporter are not taxable. Depositions, bills of exceptions, and transcripts or copies of depositions, bills of exceptions, and transcripts prepared and sold by anyone other than a court reporter are taxable.

080.02A Bill of exceptions means a verbatim record of anything and everything said or done by anyone in the course of trial or any other proceeding; any motion, comment, or statement made by the court in the presence and hearing of a panel of potential jurors or the trial jury; any objection to the court’s proposed instructions or to instructions tendered by any party, together with the court’s rulings, and in post trial proceeding; amendments to the bill of exceptions, together with the court’s rulings; and the index of the bill of exceptions.

080.02B Court reporter means a person who possess the knowledge, skill, and ability to produce a verbatim record of court and other legal proceedings.

080.02C Deposition means a written declaration under oath in accordance with procedures provided by law, made upon notice to the adverse party for the purpose of enabling him or her to attend and cross-examine, or made upon written interrogatories pursuant to section 25-1242 of the Nebraska Revised Statutes.

080.02D Transcript means a writing or record (original or copy) of judicial, legislative, administrative, or other legal proceedings, including, but not limited to: pleadings upon which the case was tried; the judgment, decree, or final order sought to be reversed, vacated, or modified; the lower court’s memorandum opinion, if any; and other parts of the record as are necessary and material to the assignments of error.

080.02E Verbatim record means one which accurately reflects the spoken word and nonverbal communication and action.

080.03 Blueprints, abstracts, law briefs, and other similar documents furnished in connection with personal services in a professional capacity are not taxable when furnished as a part of providing personal services.

080.04 If blueprints, abstracts, law briefs, or other similar documents or the information on such documents are sold by a person without providing personal services in a professional capacity, the sales tax must be collected on the sale of the documents.

080.05 Mailing lists and prospect lists provided in the form of labels, magnetic media, or diskette, whether in an electronic or any other format, are taxable.

080.06 Sales of Nebraska Statutes, reports of court cases, advance sheets, brand books, departmental manuals, and other similar publications are taxable.

080.07 Sales of copies of medical records provided to the patient or a person named as the patient’s power of attorney for health care are not taxable. A power of attorney for health care, under Neb. Rev. Stat. §§ 30-3401 through 30-3432, authorizes a designated attorney-in-fact to make health care decisions for the principal when the principal is incapable.

080.08 Persons performing professional services are consumers of all materials and supplies used in rendering their professional services and must pay the sales or use tax when purchasing materials and supplies.

(Section 25-1280, R.R.S., 2004, sections 77-2701.33, 77-2704.58, 77-2704.59, R.R.S. 2009, and ABI v Egr, 264 Neb. 574 (2002). June 6, 2011.)

REG-1-081 CABLE AND SATELLITE SERVICE

081.01 Gross receipts for furnishing community or county antenna television service (cable service), furnishing satellite television or radio programming (satellite service), or selling prepaid satellite service are subject to sales tax.

081.01A Furnishing cable service means delivering programming to customers using signals transmitted over or through a distribution system of wires, cables, or other conduits.

081.01B Furnishing satellite service means delivering programming to customers using signals emitted by satellites and received by receivers at the customer’s location.

081.01C Selling prepaid satellite service means selling the right to obtain satellite service from a person that furnishes satellite service which is paid for in advance using an access code or authorization code to activate a satellite receiver. The seller of the prepaid satellite service does not have to furnish the satellite service for the sale to be subject to tax.

081.02 Gross receipts for furnishing prepaid satellite services does not include payments from the seller of the prepaid service to a satellite service provider.

081.03 All billings to the final consumer must indicate a separate amount for the sales tax.

081.04 Installation, service connection, and move and change charges are taxable gross receipts, whether paid to the person providing the cable or satellite service, or to another person.

081.04A When an Option 2 or Option 3 contractor is not acting as a subcontractor for a public utility, labor charges for installation performed on the customer’s side of the demarcation point are not subject to tax. Reg-1-017, Contractors.

081.04B Cable service operators and retailers of satellite service are not public utilities for purposes of this section.

081.05 If any or all of the charge for the activation commission, finder’s fee, installation charge, or similar payment is paid to the installer by a third-party service provider any tax due must be paid and remitted to the Department by the third-party service provider.

081.06 Cable service operators and retailers of satellite service are consumers of property used in providing, installing, constructing, operating, or servicing the system. Purchases of materials for these purposes are taxable.

081.07 Cable service operators and retailers of satellite services may purchase tapes, movies, digital goods, satellite programming, remote controls, and magazines sales tax exempt for resale to customers, but must collect sales tax on sales or rentals of these items to their customers.

(Neb. Rev. Stat. §§ 77-2701.16, 77-2701.32, and 77-2703(l). June 24, 2017.)

REG-1-082 LABOR CHARGES

082.01 INTRODUCTION

082.01A Labor charges relating to tangible personal property will generally fall into one of four categories: production, assembly, repair, and installation. Labor on annexed property, fixtures, or real estate is contractor labor and is generally exempt .(See Reg-1-017, Contractors)

082.02 TYPES OF LABOR CHARGES

082.02A PRODUCTION LABOR. Production labor is labor used for producing, fabricating, processing, printing, or imprinting tangible personal property for consumers during which the tangible personal property is created, transformed, or reduced to a different state, quality, form, property, or thing. Transformation may occur by hand, machine, art, chemical action, or natural means. The property may be furnished by the person performing the labor; furnished directly by the consumer; or furnished indirectly through the consumer arranging for delivery of the property by a third party.

082.02B ASSEMBLY LABOR. Assembly labor is the labor involved in collecting or gathering together the various parts and placing them in their proper relationship to each other to constitute a piece of machinery, equipment, or other tangible personal property.

082.02C REPAIR LABOR. Repair labor is defined as the labor involved in restoring to essentially its original form and condition or replacing a used, worn, or damaged item of tangible personal property. Repair labor includes replacing a component or subassembly of an item with a substantially similar component or subassembly. Repair labor does not include making repair parts for another person who is making the repair.

082.02D INSTALLATION LABOR. Installation labor is defined as the labor involved in placing a piece of machinery, equipment, or other tangible personal property that is already assembled in a position where it will reasonably accomplish the purposes for which it was intended.

082.03 TAXABILITY OF LABOR CHARGES

082.03A Charges for production and assembly labor are taxable.

082.03B Charges for installation and repair labor are taxable when the item of property being installed, repaired, or replaced is taxable and is not annexed to real property.

082.03C Charges for labor to repair motor vehicles are not taxable.

082.03C(1) Charges for painting of motor vehicles, including labor, are taxable.

082.03C(2) Charges for labor to install accessories or add-ons to motor vehicles are taxable.

082.04 STATEMENT ON SALES INVOICE. Taxable charges for labor performed on tangible personal property are taxable regardless of whether they are separately stated on the same sales invoice or are separately invoiced. Charges for otherwise exempt labor performed on tangible personal property are not taxable; provided, these charges are separately stated on the same sales invoice or are separately invoiced, and such separate statement is not used as a means of avoiding the imposition of the tax upon the actual sales price of the tangible personal property.

(Sections 77-2701.33, R.R.S. 2003, and sections 77-2701.16, and 77-2701.35, R.S.Supp., 2008. February 22, 2009.)

REG-1-083 PREPARED FOOD AND BEVERAGE SERVICE

083.01 Retail sales of prepared food, including sales by caterers and concessionaires, and all sales of prepared food, food, and food ingredients through vending machines are taxable. Retail sales of alcoholic beverages are taxable, whether sold packaged or sold by the drink. (Reg-1-031, Coin-Operated Machines; Reg-1-040, Alcoholic Liquors Consumed on the Premises; and Reg-1-087, Food or Food Ingredients.)

083.02 Prepared food is food generally intended for immediate consumption, and is prepared to a point generally accepted as ready to be eaten without further preparation. Prepared food means:

083.02A Food sold in a heated state or heated by the retailer, including, but not limited to hamburgers, hot dogs, pizza, egg rolls, baked beans, and nachos with heated cheese sauce;

083.02B Two or more foods or food ingredients mixed or combined by the retailer for sale as a single item and not sold by weight or volume, including, but not limited to, fountain drinks, ice cream cones, sandwiches, and salad bars; or

083.02C Food sold with eating utensils provided by the retailer. Eating utensils include, but are not limited to, plates, knives, forks, spoons, glasses, cups, napkins, or straws. Plates do not include a container or packaging used to transport the food.

083.02C(1) If 75% or less of the sales of food by the retailer are sales of prepared food described by 083.02A and 083.02B, eating utensils are considered provided by the retailer only if they are given to the purchaser by the retailer.

083.02C(2) If more than 75% of the sales of food by the retailer are sales of prepared food described by 083.02A and 083.02B, eating utensils are considered provided by the retailer if they are available on the premises where the food is sold, regardless of whether or not the purchasers are given the utensils or take them.

083.02C(3) The 75% test is determined in the following manner:

083.02C(3)(a) The numerator is the total sales of prepared food described by 083.02A and 083.02B.

083.02C(3)(b) The denominator is the total sales of food, food ingredients, prepared food, candy, dietary supplements, and soft drinks.

083.02C(3)(c) Exclude sales of alcoholic beverages, tobacco, motor vehicle fuels, and all other non-food sales from both the numerator and the denominator.

083.02C(3)(d) The percentage is calculated using the retailer’s most recently completed tax year, or if the retailer has been in operation less than a year, the retailer must make a good faith estimate of the percentage for the first year. The good faith estimate must be reviewed after three months of operation and adjusted, if appropriate. A single percentage should be calculated for all of the retailer’s locations in the state.

083.02C(4) Even if more than 75% of the sales of food by the retailer are sales of prepared food, sales of food or food ingredients are not taxable if the transaction is for four or more servings as described in the “Nutrition Facts” box on the labels as required by 21 C.F.R. § 101.9, and the retailer maintains adequate records of each sale. If the transaction is for less than four servings, or the retailer does not maintain adequate records of these sales, sales tax must be collected on these food sales.

083.02C(5) Examples of food sold with eating utensils include, but are not limited to, pieces of cake or pie served with a fork, bagels served with a knife, and cookies or donuts served on a napkin.

083.03 Prepared food does not include:

083.03A Food sold by a manufacturer whose primary NAICS classification is a food manufacturer (311XX);

083.03B Bakery items such as bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas that are not sold in a heated state or with eating utensils;

083.03C Food that is only cut, repackaged, or pasteurized by the seller, including, but not limited to, luncheon meats, cheeses, meat and cheese trays, and fruit trays;

083.03D Food sold in an unheated state by weight or volume as a single item, including, but not limited to, containers of potato salad, coleslaw or fruit salad, pudding, and popcorn; or

083.03E Eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer to prevent foodborne illnesses.

083.04 Sales and use tax applies to the gross receipts from preparing or serving prepared food and alcoholic beverages, including, for example charges for food, wages, use of dishes, room service, silverware, glassware, chairs, and tables.

083.04A Single-use, disposable food service items available to customers as a part of the retail sale of prepared food may be purchased for resale. Examples include, but are not limited to paper napkins, place mats, straws, plastic utensils, and paper cups.

083.05 Charges made by a caterer, restaurant or other retailer of prepared food or alcoholic beverages, for furnishing employees, for example, bartenders, servers, or chefs are taxable even if separately stated at the time of billing. Sales and use tax is not applied to charges for announcers, coat check services, ushers, or other persons not connected with preparing or serving of prepared food or alcoholic beverages if the charges for these services are separately stated on the invoice and the type of service is adequately described.

083.06 Sales and use tax applies to sales of prepared food or alcoholic beverages by railroads, airlines, or other transportation companies while operating in Nebraska.

083.06A If transportation companies provide prepared food or alcoholic beverages to passengers without charge, the transportation company’s purchases of prepared food or alcoholic beverages are considered retail sales and subject to sales or use tax regardless of where the prepared food or alcoholic beverages are served to passengers.

083.07 If a retailer adds a charge for gratuities or tips to charges for prepared food and alcoholic beverages, these charges are taxable even if all or a portion of the amount is paid by the retailer to his or her employees.

083.07A Discretionary gratuities or tips given by customers are exempt even if charged to the customer’s account and not paid directly to the server, waiter, or waitress at the time of sale or service.

083.08 The following sales of prepared food are not taxable:

083.08A Prepared food sold and served by a religious organization at a function of the religious organization;

083.08B Prepared food sold and served to patients, residents, and inmates of hospitals and other institutions licensed by the state for the care of human beings;

083.08C Prepared food sold and served at political fund-raising events by ballot question committees, candidate committees, independent committees, and political party committees;

083.08D Prepared food sold and served to the elderly, handicapped, or recipients of Supplemental Security Income by organizations that accept payments from the Supplemental Nutrition Assistance Program (SNAP);

083.08E Any purchases made with payments from SNAP; and

083.08F Prepared food sold or served by public or private schools, school districts, student organizations, or parent-teacher associations pursuant to an agreement with the proper school authorities, or in an elementary or secondary school or any institution of higher education, public or private, during the regular school day or at an approved function of the school or institution. (Reg-1-092, Educational Institutions).

083.08F(1) This exemption does not apply to sales of prepared food by an institution of higher education at a facility or event that is open to the public.

083.09 Fraternities, sororities, dorms, boarding houses, retirement communities, or other residential facilities where members or residents reside at a common location and prepared food is provided by the residential facilities as part of the agreement for occupancy, are not selling prepared food at retail.

083.09A If the residential facility contracts with a caterer, restaurant, or other food service provider to provide prepared food to members or residents of the residential facility, the charge to the residential facility is subject to sales and use tax.

083.09B If prepared food is provided to non-members or non-residents for a charge, or if there is a charge for additional prepared food served to the member or resident, the charge is subject to sales and use tax.

083.10 If a recreational, athletic, or summer camp charges a single price for attendance, these charges are not considered sales of prepared food and are exempt from sales and use tax.

083.11 Organizations that conduct fund-raising functions where prepared food and alcoholic beverages are served must compute the tax in accordance with Reg-1-090.09. The organizations may purchase prepared food or alcoholic beverages for these functions for resale.

083.12 If an employer pays to have prepared food or alcoholic beverages provided to its employees, the charge is taxable whether the employer pays the entire price, an amount per meal, or a percentage of the price of a meal.

083.12A Management fees or subsidy payments made by an employer to the provider, that are not based on the number served or the amount charged, are not taxable retail sales.

083.12B Any amount paid by an employee for the prepared food is subject to sales tax.

083.13 If a caterer, restaurant, or other food service provider provides prepared food to its employees, no use tax is due on the ingredients used to provide the free meals because food and food ingredients are not taxable. Any amount paid by an employee for the prepared food is subject to sales tax.

083.14 Concession sales are sales of food, prepared food, or alcoholic beverages made during the conduct of an event or recreational activity. Examples of concession sales include sales made at athletic events, concerts, movies, plays, amusement parks, fairs, and golf courses.

083.14A The sales tax does not have to be separately stated and collected from the customer on concession sales of food, prepared food, and alcoholic beverages. Retailers who do not separately state the sales tax will determine their taxable receipts using the procedure set out in Reg-1-008.03. Including the tax in the sales price does not exempt the concession retailer from reporting and remitting the applicable sales tax on the gross receipts from those sales.

083.14B The concession retailer may separately state and collect sales tax if he or she chooses to do so.

083.14C If more than 75% of the sales of the concession retailer are sales of prepared food under 083.02A or 083.02B as calculated under 083.02C(3), and eating utensils, as defined in 083.02C are available on the premises, the concession retailer must collect sales tax on all its sales.

(Neb. Rev. Stat. §§ 77-2701.16, 77-2703(1)(c), 77-2704.10, 77-2704.24, and 77-2704.25. July 3, 2013.)

REG-1-084 APPLICATION FOR REFUND; AIR OR WATER POLLUTION CONTROL FACILITY

084.01 An air or water pollution control facility shall mean and include any system, treatment works, or appliance used or placed in operation primarily for the purpose of reducing, controlling, or eliminating air or water pollution caused by industrial or agricultural waste. Industrial or agricultural waste shall mean any liquid, gaseous, or solid waste substance resulting from any process of industry, manufacture, including the generation of electricity, trade or business, or from the development, processing, or recovery of any paper or wood which is capable of polluting the air or waters of this state.

084.01A Facilities such as air conditioners, dust collectors, filters, fans, and similar facilities designed, constructed or installed solely for the benefit of the person for whom installed or the personnel of such person, and facilities designed or installed for the reduction or control of automobile exhaust emissions are not air pollution control facilities.

084.02 Before applying for a refund of Nebraska sales and use tax paid, the applicant shall receive a written final findings of the Department of Environmental Quality (DEQ). If DEQ finds that the facility, a portion of a facility, or single location with multiple facilities is designed and operated primarily for control, capture, or removal of industrial or agricultural waste from the air or water and is suitable, reasonably adequate, and meets the intent and purposes of the Environmental Protection Act, DEQ shall notify the owner of the facility in writing of its findings.

084.02A The granting of a permit or approval to operate a facility does not meet the requirements of a written final finding of DEQ for the purposes of the Air and Water Pollution Control Tax Refund Act of the Nebraska Revised Statutes.

084.02B Any finding of DEQ with regard to whether or not a facility or portion of a facility qualifies for the Air and Water Pollution Control Tax Refund Act is not final if it has been appealed or is being reconsidered by DEQ.

084.03 The application for a refund must be filed within three years of the date of payment of the applicable sales and use tax. The necessary forms can be obtained from the Department of Revenue. The application for a refund must be filed separate from any other application, return, or protest and must be accompanied by:

084.03A A copy of the written final findings of DEQ;

084.03B Plans and specifications of such facility including all materials incorporated therein;

084.03C A descriptive list of all equipment acquired by the applicant for the purpose of industrial or agricultural pollution control and showing where in the facility the equipment is used;

084.03D The proposed operating procedure for the facility; and

084.03E The acquisition cost of the facility for which a refund is claimed.

084.04 The owner of any air or water pollution control facility must obtain such information from the contractor and furnish it in support of his or her application for refund where he or she has not purchased the tangible personal property annexed therein.

084.05 No refund shall be allowed under the Air and Water Pollution Control Tax Refund Act on any facility which is not used primarily for pollution control nor for which a refund is otherwise provided under the terms of the Nebraska Revenue Act of 1967, as amended. DEQ shall determine whether or not industrial or agricultural pollution control exists and the Department of Revenue shall determine the amount of sales and use tax to be refunded. The Department of Revenue may not abridge the authority of DEQ to determine whether or not industrial or agricultural pollution control exists. Any person aggrieved by action taken with respect to the determination of the amount of a refund under the Air and Water Pollution Control Tax Refund Act may appeal from the findings and order of the Tax Commissioner in the manner and form and within the time provided by sections 84-917 to 84-919, of the Nebraska Revised Statutes.

(Sections 77-27,149 through 77-27,155, R.R.S. 2003. October 1, 2003.)

REG-1-085 Repealed .

REG-1-086 Repealed .

REG-1-087 FOOD OR FOOD INGREDIENTS

087.01 Sales of food or food ingredients are exempt from sales and use tax.

087.01A Food or food ingredients means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value.

087.01A(1) Food or food ingredients includes, but is not limited to: cereals, eggs, fruits, meats, vegetables, milk, health foods consumed in place of other foods and not as a vitamin or mineral supplement, flour, cooking oils, sugar, soft drinks, bottled water, ice, candy, and chewing gum.

087.01A(2) Any food products with the “Nutrition Facts” box on their labels as required by 21 C.F.R. § 101.9, are food or food ingredients that are exempt from sales tax under this section.

087.01B Food or food ingredients does not include alcoholic beverages, dietary supplements, or tobacco.

087.01B(1) Dietary supplement means any product, other than tobacco, intended to supplement the diet that is not presented as conventional food and that is required to be labeled as a dietary supplement, identifiable by the “Supplemental Fact Box” found on the label as required by 21 C.F.R. § 101.36.

087.02 Sales of prepared food, including sales by caterers and concessionaires and all sales of food, prepared food, and food ingredients through vending machines are subject to tax (Reg-1-031, Coin-Operated Machines, and Reg-1-083, Prepared Food and Beverage Service).

(Neb. Rev. Stat. §§ 77-2704.10, 77-2704.24, 77-2704.25, and 77-2704.54. July 3, 2013.)

REG-1-088 COMPUTER SOFTWARE

088.01 The gross receipts from furnishing software regardless of the manner in which it is conveyed are taxable.

088.01A The gross receipts from furnishing software includes services provided by a consultant that result in a transfer of software from the consultant to the client.

088.02 Charges for customer training are taxable whenever paid to the retailer of the software. Charges for training that are paid to a person other than the retailer of the software are exempt.

088.03 Charges for consultants who only provide generalized advice and who do not provide any software or modifications to software are exempt.

088.04 Software that alters existing software is considered separate from the existing software and is taxable.

088.05 Charges for agreements which require the seller, without additional charge or at a reduced price, to provide future enhancements, changes, or modifications, are taxable.

088.06 Computer software is a sequence of instructions which directs the computer to process either digital or analog data. Software does not include data such as mailing lists, even when in machine-readable form, or charges for converting data into machine-usable form. For the taxability of lists see Reg-1-080, Documents.

(Sections 77-2701.39, R.R.S. 2003, and sections 77-2701.16, 77-2701.35, 77-2703(1), and , 77-2703.01, R.S.Supp., 2008. February 22, 2009.)

REG-1-089 ENERGY SOURCE UTILITY EXEMPTION

089.01 The sale, purchase, use, or other consumption of electricity, coal, gas, fuel oil, diesel fuel, tractor fuel, gasoline, coke, nuclear fuel, butane, and compressed fuel that includes compressed natural gas and liquefied petroleum gas (propane) may be exempt from the sales and use tax.

089.01A If more than 50% of the amount purchased is used or directly consumed in processing, manufacturing, refining, generation of electricity, irrigation or farming, or by any hospital the purchase of the fuels listed above is exempt.

089.02 The following definitions and guidelines are to be applied in determining the percentage of exempt energy consumption:

089.02A Processing or manufacturing is defined as an action or series of actions performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing. Processing includes grain drying and feed grinding in a commercial facility, and the freezing of food products. Processing or manufacturing does not include repairing property, building erection, cold storage of food products, or the preparation of food for immediate consumption.

089.02B Refining is defined as the action or process of removing impurities from crude or impure materials, such as glass, metal, sugar, and petroleum products. Refining includes the extraction of gas and petroleum products.

089.02C Irrigation is defined as the application of water to lands for the raising of agricultural crops.

089.02D Farming is commercial agriculture, which is the business of producing food products, or other useful and valuable crops, or raising animal life. The crops or animal life can either be sold or used by the grower. Commercial agriculture includes commercial production in greenhouses, nurseries, tree farms, sod farms, and feedlots. Commercial agriculture does not include storage of crops off the farm or in commercial elevators, or animal life in stockyards or sale barns. Energy consumed by on-farm grain storage and processing is considered to be consumed in farming.

089.02E Gas is defined as those gases that are burned for energy or oxygen used in welding or cutting metals.

089.03 When determining the percent of exempt use, energy consumed directly in processing, manufacturing, refining, generation of electricity, irrigation, or farming, as defined in this regulation, is used in a qualified use. Energy consumed in heating, cooling, or lighting that portion of the facility directly used in processing, manufacturing, refining, irrigation, or farming, is considered to be for a qualified use. If the purchaser properly determines that more than 50 percent of the energy charge through a single meter is consumed for a qualified use, the entire billing for that meter is exempt from the sales and use tax. However, if the purchaser determines that 50 percent or less of the energy charge through a single meter is consumed for a qualified use, he or she cannot issue an exempt certificate on that meter billing. The entire charge (qualified and nonqualified use) is taxable.

089.03A For purposes of determining the usage percent, a one-year period of consumption will be required. New customers may project their anticipated consumption.

089.03B The use of separate energy meters is acceptable for establishing exemptions within a single facility; however, the taxability of the entire billing for that meter is dependent upon the total energy usage through that meter.

089.04 Fuels commonly used to propel motor vehicles, such as fuel oil, diesel fuel, tractor fuel, and propane are subject to either diesel or compressed fuel tax or sales tax, depending upon their usage.

089.04A At the time fuel oil, diesel fuel, tractor fuel, or propane is placed in a bulk tank which is designed or equipped to fuel vehicles, fuel oil, diesel fuel, tractor fuel, or propane is taxed or exempted under the diesel or compressed fuel rules.

089.04B Fuel oil, diesel fuel, tractor fuel, or propane which is exempt from the sales tax at the time of purchase becomes subject to the consumer’s use tax only when consumed for purposes other than for irrigation of crops or to propel any vehicle such as a tractor, fork lift, grader, or bulldozer. This fuel may qualify for exemption under paragraph 089.01A.

089.04C All fuel oil, diesel fuel, tractor fuel, or propane placed in a bulk tank which is not designed to fuel motor vehicles, is taxed or exempted under the sales and use tax regulations.

089.05 The procedure for claiming an exemption from sales and use tax except those claims set forth in sections 089.05A and 089.05B must be supported by properly completing the Nebraska Energy Source Exempt Sale Certificate, Form 13E.

089.05A The exempt sale of diesel or compressed fuel placed in a bulk tank designed or equipped to fuel vehicles does not need to be supported by a certificate of exemption when the quantity purchased and the other records maintained support such exempt sale.

089.05B Diesel fuel that is placed into a supply tank connected to stationary equipment used to irrigate crops is exempt from sales and use tax. Such sales do not need to be supported by a certificate of exemption when the quantity purchased and the other records maintained by the seller support such exempt sale.

089.05C Compressed natural gas or liquefied petroleum gas (propane) that is placed into a supply tank connected to stationary equipment used to irrigate crops is taxable unless the purchaser issues to the seller a Nebraska Energy Source Exempt Sale Certificate, Form 13E.

089.05D An electricity or gas services public utility with a formal classification of usage that reasonably reflects the actual use by the customer, and such usage is for an exempt purpose, does not need to accept an exempt sale certificate from each customer account in the classification. This provision is not to be construed as relieving the consumer of liability for the applicable tax on any such usage.

089.05E Persons furnishing electricity and gas services as public utilities may elect to assume or absorb the applicable sales tax or may elect to pass the tax to the final consumer in the same manner as all other retailers. If the vendor elects to assume or absorb the tax, the utility vendor will remit the applicable tax directly to the Department of Revenue based upon the total charges made to the ultimate consumer. All billings to the ultimate consumer shall contain a statement to the effect that no tax is being collected for customers who are exempt or that the tax has been assumed or absorbed by the vendor for taxable customers.

089.05F In the event the vendor of utility services elects to pass the applicable tax to the final customer, the tax shall be separately stated on all billings; provided, that in lieu of separately stating the tax, the Department of Revenue hereby authorizes the vendor to include a statement on all billings to the effect that the total charge includes sales tax. The gross receipts will be factored to determine the proper amount of tax.

(Section 77-2704.13, R.R.S. 2003. April 12, 2005.)

REG-1-090 NONPROFIT ORGANIZATIONS

090.01 The fact that an organization is nonprofit does not, by itself, entitle the organization to an exemption from payment of sales and use tax on its purchases. Some nonprofit organizations are exempt from payment of the Nebraska sales and use tax on purchases to the extent described in subsections 090.02A through 090.04B of this regulation. Purchases made by these organizations are exempt only after the organization has applied for and received a Nebraska Exempt Organization Certificate of Exemption from the Nebraska Department of Revenue (Department). Religious organizations are discussed in Reg-1-091, Religious Organizations; and educational institutions are discussed in Reg-1-092, Educational Institutions. All other nonprofit organizations are not exempt and must pay sales or use tax. The following nonprofit organizations are exempt from paying sales and use taxes to the extent indicated.

090.02 A nonprofit organization operating any of the following facilities that are licensed under the Health Care Facility Licensure Act is only exempt on purchases for use at the facility, or portion of the facility, covered by the license and on purchases for use outside the facility that are necessary to fulfill the nonprofit organization’s requirements to hold or maintain its license. Any purchases by the nonprofit organization for use at facilities not included in the license, or for any other activities are not exempt from the Nebraska sales and use tax.

090.02A A hospital.

090.02B A health clinic, when one or more hospitals, or the parent corporations of the hospitals, own or control the health clinic for the purpose of reducing the cost of health services, or when the health clinic receives federal funds through the United States Public Health Service.

090.02C A skilled nursing facility.

090.02D An intermediate care facility defined in Neb. Rev. Stat. § 71-420, and a intermediate care facility for the mentally retarded defined in Neb. Rev. Stat. § 71-421.

090.02E A nursing facility.

090.02F An assisted-living facility.

090.02G Beginning October 1, 2012, a mental health center.

090.03 A nonprofit organization operating any of the following activities or facilities that are licensed or certified by the Nebraska Department of Health and Human Services, is only exempt on purchases for use in the activity or at the facility, or portion of the facility, covered by the license or certification and on purchases for use outside the activity or facility that are necessary to fulfill the nonprofit organization’s requirements to hold or maintain its license or certification. Any purchases by the nonprofit organization for use at the activities or facilities not included in the license or certification, or for any other activities, are not exempt from the Nebraska sales and use tax.

090.03A A licensed child placing or child placement agency.

090.03B A licensed child-caring agency, providing 24-hour daily care, supervision, custody, or control of children, in lieu of care or supervision normally exercised by parents in their own home, that is licensed under Neb. Rev. Stat. §§ 71-1901 to 71-1906.01.

090.03B(1) A licensed child-caring agency does not include an organization providing day care, early childhood programs, or periodic care as defined in Neb. Rev. Stat. § 71-1910.

090.03C An organization providing community-based services for the developmentally disabled that is certified under the Health Care Facility Licensure Act.

090.03D An organization operating a home health agency, hospice, or hospice or respite care service licensed under the Health Care Facility Licensure Act.

090.04 The following nonprofit organizations are exempt from sales and use tax on all purchases:

090.04A A nonprofit organization providing services exclusively to the blind; and

090.04B The State Fair Board.

090.05 The nonprofit organization seeking exemption from payment of sales and use tax must submit a Nebraska Exemption Application for Sales and Use Tax, Form 4, accompanied by the necessary supporting documentation. Exemptions are granted to nonprofit organizations listed under Reg-1-090.02 through Reg-1-090.04B, based on the factual documentation that is presented. In those instances where licensure or certification is a requirement, the Department will contact the state agency responsible for issuing the license to confirm that the license or certification was issued. Nonprofit organizations approved for exemption from payment of sales or use tax are issued a Nebraska Exempt Organization Certificate of Exemption. This certificate assigns the nonprofit organization an exemption number (05-XXXXXXX), which must be used when claiming its exemption.

090.06 The nonprofit organization must give its seller a Nebraska Resale or Exempt Sale Certificate, Form 13, as proof of its exempt status. Section B of this certificate, or an approved substitute form, must be completed in accordance with Reg-1-014, Exempt Sale Certificate.

090.07 Only the nonprofit organization that has been issued a Nebraska Exempt Organization Certificate of Exemption may make purchases to be used by and for the purposes of the nonprofit organization without payment of sales or use tax. Affiliated or subsidiary organizations cannot make tax exempt purchases using an exempt nonprofit organization’s exemption certificate, even if they are operating in support of or under the guidance of the exempt organization. The affiliated or subsidiary organization must apply for its own exemption certificate. The affiliated or subsidiary organization may or may not qualify for its own exemption certificate.

090.07A The sales and use tax exemption does not extend to a person purchasing property or services to be given or donated to an exempt nonprofit organization. For these purchases to be tax exempt, the person must donate the funds to the nonprofit organization, and the nonprofit organization must make the purchase. Any person who removes property from inventory that was originally purchased sales tax exempt with a resale certificate, and donates the property to an exempt nonprofit organization, must remit use tax on the property donated. (Reg-1-035, Consumption of Untaxed Property)

090.07B An exempt nonprofit organization engaging in a construction or repair project will receive the benefit of its tax exempt status by issuing the contractor a Purchasing Agent Appointment, Form 17, and complying with the provisions of Reg-1-017, Contractors. If the exempt nonprofit organization does not issue the contractor a Purchasing Agent Appointment, Form 17, prior to the building materials being annexed to real estate, the exempt nonprofit organization may apply to the Department for a refund of any sales or use tax paid by the contractor on building materials annexed to real estate in the project.

090.07C When a nonprofit organization is engaging in a construction or repair project, it must be licensed or certified to be exempt from sales and use tax. But, if it was not licensed or certified at the time of the purchase, the nonprofit organization must pay sales tax or remit use tax, and cannot issue either a Purchasing Agent Appointment, Form 17, or a Resale or Exempt Sale Certificate, Form 13, to any contractor relating to purchases of building materials for construction or repair performed before licensing or certification. When the nonprofit organization becomes licensed or certified upon completion of the project, it may apply for a refund of the sales tax paid or collected, or the use tax remitted by any contractor on building materials necessary to open the facility and qualify for the license or certification.

090.07D A nonprofit organization required to be licensed or certified to be exempt from sales and use tax, but that is not licensed or certified at the time of the purchase, cannot make tax exempt purchases. When the nonprofit organization becomes licensed or certified upon completion of the project, it may apply for a refund of the sales or use tax paid on the equipment, furnishings, or supplies necessary to open the facility and qualify for the license or certification.

090.07E When a nonprofit organization is required to be licensed or certified to be exempt from sales and use tax, the organization may only make tax exempt purchases during the time that any required license or certification is valid.

090.08 A nonprofit organization is required to collect sales tax on sales of property made by the organization, unless the sale is otherwise exempt. Even an organization exempt from paying sales and use tax under this regulation, is required to collect sales tax on its taxable sales of property and services to the general public or to the members of the organization. Examples include: prepared food, (Reg-1-083, Food Service); copies of records, (Reg-1-080, Documents); and admissions, (Reg-1-044, Admissions).

090.08A Nonprofit organizations making sales of property or services subject to sales tax must apply for a Nebraska Sales Tax Permit using a Nebraska Tax Application, Form 20, and collect sales tax on the gross receipts from these sales.

090.08B Any nonprofit organization may purchase property for resale without paying sales tax if it issues a Nebraska Resale or Exempt Sale Certificate, Form 13, section A, to its seller. This certificate, or an approved substitute form, must be issued in accordance with Reg-1-013, Sale for Resale-Resale Certificate.

090.09 When a nonprofit organization charges for a fund-raising event that includes either prepared food or an admission for entertainment, recreation, or amusement, and the charge is combined with the solicitation of a contribution, the portion of the amount charged that represents the fair market value of the taxable prepared food or admission received is a retail sale and the nonprofit organization must collect and remit sales tax on that portion.

090.09A The nonprofit organization must determine the fair market value in advance and clearly indicate that amount on any ticket, receipt, or other evidence issued in connection with the payment and report and remit sales tax on that amount.

090.09B If there is no fair market value determined by the nonprofit organization, and there is more than one ticket price, and all purchasers receive substantially the same benefits, the lowest ticket price is presumed to be the fair market value of all tickets sold.

090.09C If there is no fair market value determined by the nonprofit organization, and fair market value cannot be determined under Reg-1-090.09B, the total charge is taxable.

090.10 Charges by committees registered with the Nebraska Accountability and Disclosure Commission, or committees for candidates for federal office, for admission to or for prepared food served at political fund-raising events are exempt from sales or use tax.

090.10A All other sales of property by committees, other than committees for candidates for federal office, are taxable.

090.10B Committees mean ballot question committees, candidate committees, independent committees, and political party committees.

090.11 Purchases by employees or members of the nonprofit organization using their own funds are subject to sales or use tax, even if the purchases are made on behalf of the nonprofit organization, and even if the organization will be reimbursing the employees or members for expenses incurred, including purchases of prepared food and lodging.

(Neb. Rev. Stat. §§ 77-2701.33, 77-2704.10 and 77-2704.12. July 3, 2013.)

REG-1-091 RELIGIOUS ORGANIZATIONS

091.01 Nonprofit organizations created exclusively for religious purposes are exempt from payment of the Nebraska sales or use tax after the organization has applied for and received a Nebraska Exempt Organization Certificate of Exemption from the Nebraska Department of Revenue (Department). This certificate assigns the organization an exemption number (05-XXXXXXX), which must be used when claiming its exemption.

091.02 The nonprofit religious organization must give its seller a Nebraska Resale or Exempt Sale Certificate, Form 13, as proof of its exempt status. Section B of this certificate, or an approved substitute form, must be completed in accordance with Reg-1-014, Exempt Sale Certificate.

091.02A Only the nonprofit religious organization that has been issued a Nebraska Exempt Organization Certificate of Exemption may make purchases to be used by and for the purposes of the nonprofit religious organization without payment of sales or use tax. Affiliated or subsidiary organizations, for example, separately organized day care centers, youth groups, or vacation bible schools, cannot make tax exempt purchases using an exempt nonprofit religious organization’s exemption certificate, even if they are operating in support of or under the guidance of the exempt organization. The affiliated or subsidiary organization must apply for its own exemption certificate. The affiliated or subsidiary organization may or may not qualify for its own exemption certificate.

091.02B The sales and use tax exemption does not extend to a person purchasing property or services to be given or donated to an exempt nonprofit religious organization. For these purchases to be tax exempt, the person must donate the funds to the nonprofit religious organization, and the nonprofit religious organization must make the purchase. Any person who removes property from inventory that was originally purchased sales tax exempt with a resale certificate, and donates the property to an exempt nonprofit religious organization, must remit use tax on the property donated. (Reg-1-035, Consumption of Untaxed Property)

091.02C An exempt nonprofit religious organization engaging in a construction or repair project will receive the benefit of its tax exempt status by issuing the contractor a Purchasing Agent Appointment, Form 17, and complying with the provisions of Reg-1-017, Contractors. If the exempt nonprofit religious organization does not issue the contractor a Purchasing Agent Appointment, Form 17, prior to the building materials being annexed to real estate, the exempt nonprofit religious organization may apply to the Department for a refund of any sales or use tax paid by the contractor on building materials annexed to real estate in the project.

091.03 A nonprofit organization that meets the following criteria will be considered as created exclusively for religious purposes. The specific tenets of a particular religion will not be compared or considered by the Department when reviewing an application for tax exempt status.

091.03A The nonprofit organization must affirmatively establish its right to exemption by demonstrating that it is organized and is being operated exclusively for religious purposes. A mere restatement of the applicant’s corporate charter or a statement of its proposed activities will not suffice.

091.03B The nonprofit organization’s net earnings cannot be used for private gain or benefit unless the use fulfills a religious or charitable purpose. Upon dissolution, all assets and accumulated earnings must be distributed to an organization exempt under the Internal Revenue Code, § 501(c).

091.03C Exempt status will be granted by the Department only if the applicant’s operation and activities are described in sufficient detail to require a conclusion that the nonprofit organization has met the requirements.

091.04 Each application will be examined by the Department to determine if the primary or dominant purpose for which the nonprofit organization has been created is religious, and if that purpose is being carried out in the operations of the organization.

091.05 In reviewing applications from nonprofit organizations seeking an exemption certificate as a religious organization, the Department may examine certain criteria, including, but not limited to, those listed in Reg-1-091.05A through 091.05N. No single criterion is controlling when making a determination of tax exempt status. These criteria include:

091.05A A distinct legal existence;

091.05B A recognized creed and form of worship;

091.05C A definite and distinct ecclesiastical government;

091.05D A formal code of doctrine and discipline;

091.05E A distinct religious history;

091.05F A membership not associated with any other religious organization or denomination;

091.05G A complete organization of ministers ministering to its congregations;

091.05H Ministers selected after completing prescribed courses of study;

091.05I A literature of its own;

091.05J Established places of worship;

091.05K Regular congregations;

091.05L Regular religious services;

091.05M Schools for the religious instruction of the young; and

091.05N Schools for the preparation of its ministers.

091.06 If the Department determines that the applicant is a nonprofit religious organization, it may have other purposes which are incidental when compared to its predominantly religious purposes or goals. In these instances, the applicant may not satisfy all of the criteria set out above.

091.07 A nonprofit religious organization is required to collect sales tax on sales of property by the nonprofit religious organization unless the sale is otherwise exempt. A nonprofit religious organization may make the following sales exempt from sales tax.

091.07A A nonprofit religious organization may sell prepared food at a function of the nonprofit religious organization without collecting sales tax. The activity is a function of the nonprofit religious organization if it is primarily for the members of the organization.

091.07B A nonprofit religious organization may have one annual sale event that is not taxed.

091.07B(1) The sale must be at an activity of the nonprofit religious organization, but it does not have to take place at a location owned by the nonprofit religious organization.

091.07B(2) The sale may last up to three consecutive days.

091.07B(3) The nonprofit religious organization may have the assistance of an auctioneer at this sale without having to collect sales tax on the property or services sold.

091.07B(4) The nonprofit religious organization may sell anything it owns at its sale, except a motor vehicle, trailer, or semi-trailer. The property or services sold may be made especially for the sale, purchased for the sale, or donated to the nonprofit religious organization for the sale.

091.08 Any nonprofit religious organization may purchase property for resale without paying sales tax if it issues a Nebraska Resale or Exempt Sale Certificate, Form 13, section A, to its seller. (Reg-1-013, Sale for Resale-Resale Certificate). This certificate, or an approved substitute form, must be issued in accordance with Reg-1-014, Exempt Sale Certificate.

091.09 Purchases by employees or members of the nonprofit religious organization using their own funds are subject to sales or use tax, even if the purchases are made on behalf of the nonprofit religious organization, and even if the organization will be reimbursing the employees or members for expenses incurred, including purchases of prepared food and lodging.

(Neb. Rev. Stat. §§ 77-2701.24, 77-2703, 77-2704.10, 77-2704.12, and 77-2706. July 3, 2013.)

REG-1-092 EDUCATIONAL INSTITUTIONS

092.01 The following educational institutions are exempt from payment of the Nebraska sales and use tax after the institution has applied for and received a Nebraska Exempt Organization Certificate of Exemption from the Nebraska Department of Revenue (Department):

092.01A A Nebraska public elementary or secondary school, or school district;

092.01B A nonprofit Nebraska private elementary or secondary educational institution established under Chapter 79, article 16;

092.01C A Nebraska community college, established under Chapter 85, Article 15;

092.01D A Nebraska educational service unit, established under the Educational Service Units Act, Chapter 79, Article 12;

092.01E A Nebraska learning community established under Chapter 79, Article 21;

092.01F The Nebraska Center for the Education of Children who are Blind or Visually Impaired, established by Neb. Rev. Stat. § 79-11,109;

092.01G The Nebraska State College System, established under Chapter 85, Article 3;

092.01H The University of Nebraska System, established under Chapter 85, Article 1;

092.01I A nonprofit, private, regionally or nationally accredited college or university with its primary campus located in Nebraska that is authorized under the Postsecondary Institution Act, Chapter 85, Article 24; and

092.01J A conference or other organization, if all the members of the conference or organization are exempt from payment of the Nebraska sales and use tax.

092.02 Schools and other educational institutions not listed in Reg-1-092.01 are not exempt, and must pay sales tax or remit use tax on their taxable purchases. These include, but are not limited to:

092.02A Home schools, other Rule 12 and Rule 13 schools, and all other educational institutions not subject to state approval or accreditation; and

092.02B Schools, colleges, or universities located in another state.

092.03 The educational institution seeking exemption from payment of sales and use tax must submit a Nebraska Exemption Application for Sales and Use Tax, Form 4, accompanied by the necessary supporting documentation. In instances where approval or accreditation is a requirement for an educational institution, the Nebraska Department of Education may be contacted to confirm the approval or accreditation. Educational institutions approved for exemption from payment of sales and use tax are issued a Nebraska Exempt Organization Certificate of Exemption. This certificate assigns the educational institution an exemption number (05-XXXXXXX), which must be used when claiming its exemption.

092.04 The educational institution must give its seller a Nebraska Resale or Exempt Sale Certificate, Form 13, as proof of its exempt status. Section B of this certificate, or an approved substitute form, must be completed in accordance with Reg-1-014, Exempt Sale Certificate.

092.05 Only the educational institution that has been issued a Nebraska Exempt Organization Certificate of Exemption may make purchases to be used by and for the purposes of the educational institution without payment of sales or use tax. Affiliated or subsidiary organizations, including student organizations or parent-teacher-student organizations, cannot make tax exempt purchases using an exempt educational institution’s certificate of exemption, even if they are operating in support of or under the guidance of the educational institution.

092.05A The sales and use tax exemption does not extend to a person purchasing property or services to be given or donated to an exempt educational institution. For these purchases to be tax exempt, the person must donate the funds to the educational institution, and the educational institution must make the purchase. Any person who removes property from inventory that was originally purchased sales tax exempt with a resale certificate, and donates the property to an exempt educational institution, must remit use tax on the property donated. (Reg-1-035, Consumption of Untaxed Property)

092.05B An exempt educational institution engaging in a construction or repair project will receive the benefit of its tax exempt status by issuing the contractor a Purchasing Agent Appointment, Form 17, and complying with the provisions of Reg-1-017, Contractors. If the exempt nonprofit educational institution does not issue the contractor a Purchasing Agent Appointment, Form 17, prior to the building materials being annexed to real estate, the exempt nonprofit educational institution may apply to the Department for a refund of any sales or use tax paid by the contractor on building materials annexed to real estate in the project.

092.05C When a private, nonprofit, postsecondary educational institution is engaging in a construction or repair project, it must be regionally or nationally accredited with its primary campus physically located in Nebraska to be exempt from sales and use tax. But, if it was not accredited or located in Nebraska at the time of the purchase, the private, nonprofit, postsecondary educational institution must pay sales tax or remit use tax, and cannot issue either a Purchasing Agent Appointment, Form 17, or a Resale or Exempt Sale Certificate, Form 13, to any contractor relating to purchases of building materials for construction or repair performed before approval or accreditation. When the private, nonprofit, postsecondary educational institution becomes accredited and located in Nebraska upon completion of the project, it may apply for a refund of the sales tax paid or collected, or the use tax remitted by any contractor on building materials necessary to open the facility and qualify for the approval or accreditation.

092.05D A private, nonprofit, postsecondary educational institution required to be accredited and with its primary campus physically located in Nebraska to be exempt from sales and use tax, but that is not accredited or located in Nebraska at the time of the purchase, cannot make tax exempt purchases. When the educational institution becomes accredited and located in Nebraska upon completion of the project, it may apply for a refund of the sales or use tax paid on the equipment, furnishings, or supplies necessary to open the facility and qualify for the license or certification.

092.05E When a private, nonprofit, postsecondary educational institution is required to be accredited to be exempt from sales and use tax, the educational institution may only make tax exempt purchases during the time that any required accreditation is valid.

092.06 An educational institution is required to collect sales tax on sales of property made by the educational institution except for:

092.06A Admissions charged by elementary or secondary schools;

092.06B Admissions charged by school districts, student organizations, or parent-teacher associations to an event or activity held in an elementary or secondary school during the regular school day, or at an approved function of the school;

092.06C Prepared food, soft drinks, and candy, served during the regular school day or at school functions, sold by;

092.06C(1) An elementary or secondary school or school district;

092.06C(2) A student organization or parent-teacher association of an elementary or secondary school; or

092.06C(3) An institution of higher education, public or private, but only if the sale is made at a facility or event that is not open to the public.

092.06D Concession sales of prepared food, soft drinks, and candy by elementary and secondary schools at events including those open to the public;

092.06E Sales by parent-booster clubs, parent-teacher associations, parent-teacher-student associations, or school-operated stores approved by elementary or secondary schools, if the proceeds are used to support school activities or the school itself; or

092.06F Occasional rental of rooms or accommodations regularly used to house students in dormitories or facilities operated by an educational institution established under Chapter 79 or 85 of the Nebraska Revised Statutes.

092.06G For purposes of the exemptions in subsections 092.06A through 092.06F:

092.06G(1) Schools include both public and private elementary and secondary schools; and

092.06G(2) Schools and school districts include organizations of schools and school districts, acting on behalf of its members in carrying out school events, activities, or functions.

092.07 An educational institution making sales of property or services subject to sales tax must apply for a Nebraska Sales Tax Permit using a Nebraska Tax Application, Form 20 and collect sales tax on the gross receipts from these sales.

092.08 Any educational institution may purchase property for resale without paying sales tax if it issues a Nebraska Resale or Exempt Sale Certificate, Form 13, section A, to its seller. This certificate, or an approved substitute form, must be issued in accordance with Reg-1-013, Sale for Resale-Resale Certificate.

092.09 Purchases by employees of the educational institution, or members of parent-booster clubs, parent-teacher associations, or parent-student-teacher associations, using their own funds are subject to sales or use tax, even if the purchases are made on behalf of the educational institution, and even if the educational institution will be reimbursing the employees or members for expenses incurred, including purchases of prepared food and lodging.

(Neb. Rev. Stat. §§ 77-2704.10, 77-2704.12, 77-2704.15, 77-2704.24 and 77-2704.25. July 3, 2013.)

REG-1-093 GOVERNMENTAL UNITS

093.01 Governmental units are only exempt from sales and use tax if they are specifically listed in subsections 093.04 through 093.06 of this regulation. Public educational institutions are discussed in Reg-1-092, Educational Institutions.

093.02 Governmental units are not required to have exemption numbers.

093.03 The United States (U.S.) government, its agencies, instrumentalities, and corporations wholly owned by the U.S. government are exempt from sales and use tax. However, sales to institutions chartered or created under federal authority, but which are not directly operated and controlled by the U.S. government for the benefit of the public, are generally taxable. (See Reg-1-072, United States Government and Federal Corporations, for organizations considered a part of the U.S. government.)

093.04 The following governmental units in Nebraska are exempt from sales and use tax:

093.04A The State of Nebraska;

093.04B A municipality, including a municipal library;

093.04C A county or township, including a county or township library;

093.04D A natural resource district;

093.04E A joint entity or agency formed to fulfill the purposes of the Integrated Solid Waste Management Act;

093.04F A city, county, or joint airport authority;

093.04G An elected county fair board;

093.04H A rural or suburban fire protection district;

093.04I A drainage district;

093.04J A local or regional housing agency, except for purchases for any commercial operation that does not exclusively benefit the residents of the affordable housing project; and

093.04K Wyuka Cemetery.

093.05 A Nebraska irrigation or reclamation district, including one that is part of a Nebraska public power and irrigation district, is exempt from sales and use tax, including any departments or portion of the district that sells electricity, gas, heat, or water.

093.06 A nonprofit corporation formed by an exempt governmental unit listed in sections 093.04 or 093.05 for the sole purpose of issuing tax-exempt bonds to finance one or more projects for the exempt governmental unit is exempt from sales and use tax for building materials, equipment, or other property purchased for the project or projects with the proceeds from the tax-exempt bonds to the same extent the exempt governmental unit would be exempt, if all of the following conditions are satisfied:

093.06A The nonprofit corporation is essentially public in nature;

093.06B The exempt governmental unit holds a beneficial interest in the nonprofit corporation;

093.06C The nonprofit corporation has or will issue bonds on behalf of the exempt governmental unit to finance a project or projects where the interest paid on the bonds is exempt from federal income tax under 26 U.S.C. § 103;

093.06D The project or projects will be the subject of a lease-purchase agreement, financing lease, or other instrument which provides for the transfer of full legal title to the property to the governmental unit when all amounts due under the lease or other instrument are paid and the indebtedness is retired; and

093.06E If a construction project has a total estimated cost greater than $50,000 or 0.6% of the total actual value of real and personal property of the exempt governmental unit for the previous fiscal year, whichever is greater, the construction project must have been approved by a majority of the voters of the exempt governmental unit at a primary, general, or special election.

093.07 All governmental units not listed in sections 093.04 through 093.06 must pay sales tax or remit use tax on taxable purchases. Governmental units that are not exempt from sales and use tax include, but are not limited to:

093.07xE A county weed district board.

093.08 Organizations which are not governmental units, but which assist in performing governmental functions are not exempt from sales or use tax. These organizations include, but are not limited to:

093.08A A volunteer fire department;

093.08B A county agricultural society or county historical society;

093.08C A corporation created under the Nebraska Nonprofit Corporation Act of the Nebraska Revised Statutes;

093.08D An institution chartered or created under federal authority, but not directly operated and controlled by the U.S. government; and

093.08E An organization using funds or grants from governmental units.

093.09 An organization established under the Nebraska Interlocal Cooperation Act entirely by exempt governmental units may make purchases for its use exempt from sales and use tax after the organization has applied for and received a Nebraska Exempt Organization Certificate of Exemption from the Nebraska Department of Revenue (Department). If any of the members are not exempt, then the organization is not exempt for any of its purchases.

093.10 The exempt governmental unit must give its seller a Nebraska Resale or Exempt Sale Certificate, Form 13, as proof of its exempt status. Section B of this certificate, or an approved substitute form, must be completed in accordance with Reg-1-014, Exempt Sale Certificate.

093.11 An exempt governmental unit engaging in a construction or repair project will receive the benefit of its tax exempt status by issuing the contractor a Purchasing Agent Appointment, Form 17, and complying with the provisions of Reg-1-017, Contractors. Except for the State of Nebraska, if the exempt governmental unit does not issue the contractor a Purchasing Agent Appointment, Form 17, prior to the building materials being annexed to real estate, the exempt governmental unit may apply to the Department for a refund of any sales or use tax paid by the contractor on building materials annexed to real estate in the project.

093.12 A governmental unit is required to collect sales tax on sales of property by the governmental unit, unless the sale is otherwise exempt.

092.13 Sales by agencies and corporations of the U.S. government are addressed in Reg-1-072.05.

093.14 Any governmental unit may purchase property tax exempt for resale if it issues a Nebraska Resale or Exempt Sale Certificate, Form 13, section A, to its seller. (Reg-1-013, Sale for Resale-Resale Certificate.) This certificate, or an approved substitute form, must be issued in accordance with Reg-1-014, Exempt Sale Certificate.

093.15 Purchases by employees of the governmental unit using their own funds are subject to sales or use tax, even if the purchases are made on behalf of the governmental unit, and even if the governmental unit will be reimbursing the employees for expenses incurred, including purchases of prepared food and lodging.

093.16 The exemptions granted to any governmental unit listed in 093.04 through 093.06 do not apply to purchases for use in the business of furnishing gas, water, electricity, or heat. The governmental unit will pay sales tax or remit use tax the same as any privately-owned utility company. (Reg-1-066, Sewer and Water, and Reg-1-089, Energy Source Utility Exemption.)

093.16A When property is shared by a taxable department and by an exempt department, (for example, a piece of equipment that is sometimes used by the water department and sometimes used by the sewer department), sales or use tax is due on the portion of the total amount paid that reflects the use by the taxable department.

093.16A(1) The governmental unit may allocate the amount paid for the property between the exempt department and the taxable department by any method that reasonably reflects the use of the property by each department, and pay sales tax or remit use tax on the portion of the sales price that reflects the allocation to the taxable department.

093.16A(2) If a taxable department and tax exempt department divide the cost of the property, the portion of the sales price paid or reimbursed by each department is presumed to reflect the use by each department.

093.16B If a taxable department and an exempt department make simultaneous and continuous use of property, like duct space, pole space, or meters, 100% of the sales price of the property is taxable. Any charges made between departments for simultaneous and continuous use of property are exempt from sales tax.

093.16C For purposes of this section, “department” means a portion of a governmental unit listed in 093.04 through 094.06 that is responsible for a specific function of the governmental unit whether or not that portion has separate accounting, management, or property.

(Neb. Rev. Stat. §§ 2-953.01, 77-2704.15, 77-2704.16, 77-2704.17, and 77-2704.20, and 4 U.S.C. section 107 and 29 U.S.C section 103. July 3, 2013.)

REG-1-094 AGRICULTURAL MACHINERY AND EQUIPMENT

094.01 For the purposes of this regulation, the following definitions will be used.

094.01A Agricultural machinery and equipment shall mean tangible personal property that is used directly in the cultivating or harvesting of a crop, the raising or caring for animal life, or the collecting or processing of an agricultural product on the farm or ranch.

094.01A(1) Agricultural machinery and equipment does not include office equipment, registered or unregistered motor vehicles, well-drilling equipment, handling or processing equipment for agricultural products not on a farm or ranch, or any building or fixture.

094.01B Commercial agriculture is the business of producing food products, or other useful and valuable crops, or raising animal life. The crops or animal life can either be sold or used by the grower to produce other products for sale. Commercial agriculture includes commercial production in greenhouses, nurseries, tree farms, sod farms, and feedlots. Commercial agriculture does not include storage of products off the farm or in commercial elevators, or animal life in stockyards or sale barns.

094.01C Depreciable agricultural machinery and equipment means agricultural machinery and equipment that has a determinable life of longer than one year.

094.01D Purchase is a transfer of title or possession for a consideration. The purchase may occur by sale, conditional sale, sale at auction, or a lease or rental for thirty days or more.

094.02 The purchase of depreciable agricultural machinery and equipment is exempt from the Nebraska and local option sales and use tax if the agricultural machinery and equipment purchased meets all of the following criteria. If any of the criteria are not met, the purchaser is not entitled to an exemption:

094.02A The item purchased is agricultural machinery and equipment;

094.02B It is used in commercial agriculture; and

094.02C The purchaser properly completes a Nebraska Resale or Exempt Sale Certificate, Form 13, Section B.

094.03 Sales of repair and replacement parts for agricultural machinery and equipment used in commercial agriculture are taxable. Charges for labor to repair agricultural machinery and equipment are not taxable provided the charges are separately itemized on the billing invoice.

094.03A The tax paid on purchases of depreciable repair and replacement parts is eligible for a refund, including the tax paid on the related repair or maintenance labor charges.

094.04 Charges for labor to repair a building, structure, or fixture used in commercial agriculture are taxable.

094.05 Personal property tax must be paid on qualified agricultural machinery and equipment and depreciable repair parts, even if sales tax is paid on the item.

(Sections 77-2708, and 77-2708.01, R.R.S. 2003. July 16, 2005.)

REG-1-095 MOLDS, DIES, AND PATTERNS

095.01 Sales of molds or dies to a manufacturer for use in manufacturing are exempt from tax.

095.01A The materials necessary to create the mold or die used in manufacturing and any chemicals, solutions, or catalysts utilized in the mold or die process are all included in the exemption.

095.02 Sales of molds, dies, and patterns that do not qualify as manufacturing machinery and equipment are exempt from tax only when all of the following conditions are met:

095.02A The mold, die, or pattern is designed and fabricated to the special order of a customer;

095.02B The mold, die, or pattern is built specifically for the manufacture of a single product; and

095.02C The mold, die, or pattern is used to produce a product which is either injection molded from plastic or stamped from metal.

095.03 A mold or pattern is a form containing a negative impression into which a softened or fluid material is injected to achieve a predetermined shape.

095.04 A die is a tool mounted on a press and consists of a pair, or a combination of pairs, of mating members which shape or cut metal.

095.05 Injection molding is a process whereby a metered quantity of a heated and plasticized material is injected under pressure into a mold and allowed to solidify. The manufacturing processes of rotational molding, extrusion, compression molding, or blow molding do not qualify as injection molding.

095.06 Metal stamping is the process in which metal is shaped by pressing a die or series of dies against the metal. The process can include operations which blank, punch, bend, iron, redress, emboss, flange, trim, or otherwise shape the metal.

095.07 The exemption for molds, dies, and patterns does not include the machinery or equipment to which the molds, dies, or patterns are connected or attached. The exemption does not apply to the purchase of raw materials or individual parts which will be fabricated into a mold, die, or pattern where the fabricator is considered the final consumer of the mold, die, or pattern.

095.08 The exemption applies to charges for modifications made to a qualifying mold, die, or pattern or to any repair or replacement parts of a qualifying mold, die or pattern.

(Section 77-2704.40, R.R.S. 2003. February 22, 2009.)

REG-1-096 MOTORBOATS

096.01 Motorboat as used in this regulation shall mean any watercraft included under Section 37-1204 of the Nebraska Revised Statutes. Every motorboat dealer in Nebraska is required to obtain a sales tax permit for each place of business in this state even though they make no sales other than sales of motorboats. The dealer shall file a tax return reporting gross sales in the same manner as all other retailers.

096.01A Motorboats means any watercraft propelled by a permanently or temporarily attached motor and shall include, among others, open or closed bow outboards, inboards, inboard/outboard boats, personal watercraft (jet skis, wave runners), air boats, cabin cruisers, houseboats, pontoons, canoes, jon boats, sail boats, and rowboats.

096.01B If a trailer is sold with a motorboat, the dealer must separately state the selling price of the trailer on the purchaser’s invoice and furnish the purchaser with a Nebraska Sales/Use Tax and Tire Fee Statement for Motor Vehicles and Trailer Sales, Form 6, for the trailer.

096.02 The sales and use tax imposed upon the sale of a motorboat shall be the liability of the purchaser and the tax shall be collected by the county treasurer or other designated county official at the time the purchaser makes application for registration of the motorboat for operation in this state. If the purchaser retains such motorboat in this state and does not register it for operation within thirty days of the purchase date, the tax shall be paid immediately to the county treasurer or other county official. If the tax is not paid within thirty days of the purchase date, the county treasurer or other designated official shall collect the tax, interest from the thirtieth day until the date of payment, and a penalty of five dollars ($5.00).

096.03 The dealer or seller is not authorized to collect the tax on the sale of motorboats but shall, at the time of the sale, state on the sales invoice the dollar amount of the tax and furnish the purchaser a Nebraska Sales and Use Tax Statement for Motorboat Sales, Form 6MB.

096.03A The tax due shall be computed on the difference between the total sales price and the total of any trade-in allowance for another motorboat taken by any person and any rebates used to reduce the selling price of the motorboat.

096.03A(1) The selling price of a motorboat includes charges for the boat, motor, destination fees, import custom fees, document processing fee, and warranty transfers. The selling price also includes charges for accessories, and service and maintenance agreements unless such charges are separately invoiced. When these charges are separately invoiced the dealer or seller collects and remits sales tax on these charges.

096.03B All information requested by the Nebraska Department of Revenue must be furnished and a copy of each Form 6MB must be sent to the Nebraska Department of Revenue by the seller at the time the sales and use tax return is filed. Any dealer or seller who fails or refuses to furnish such information may be found guilty of a misdemeanor and shall, upon conviction, be punished by a fine of not less than twenty-five dollars ($25.00) nor more than one hundred dollars ($100.00) for each offense.

096.03C Any dealer or seller who willfully prepares a false or fraudulent sales or use tax return or Form 6MB may be found guilty of a Class IV felony and shall, upon conviction, be fined not more than ten thousand dollars ($10,000.00), or be imprisoned not more than five years, or both.

096.03D Any purchaser, or agent thereof, who completes Nebraska Sales and Use Tax Statement for Motorboat Sales, Form 6MB, claiming an exemption for any purchase which is not exempt from sales and use tax under sections 77-2701 through 77-27,135 of the Nebraska Revised Statutes, shall be subject to a penalty of one hundred dollars ($100.00) or ten times the tax, whichever amount is larger. Any purchaser, or agent thereof, who fraudulently signs a Form 6MB with the intention to avoid payment of the tax may, in addition to the above penalty, be found guilty of a class IV misdemeanor.

096.03E Any seller who willfully understates the amount upon which the sales tax is due shall be subject to an administrative penalty of one thousand dollars ($1,000.00).

096.04 County treasurers or other designated county officials are appointed as sales and use tax collectors for all sales of motorboats made outside of this state to purchasers and users of motorboats required to be registered in this state. The county treasurer, or other designated county official, shall collect the applicable use tax from the purchaser of a motorboat purchased outside of this state at the time application for registration is made. The full use tax on the purchase price shall be collected by the county treasurer or other designated county official if a sales or occupation tax was not paid by the purchaser in the state of purchase. If a sales or occupation tax was lawfully paid in the state of purchase at a rate less than the tax imposed in this state, use tax must be collected on the difference as a condition for registration in this state.

096.05 The purchase of a licensed motorboat may be exempt for any of the following reasons:

096.05A If the owner of a motorboat is, or was, a nonresident of this state and establishes as a fact that he or she purchased the motorboat outside of this state and there registered and titled the motorboat, then the use tax is not required for licensing or registering in this state;

096.05B The motorboat is purchased for the purpose of renting or leasing with the rental or lease payment set at a fair market value, and the purchaser holds a sales tax permit so as to remit tax on the lease or rental receipts;

096.05C The motorboat is a gift to the applicant or received through inheritance and tax was previously paid by the donor or prior owner;

096.05D The purchase of the motorboat is exempt under paragraphs 012.02C or 012.02D of Reg-1-012, Exemptions;

096.05E The motorboat is sold pursuant to an occasional sale as set out in Reg-1-022, Occasional Sales.

096.06 If the purchase of a licensed motorboat is exempt for any of the reasons in paragraph 096.05, the county treasurer or other designated county official may, after obtaining a properly completed Form 6MB accurately identifying the basis of exemption, complete the registration without collecting the tax.

096.07 The lessor of a motorboat must collect tax on the gross receipts from rental or lease of a motorboat which is registered for operation within this state and which is rented or leased for periods of one year or more or which is delivered by the lessor within this state and is rented or leased for a period of less than one year.

096.08 A rebate received by the purchaser from a manufacturer after the sale does not reduce the sales and use tax base. The retail price remains at the amount agreed upon at the time of the sale which is the amount upon which the tax must be collected.

096.08A A rebate received from a manufacturer that is used to reduce the selling price of the motorboat reduces the sales and use tax base. A rebate is used to reduce the selling price of the motorboat when it is transferred to the dealer at the time of the sale and is shown on the sales invoice as a price reduction, partial payment, or a down payment.

(Sections 77-2701.24, and 77-2701.35, R.R.S. 2003, and sections 77-2701.16, 77-2703(1)(j), and 77-2703.01, R.S.Supp., 2004. July 16, 2005.)

REG-1-097 DIRECT PAYMENT PERMIT

097.01 Companies that are issued a direct payment permit are authorized to pay the proper Nebraska and local sales tax on certain purchases directly to the Nebraska Department of Revenue (Department) in lieu of paying the sales tax to the seller.

097.02 Companies may apply for a direct payment permit by completing a Nebraska Application for Direct Payment Authorization, Form 20DP, and paying the nonrefundable $10 application fee. If the application is approved, a direct payment permit will be issued.

097.03 In order to qualify for a direct payment permit, the applicant must meet the following conditions:

097.03A The company must have annual taxable purchases in Nebraska of property and services totaling at least $3 million. Taxable purchases exclude purchases for resale;

097.03B The company must demonstrate that its system of accruing tax on purchases is adequate for accruing tax on all taxable purchases; and

097.03C The company must agree to accrue and pay all sales and use taxes to the Department on or before the 20th day of the month following the date of purchase, lease, or rental.

097.04 The holder of a direct payment permit will not receive any collection fee on those taxes due on taxable property purchased under the direct payment permit.

097.05 The holder of a direct payment permit cannot use the permit for the following transactions:

097.05A Cash purchases;

097.05B Purchases of motor vehicles, motorboats, all-terrain vehicles, and utility-type vehicles;

097.05C Purchases of lodging and related services;

097.05D Purchases of food or beverages;

097.05E Purchases of admissions; and

097.05F Purchases for resale.

097.06 The company must accept responsibility for use by any other company to which the direct payment permit has been delegated.

097.07 The holder of a direct payment permit must furnish a copy of the direct payment permit to each seller for purchases of taxable property or services on which an exemption is claimed.

097.07A The holder of a direct payment permit must keep a current list of all sellers from whom purchases are made under the direct payment permit, and submit the list for examination upon request of the Tax Commissioner.

097.07B If the permit is revoked or relinquished, the holder of the permit must notify all sellers who have been furnished copies of the permit that the permit is no longer valid.

097.08 If a seller receives a direct payment permit from a purchaser, the seller is relieved from the obligation to collect tax on taxable sales. A copy of the direct payment permit must be maintained in the records of the seller.

097.08A The holder of a direct payment permit may use the permit to make tax-exempt purchases of computer software, digital goods, or services that will be concurrently available for use in more than one jurisdiction.

097.08B The holder of a direct payment permit may also use the permit to make tax-exempt purchases of direct mail as defined in Reg-1-105. Sales tax will be remitted based on the requirements of Reg-1-105. A certificate of exemption for direct mail is not required for direct mail purchases.

097.09 The tax that is remitted by a company issued a direct payment permit is a sales tax. The company issued a direct payment permit cannot claim an exemption under Reg-1-002E on items purchased from any Nebraska licensed seller or from any seller engaged in business in Nebraska.

097.10 Items purchased under the special permission letter of exemption for certain common carriers as provided in Reg-1-015 and delivered in Nebraska are not subject to sales and use tax when shipped outside Nebraska, even though the same company has been granted the authority to operate under the provisions of the direct payment permit program for sales and use tax purposes.

097.11 The direct payment permit can be delegated to another company if the holder of the permit has at least an 80% ownership of the other company.

097.12 The Tax Commissioner may revoke a direct payment permit any time the holder of the permit no longer qualifies for the issuance of a permit, fails to comply with the conditions under which the permit was issued, or for any other reason constituting misuse of the permit.

(Neb. Rev. Stat. §§ 77-2703(1)(f), 77-2705, 77-2705.01, 77-2705.02, and 77-2705.03. June 24, 2017.)

REG-1-098 BUILDING CLEANING AND MAINTENANCE

098.01 Gross receipts from building cleaning and maintenance services are taxable.

098.02 Building cleaning and maintenance services include both interior and exterior cleaning of commercial and residential buildings, homes, apartments, outbuildings, and agricultural buildings.

098.03 Building cleaning and maintenance services include:

098.03A Cleaning and maintenance of tangible personal property located in a building, and fixtures or any property annexed to real estate that is attached to, is a part of, or is enclosed in, a building; and

098.03B Cleaning and maintenance services performed after fires, floods, or other natural disasters.

098.04 Building cleaning and maintenance services do not include:

098.04A Repairs to fixtures or property annexed to real estate; (See Reg-1-017 for the taxation of repairs to fixtures or annexed property.)

098.04B Cleaning of annexed property that is not attached to, a part of, or enclosed in, a building.

098.05 Service contracts that provide for building cleaning or maintenance service are taxable. (Reg-1-074, Warranties and Guarantees.)

098.06 Charges to property owners by property management companies that include building cleaning and maintenance services as a part of their management services are not taxable. Any additional charges to the property owner for building cleaning and maintenance services are taxable. Property management companies are the consumers of building cleaning and maintenance services they purchase for buildings they manage.

098.07 A building cleaning and maintenance service provider must pay sales or use tax on all purchases of materials, equipment, and supplies, including trash can liners, paper products, soap, and waxes, used to provide his or her cleaning and maintenance services.

098.08 Buildings and fixtures are defined in Reg-1-017, Contractors.

(Section 77-2702.07, R.R.S. 2003. October 1, 2003.)

REG-1-099 MOTOR VEHICLE SERVICES

099.01 Gross receipts from certain services performed on motor vehicles are subject to tax. The taxable services include motor vehicle towing, motor vehicle washing and waxing, motor vehicle painting, and the installation of accessories or equipment on motor vehicles.

099.02 Motor vehicles as used in this regulation shall mean automobiles, trucks, trailers, semitrailers, and truck tractors as defined in Section 60-301 of the Nebraska Revised Statutes.

099.03 Motor vehicle towing.

099.03A Motor vehicle towing includes, but is not limited to, towing or transporting a vehicle from one location to another location, recovering a vehicle from a ditch, or uprighting an overturned vehicle.

099.03A(1) Charges for towing of common carrier vehicles are taxable.

099.03B Motor vehicle towing does not include the towing of other property or vehicles that are not defined as motor vehicles, or the delivery of inventory motor vehicles to a licensed motor vehicle dealer.

099.03C The charge for motor vehicle towing is taxable if the motor vehicle is delivered in Nebraska. The charge for towing a motor vehicle picked up in another state and delivered in Nebraska is taxable in this state. The charge for towing a motor vehicle picked up in Nebraska and delivered in another state is not taxable in this state.

099.04 Motor vehicle washing and waxing.

099.04A Motor vehicle washing and waxing includes washing or cleaning, waxing, polishing, or detailing the interior or the exterior of a motor vehicle.

099.04A(1) Charges for washing or waxing of common carrier vehicles are taxable.

099.04A(2) Charges for washing or waxing of inventory motor vehicles of licensed motor vehicle dealers are taxable.

099.04B For the proper calculation of the tax from coin-operated wash facilities see Reg-1-031, Coin-operated Machines.

099.04C Any person providing motor vehicle washing and waxing services must pay sales or use tax on all purchases of materials, equipment, and supplies, including towels, soaps, and waxes, used to provide his or her services.

099.05 Motor vehicle painting.

099.05A Motor vehicle painting includes, but is not limited to, refinishing, sealing, or applying rust protection or clear coat to motor vehicles.

099.05A(1) Motor vehicle painting also includes the labor and services necessary to prepare the vehicle, or parts of the vehicle, for painting or to clean the vehicle after painting.

099.05A(2) Motor vehicle painting does not include the replacement of parts or any repairs to a motor vehicle other than the repair of the finish or coatings on the vehicle.

099.05B Any person providing motor vehicle painting services must pay sales or use tax on all purchases of materials, equipment, and supplies, including sandpaper, compounds, tape, and cleaners, used to provide his or her services.

099.06 Installation of accessories or equipment.

099.06A The charges for the installation of accessories or equipment on a motor vehicle are taxable.

099.06A(1) The installation of accessories or equipment on a motor vehicle includes, but is not limited to, adding a radio or CD player, running boards, trailer hitches, bed liners, window tinting, or a moon roof.

099.06B The installation of accessories or equipment does not include the replacement of a nonfunctioning part or component of the motor vehicle with a comparable part or component.

099.06C For the taxability of installation of equipment for transporting medically disabled persons, such as wheelchair lifts see Reg-1-050, Medicines and Medical Equipment.

099.07 Any person providing services on motor vehicles must pay sales or use tax on all purchases of materials, equipment, and supplies used to provide his or her services.

(Section 77-2702.07, R.R.S. 2003. October 1, 2003.)

REG-1-100 PEST CONTROL SERVICES

100.01 Gross receipts from pest control services are taxable.

100.02 Pest control services are those services intended to inspect for, detect, eliminate, neutralize, or control pests.

100.03 For the purposes of this regulation, pests include animals that infest buildings, plants, lawns, and any other property. Pests include, but are not limited to:

100.03A Spiders, mites, ticks, ants, wasps, and other insects;

100.03B Termites and other wood infesting organisms;

100.03C Rodents, snakes, birds, or other animals; and

100.03D Grubs and worms.

100.04 Charges by lawn service providers who apply pest control chemicals are taxable. A single application containing both pest control chemicals and other chemicals is taxable.

100.05 A pest control service provider must pay sales or use tax on all purchases of materials, equipment, and supplies used to provide his or her services.

100.06 Service contracts for pest control services are taxable. (Reg-1-074, Warranties and Guarantees)

100.07 Charges for applying agricultural chemicals to land, crops, or animals in commercial agriculture are not taxable. (Reg-1-061, Agricultural Chemicals, and Reg-1-63, Feed and Water for Animal Life)

(Section 77-2702.07, R.R.S. 2003. October 1, 2003.)

REG-1-101 SECURITY AND DETECTIVE SERVICES

101.01 Gross receipts from providing security and detective services are taxable.

101.02 Security services include those services to protect property from theft, vandalism, or destruction or to protect individuals from harm including physical attack or harassment. Security services include, but are not limited to:

101.02A Body guard, security patrol, or armored car services;

101.02B Planning for or consulting on security services;

101.02C Training in security measures or training persons or animals to provide security services; and

101.02D Monitoring and maintenance of security or surveillance systems, including installing, testing, cleaning, adjustment, or repair of the equipment. (See Reg-1-017, Contractors, for taxation of annexation or repair of property annexed to real estate.)

101.03 Detective services are those services provided by licensed detectives or licensed detective agencies in the business of investigating to obtain information for others. Detective services include, but are not limited to:

101.03A Background, employment, or criminal investigations;

101.03B Surveillance;

101.03C Obtaining evidence, or recovery of lost or stolen property; and

101.03D Polygraph or voice stress examinations.

101.04 Security or detective services provided by an employee to his or her employer are not taxable.

101.05 Security and detective services provided by the state or a political subdivision of the state in a governmental capacity are not taxable even if a charge is made.

101.05A Security or detective services provided by off-duty police officers are taxable unless the payment is made by a political subdivision.

101.06 A security or detective service provider must pay sales or use tax on all purchases of materials, equipment, and supplies used to provide his or her services.

REG-1-102 ANIMAL SPECIALTY SERVICES

102.01 Gross receipts from animal specialty services are subject to tax, except for animal specialty services provided to livestock. Animal specialty services provided to animal life of a kind, the products of which ordinarily constitute food for human consumption or of a kind, the pelts of which ordinarily are used for human apparel, are taxable unless these animals are also livestock as defined in this regulation.

102.01A Livestock means domesticated cattle, horses, mules, donkeys, sheep, and swine. All other animals are not considered livestock for the purposes of this regulation.

102.02 Animal specialty services include, but are not limited to:

102.02A Boarding or caring for an animal;

102.02B Grooming;

102.02C Training, exercising, or handling;

102.02D Animal waste removal;

102.02E Breeding or insemination services;

102.02F Identification implants; or

102.02G Cremation, burial, or disposal services.

102.03 Animal specialty services do not include:

102.03A Professional services, including hospitalization, by a veterinarian as defined in Reg-1-078, Veterinarians;

102.03B Animal grooming performed by a licensed veterinarian or a licensed veterinary technician in conjunction with medical treatment;

102.03C Breeding or insemination services for use in ranching, farming, commercial, or industrial uses;

102.03D Impound fees set by local ordinance or amounts collected by animal control agencies for violations of local ordinances.

102.04 An animal specialty provider must pay sales or use tax on all purchases of materials, equipment, and supplies, including shampoos, flea and tick treatments, and food, used to provide his or her services.

REG-1-103 RECREATIONAL VEHICLE PARK SERVICES

103.01 Gross receipts from recreational vehicle park services are subject to tax. The sales tax will continue to apply even if the service is provided for more than thirty (30) days.

103.01A Recreational vehicles include motor homes, trailers, pickup campers, and any other vehicle used to live in or for camping.

103.02 Recreational vehicle park services are those services provided by parks, campgrounds, mobile home parks, or other places offering facilities for recreational vehicles. Recreational vehicle park services include, but are not limited to:

103.02A Pads or sites for recreational vehicles;

103.02A(1) The charge for the use of a pad or site suitable for use by a recreational vehicle is taxable even if it is used by tent campers or by persons not using hook-ups or other amenities.

103.02B Utility hook-ups and dump stations; and

103.02C Showers or other amenities.

103.03 Recreational vehicle park services do not include:

103.03A Sites or areas restricted to tents;

103.03B Storage spaces for recreational vehicles where occupancy is not permitted;

103.03C Coin-operated laundry facilities. (Reg-1-048, Laundries and Dry Cleaners.)

103.04 Recreational vehicle park service providers must pay sales or use tax on all purchases of materials, equipment, and supplies used to provide their services.

(Section 77-2702.07, R.R.S. 2003. October 1, 2003.)

REG-1-104 REPEALED

REG-1-105 DIRECT MAIL

105.01 Direct mail means printed material delivered or distributed by U.S. mail or other delivery service to a mass audience or to addresses on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipients. Direct mail includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. Direct mail does not include multiple items of printed material delivered to a single address.

105.01A Advertising and promotional direct mail means direct mail that is intended to attract public attention to a product, person, business, or organization or attempt to sell, popularize, or secure financial support for the same. Advertising and promotional direct mail includes, but is not limited to: flyers, brochures, and catalogs.

105.01B Other direct mail includes transactional documents that contain personal information specific to the addressee, such as billing invoices and bank statements, or legal mailings such as privacy notices and stockholder reports. Other direct mail does not include the development of billing information or data processing services that are more than incidental to the transaction.

105.02 Sales of advertising and promotional direct mail and other direct mail are exempt from sales tax when the purchaser furnishes the seller with a certificate of exemption for direct mail.

105.02A The purchaser issuing the certificate of exemption for direct mail is responsible for remitting use tax on material delivered to locations within Nebraska. The tax is due on the Nebraska portion on or before the 20th day of the month following the close of the reporting period.

105.02B A certificate of exemption for direct mail remains in effect until it is revoked, in writing, by the purchaser.

105.03 In lieu of a certificate of exemption for direct mail, purchasers of advertising and promotional direct mail may furnish the seller with delivery information showing the jurisdictions to which the advertising and promotional direct mail is delivered.

105.03A If the purchaser is unable to provide the seller with information showing the state and local jurisdictions to which the advertising and promotional direct mail is delivered, the purchaser may utilize any reasonable, consistent, and uniform method of allocating the sale to the jurisdictions of delivery. Acceptable methods of allocation include:

105.03A(1) Population in the jurisdictions of delivery as a percentage of the total population in the distribution area;

105.03A(2) Percentage of customer accounts in the jurisdictions of delivery as a percentage of the total number of customer accounts of the purchaser; or

105.03A(3) Summary by zip code.

105.03B The seller must collect sales tax on the gross receipts from the sale of advertising and promotional direct mail delivered to locations within Nebraska.

105.04 If the purchaser of advertising and promotional direct mail does not provide the seller with either a certificate of exemption, delivery information, or an allocation method under Reg-1-105.03A, the seller must collect sales tax on sales of advertising and promotional direct mail based upon the address from which the advertising and promotional direct mail was shipped.

105.05 If the purchaser of other direct mail does not provide the seller with a certificate of exemption, the seller must collect sales tax on sales of other direct mail based upon the purchaser’s address.

105.06 The sales tax paid to the seller under either sections 105.04 or 105.05 does not constitute a properly-paid tax for purposes of allowing credit against the use tax due to the state or locality based upon the delivery locations.

105.07 A properly completed certificate of exemption for direct mail received from the purchaser is conclusive proof for the seller that the sale is exempt.

105.08 The Nebraska Department of Revenue (Department) will recognize only the Streamlined Sales and Use Tax Agreement (SSUTA) certificate of exemption for direct mail or a previously-approved substitute for this certificate. To be properly completed, the certificate of exemption for direct mail must include all of the following:

105.08A Identification of both the purchaser and retailer including the type of business engaged in by the purchaser;

105.08B The use tax or sales tax permit number of the purchaser. If the purchaser has no permit number, state the reason;

105.08C An authorized signature or other form of authorization as required by the SSUTA; and

105.08D The date of issuance.

105.09 Any purchaser, or the agent for the purchaser, who gives a certificate of exemption for direct mail or delivery instructions to the retailer covering purchases of advertising and promotional direct mail which are not for delivery to a mass audience, is subject to a penalty of $100 or ten times the tax, whichever amount is larger, for each instance of presentation and misuse. The penalty applies to each purchase made during the period the certificate is in effect.

105.10 Any purchaser, or the agent for the purchaser, who fraudulently signs a certificate of exemption for direct mail or provides delivery instructions with intent to avoid payment of the tax may, in addition to the penalty set out in section 105.09, be found guilty of a Class IV misdemeanor.

105.11 The Department may make and retain copies of any certificates of exemption for direct mail or any delivery instructions received from the purchaser.

(Neb. Rev. Stat. §§ 77-2701.12, 77-2703.03, and 77-2713(5). June 24, 2017.)

REG-1-107 MANUFACTURING MACHINERY AND EQUIPMENT EXEMPTION

107.01 The sale, lease, or rental of manufacturing machinery and equipment to a manufacturer for use in manufacturing is exempt from tax.

107.02 Manufacturer means a person who is primarily engaged in the business of manufacturing. Persons are primarily engaged in the business of manufacturing if more of their total annual revenues are derived from the sales of products they manufacture and sell as tangible personal property, or from production labor as defined in Reg-1-082.02A performed on products sold as tangible personal property by other manufacturers than from any other commercial activity.

107.02A A manufacturer does not include any person who derives more of its total annual revenues from selling annexed property, selling services, selling intangible property, making retail sales, generating electricity, producing or transmitting information, programming, or data, providing food or drink service, purifying or transporting water, mining or quarrying, or engaging in any other business than from the business of manufacturing.

107.02B Sales of products or materials that are annexed to real estate, either by the seller or a subcontractor of the seller, are not sales of tangible personal property.

107.02C Total annual revenues means revenues from all of the activities, locations, divisions, departments, or operations of the person, both within and outside this state, and includes sales of annexed property, tangible personal property, services, or intangibles. Total annual revenues are measured over a period of 12 consecutive months, including the month in which the manufacturing machinery and equipment is placed in service.

107.03 Manufacturing means an action, or series of actions, performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing. Manufacturing requires a physical change to the tangible personal property and does not include an increase in the value of a product without a physical change. Manufacturing does not include:

107.03A Generation or transmission of electricity;

107.03B Growing or caring for crops or animal life;

107.03C Mining, quarrying, and any other activity performed in severing raw materials or other property from the ground;

107.03D Preparation of food for immediate consumption;

107.03E Production or transmission of data;

107.03F Production or transmission of information;

107.03G Production or transmission of programming, including computer software;

107.03H Purification or transportation of water;

107.03I Retail operations; or

107.03J Sorting, cleaning, or repackaging of property, or breaking bulk quantities of property into smaller units or packages.

107.04 Manufacturing machinery and equipment used in manufacturing includes:

107.04A Chemicals, solutions, or catalysts when utilized in a mold or die process;

107.04B Computers, software, and related peripheral equipment used to guide, control, operate, or measure the manufacturing process;

107.04C Machinery and equipment used by a manufacturer to produce steam, electricity, or chemical catalysts and solutions that are essential to the manufacturing process even if the produced items are consumed during the manufacturing process, but does not include the chemical catalysts and solutions themselves (See subsection 1-107.05B);

107.04D Machinery and equipment used to maintain the integrity of the product or to maintain the unique environmental conditions necessary for either the product or the manufacturing machinery and equipment. Heating, ventilating, and cooling the workplace to make conditions suitable for employees is not maintaining unique environmental conditions;

107.04E Machinery and equipment used to produce, fabricate, assemble, process, finish, refine, or package tangible personal property for sale;

107.04E(1) Machinery and equipment includes items attached to manufacturing machinery and equipment, which facilitate its operations or functions, such as drill bits or sanding belts.

107.04F Machinery and equipment used to transport, convey, handle, or store the raw materials or components used in manufacturing, or the products produced by the manufacturer for sale. This includes forklifts and other motorized vehicles used within the manufacturing facility, but does not include any containers used to transport the manufactured products to customers. (See Reg-1-107.05D);

107.04G Materials and parts purchased by a manufacturer to construct its own machinery and equipment, or its own molds and dies used in its manufacturing process;

107.04H Molds and dies used to determine the physical characteristics of the finished product or its packaging material;

107.04I Testing equipment used to measure the quality of the finished product. This includes machinery and equipment used during the manufacturing process to measure the quality of the item being manufactured, but does not include any equipment used in research and development to improve existing products or develop new products; and

107.04J Tools powered by sources other than human effort, such as electricity, battery, or compressed air.

107.05 Manufacturing machinery and equipment does NOT include:

107.05A Building materials purchased by a manufacturer to attach, anchor, house, enclose, or supply external power to machinery and equipment used in its manufacturing process;

107.05B Chemicals, solutions, and catalysts, except those utilized in a mold or die process, whether or not such items are essential to the manufacturing process;

107.05C Computers, software, and related peripheral equipment which are not used in guiding, controlling, operating, or measuring the manufacturing process;

107.05D Containers used to transport the manufactured product to customers including, but not limited to, pallets, tanks for welding gases, and bottles. Containers will be taxed or exempted pursuant to the provisions of Reg-1-043, Containers;

107.05E Hand tools. Hand tools means only those tools that are held in the hand and are powered solely by human effort;

107.05F Machinery and equipment used in research and development;

107.05G Office equipment;

107.05H Supplies and other items consumed by a manufacturer whether or not such items are essential to the manufacturing process, such as solvents or cutting oils; and

107.05I Vehicles required to be registered for operation on the roads and highways of this state and items attached to the vehicles.

107.06 Person means any individual, firm, partnership, limited liability company, joint venture, association, corporation, estate, trust, business trust, receiver, trustee, syndicate, cooperative, assignee, or other group or combination acting as a unit.

107.07 When machinery and equipment is used for both manufacturing and for other purposes, the manufacturing use must be more than 50 percent of the total use to qualify for the exemption specified in this regulation. When a manufacturer claims an exemption for manufacturing machinery and equipment, it must maintain records clearly showing that it used the machinery and equipment more than 50 percent of the time in its manufacturing process.

107.08 Option 2 or Option 3 contractors who purchase and annex manufacturing machinery and equipment for a manufacturer must pay sales or use tax on their cost of the manufacturing machinery and equipment or the parts and components of the manufacturing machinery and equipment. Option 2 and Option 3 contractors may not accept an exemption certificate from a manufacturer for annexed manufacturing machinery and equipment.

107.09 Repair or replacement parts or accessories purchased by a manufacturer and used in maintaining, repairing, or refurbishing manufacturing machinery and equipment are exempt from tax.

107.09A Persons who do not qualify as a manufacturer in any year must pay tax on all purchases of repair parts and repair labor for the manufacturing machinery and equipment made during that year, even if the manufacturing machinery and equipment was exempt when it was purchased.

107.09B Option 2 or Option 3 contractors must pay tax on their purchases of repair or replacement parts used to repair annexed manufacturing machinery and equipment.

107.10 Purchases by a manufacturer of installation, repair, or maintenance services performed on exempt manufacturing machinery and equipment are exempt from tax.

107.11 Purchases by a manufacturer of warranties, guarantees, or maintenance agreements covering exempt manufacturing machinery and equipment are exempt from tax.

107.11A Option 2 or Option 3 contractors must pay tax on their purchases of repair or replacement parts used to fulfill their obligations under these agreements.

107.12 A retailer may make a tax-free sale of manufacturing machinery and equipment and any property or service identified in Reg-1-107.04 when the manufacturer issues the retailer either a properly completed Nebraska exemption certificate or another exemption form approved by the Department of Revenue under Reg-1-014, Exempt Sale Certificate.

107.12A An Option 1 contractor may accept an exemption certificate from a manufacturer and not collect tax on annexed manufacturing machinery and equipment.

(Sections 77-2701.46, 77-2701.47, and 77-2704.22 R.R.S. 2009. June 6, 2011.)

REG-1-108 BUNDLED TRANSACTIONS

108.01 Receipts from the sale of bundled transactions are taxable when one or more of the products included in the bundle are taxable.

108.02 Bundled transaction means the retail sale of two or more distinct and identifiable products which are sold for one, nonitemized price.

108.02A Bundled transactions do not include sales involving real property or services to real property.

108.02B The following items are not considered distinct and identifiable products for purposes of determining if a bundled transaction exits:

108.02B(1) Containers, boxes, sacks, bags, labels, tags, and other packaging that accompanies the sale of the product;

108.02B(2) Products provided free-of-charge with the required purchase of another product; and

108.02B(3) Components of the Sales Price definition found in Reg-1-007.01S.

108.02C The term “one nonitemized price” does not include transactions where:

108.02C(1) The sales price varies with the purchaser’s selection of products; or

108.02C(2) The sales price is separately identified by product on binding sales documents or other sales-related documents such as invoices, bills of sale, receipts, contracts, service agreements, and price lists made available to the purchaser in either paper or electronic form.

108.03 A transaction which otherwise meets the definition of a bundled transaction is not a bundled transaction if it is:

108.03A The retail sale of tangible personal property and a service where the tangible personal property is essential to the use of the service, is provided exclusively in connection with the service, and the true object or main product of the transaction is the service, or

108.03B The retail sale of services where one service is provided that is essential to the use or receipt of a second service the first service is provided exclusively in connection with the second service, and the true object or main product of the transaction is the second service, or

108.03C A transaction that includes taxable products and nontaxable products and the seller’s cost or sales price of the taxable products is de minimis.

108.03C(1) De minimis means the taxable product is 10% or less of the total seller’s cost or sales price.

108.03C(2) Sellers must use the full term of a service contract to determine if the taxable products are de minimis.

108.04 The determination as to whether a product is the true object or main product of a transaction will involve factors such as the business of the seller and the purchaser’s object in engaging in the transaction.

108.05 Bundled transaction does not include the retail sale of food and food ingredients, drugs, over-the-counter drugs, durable medical equipment, mobility enhancing equipment, prosthetic devices, or home medical supplies which are sold for one nonitemized price with taxable property where the seller’s cost or sales price of the exempt items is more than 50% of the seller’s total cost or sales price of the bundle.

108.06 A seller of bundled transactions which include any telecommunications services, ancillary services, internet access, or audio or video programming services may identify in its books and records the sales price of any nontaxable products and collect and remit tax on only the sales price of the taxable products in the bundle. If the price attributable to the nontaxable products is not reasonably identifiable and verifiable, the entire charge for the bundled transaction is taxable.

(Sections 77-2703 and 77-2701.48, R.S.Supp. 2008. February 22, 2009.)

REG-1-109 COMMUNITY-BASED ENERGY DEVELOPMENT (C-BED) PROJECTS

109.01 Sales of qualified materials for use in the manufacture, installation, construction, repair, or replacement of qualified community-based energy development (C-BED) projects are exempt from sales and use tax provided the purchaser files the appropriate documentation as required under this regulation.

109.02 The following definitions will be used for this regulation.

109.02A C-BED project means a new wind energy project:

109.02A(1) That meets the eligible ownership structure and other requirements as set forth in Neb. Rev. Stat. § 77-2704.57 and §§ 70-1901 to 70-1909, and in this regulation;

109.02A(2) Which is supported by a resolution adopted by the county or counties in which the C-BED project is to be located or by the tribal council for a C-BED project located within the boundaries of an Indian Reservation located in Nebraska; and

109.02A(3) Where at least 33% of the gross power purchase agreement payments over the life of the power purchase agreement must flow to the qualified owners or local community. Equity partners, if any, may receive the remaining payments.

109.02B C-BED project developer means both the person arranging and organizing the C-BED project, and any person who is operationally responsible for the C-BED project.

109.02C Debt financing payments mean principal, interest, and other typical financing costs paid by the C-BED project developer to one or more third-party financial institutions for the financing or refinancing of the construction of the C-BED project. Debt financing payments do not include the repayment of principal at the time of a refinancing.

109.02D Electric supplier means any legal entity supplying, producing, or distributing electricity within the state for sale at wholesale or retail.

109.02E Electric utility means an electric supplier that:

109.02E(1) Owns more than 100 miles of 115 kilovolt or larger transmission lines in Nebraska;

109.02E(2) Owns more than 200 megawatts of electric generating facilities; and

109.02E(3) Has the obligation to directly serve more than 200 megawatts of wholesale or retail electric load in Nebraska.

109.02F Eligible ownership structure means:

109.02F(1) For a C-BED project that consists of more than two wind turbines:

109.02F(1)(a) The C-BED project must be developed by one or more qualified owners and may also include equity partners;

109.02F(1)(b) No single individual qualified owner may own, directly or indirectly, more than 15% of the C-BED project; and

109.02F(1)(c) No single electric supplier may own, directly or indirectly, more than 15% of the C-BED project, and the combined ownership of all electric suppliers cannot exceed 25% of the C-BED project.

109.02F(2) For a C-BED project that consists of one or two wind turbines:

109.02F(2)(a) The C-BED project must be developed by one or more qualified owners and may also include equity partners; and

109.02F(2)(b) No single electric supplier may own, directly or indirectly, more that 15% of the C-BED project, and the combined ownership of all electric suppliers cannot exceed 25% of the C-BED project.

109.02G Equity partner means a person who is not a qualified owner and who has received an ownership interest in exchange for an investment in the C-BED project.

109.02H Gross power purchase agreement payments mean the total amount of payments received from the purchaser of the power during the life of the agreement. For power purchase agreements entered into after August 29, 2009 and on or before December 31, 2011, if the qualified owners have a combined total of at least 33% of the equity ownership in the C-BED project, gross power purchase agreement payments will be reduced by the debt financing payments. For the purposes of determining eligibility of the project, an estimate of the payments and their recipients will be used.

109.02I New wind energy project means the manufacture, installation, construction, repair, or replacement of a device, such as a wind charger, windmill, or wind turbine, that is used to convert wind energy to electrical energy, or for the transmission of this electricity to the purchaser.

109.02J Payments to the local community mean payments that are made to local residents, property owners, or governments.

109.02J(1) Payments to the local community include, but are not limited to, lease payments to property owners on whose property a wind turbine is located, wind energy easement payments, real and personal property tax receipts from the C-BED project, and loan payments received or processed by a local financial institution that is actually financing construction of the project.

109.02J(2) Payments to the local community do not include construction costs, purchases of qualified or nonqualified property prior to the initial delivery of power payments or deposits received or processed by local financial institutions, and loan payments received or processed by a local financial institution on behalf of a non-local financial institution that is actually financing construction of the project.

109.02K Qualified property means any property used to manufacture, install, construct, repair, or replace a device used in a C-BED project such as a wind charger, windmill, or wind turbine including the substation, power lines connecting these devices together and power lines connecting the project to the electrical grid system, and property used to construct the pads that support the wind chargers, windmills, wind turbines, windmill towers, and substations.

109.02K(1) Nonqualified property means all property other than qualified property.

109.02K(2) Nonqualified property includes, but is not limited to: motor vehicles; maintenance equipment and tools; communication systems (i.e., meteorological towers and data recorders-computer systems that are not an integral part of the wind turbine); information centers and related security systems (i.e., cameras and recorders); erosion control systems (i.e., landscaping, grass seed, sod, and irrigation systems); office and maintenance buildings; computer equipment that is not an integral part of the wind turbine; office equipment; signage of any kind; furnishings; roads; bridges; gates; fencing; site lighting; and any materials for the electrical grid system. The purchase and use of property that is not qualified property is taxable.

109.02L Qualified owner means a person or organization with an equity ownership stake in the project who is:

109.02L(1) A Nebraska resident;

109.02L(2) A limited liability company that is organized under the Limited Liability Company Act and which has only Nebraska residents as members.

109.02L(3) A Nebraska nonprofit corporation organized under the Nebraska Nonprofit Corporation Act;

109.02L(4) An electric supplier; or

109.02L(5) A tribal council of a federally recognized American Indian Tribe with a reservation located in Nebraska.

109.03 To receive the sales and use tax exemption, the C-BED project developer must submit a Community-Based Energy Development Project Application and the following supporting documentation to the Nebraska Department of Revenue (Department):

109.03A The organization of the C-BED project;

109.03B The proposed distribution structure of the payments made under the power purchase agreement;

109.03C A copy of the power purchase agreement;

109.03D The C-BED project financial pro forma; articles of incorporation; operating agreements;

109.03E A copy of the resolution in support adopted by the county board or tribal council where the project is located; and

109.03F Written documentation demonstrating that a written offer to become a qualified owner has been made to each owner on whose property a turbine will be located to the extent feasible.

109.04 If the Department approves the C-BED Project Application, the Department will subsequently issue a Certificate of Exemption that may be used by the project developer and contractors to purchase qualified property tax-free.

109.04A To purchase qualified property tax-free, the C-BED project developer and any contractors must complete and issue to each vendor a Nebraska Resale or Exempt Sale Certificate, Form 13, and attach a copy of the Certificate of Exemption. The basis for the exemption must be entered on the Form 13.

109.04B A C-BED project developer or contractor may claim and receive a refund of any sales or use tax paid for purchases of qualified property made after the Department has received the application for the Certificate of Exemption, and before the Department has issued the Certificate of Exemption if the project met all the requirements of a C-BED project at the time of the purchase.

109.05 The Department may examine the actual payments to qualified owners and the local community and the distribution of the power purchase agreement payments to determine if the projected distributions were met. If the power purchase agreement payments to qualified owners and the local community do not meet the requirements of this regulation or Neb. Rev. Stat. § 77-2704.57, the Department may recover the amount of the sales or use tax that should have been paid on property used at the project from the C-BED project developer, at any time up to and including three years after the end of the power purchase agreement.

109.05A The amount due under this section includes the sales and use taxes that would have been paid if no Certificate of Exemption had been granted, and interest at the rate specified in Neb. Rev. Stat. § 45-104.02, from the date the tax was due until the date the sales and use tax is paid.

109.05B At any time prior to the end of the power purchase agreement, the C-BED project developer may voluntarily surrender the Certificate of Exemption granted by the Tax Commissioner and pay the Department the amount of sales and use tax that should have been paid, plus interest.

109.06 To meet the requirements of the exemption, at least 33% of the gross power purchase agreement payments must be distributed to the qualified owners or the local community. Only payments made after the receipt of the first power purchase agreement payments will be considered when determining the percentage received by the qualified owners or the local community. Distribution of a tax attribute, a noncash benefit, loan proceeds, or some other payment that does not come out of the power purchase agreement payments will not be considered.

109.06A Payments to the local community are those payments that are defined above as payments to the local community in section 109.02J of this regulation.

109.06B For power purchase agreements entered into after August 29, 2009 and on or before December 31, 2011, if the qualified owners have a combined total of at least 33% of the equity ownership in the C-BED project, the gross power purchase agreement payments will be reduced by the debt financing payments.

109.06C To prevent the same payment from being counted both as a distribution to the owner and as a local payment or debt financing payment, the distributions to the qualified owners for any purpose will be considered prior to all expenses other than expenses that are considered to be local payments, or any debt financing that reduces the gross power purchase agreement payments. Any expenses that are allocated to the owners must be allocated in the same proportion as the distributions of the power purchase agreement payments for the same year.

109.06D In determining if debt financing may be excluded under section 1-109.06B, the percentage of ownership that is considered is the percentage of ownership for the same year that the debt financing payment is to be excluded.

109.07 Changes in Ownership Structure. If there is any change in the ownership structure after the application is submitted or approved, including a change of an equity partner, a new application must be submitted to the Department. If the new ownership structure does not meet the statutory requirements and the new application is not approved by the Department, all purchases of qualifying property after the effective date of the change in ownership structure are taxable.

109.07A A C-BED project developer must notify the electric utility that has a power purchase agreement with a C-BED project if there is a change in the ownership structure which makes the project no longer eligible as a C-BED project.

109.07B The Tax Commissioner must notify an electric utility that has a power purchase agreement with a C-BED project if there is a change in the ownership structure which makes the project no longer eligible as a C-BED project.

109.07C Acquisition of a C-BED project by an electric utility prior to the end of the power purchase agreement disqualifies the C-BED project for the sales and use tax exemption for all purchases of qualifying property made after the date of the acquisition by the electric utility, and may require payment of any sales and use taxes not previously paid if the payments to the qualified owners and the local community no longer meet the required criteria for the period the agreement was in effect.

109.08 Changes in the Power Purchase Agreement. The C-BED project developer must notify the Tax Commissioner of any changes in the power purchase agreement or of the termination of the agreement. If the power purchase agreement is amended, a new application must be submitted. If the distribution of the gross power purchase agreement payments no longer meets the statutory requirements and the new application is not approved by the Department, the Department may recover the amount of the sales or use tax that should have been paid on materials used at the project from the C-BED project developer, at any time up to and including three years after the end of the power purchase agreement, and interest at the rate specified in Neb. Rev. Stat. § 45-104.02, from the date the tax was due until the date the sales or use tax is paid.

109.09 Changes in Documents Supporting the Application. The C-BED project developer must notify the Tax Commissioner of any changes in any of the other documents supporting the application during the life of the power purchase agreement. The Tax Commissioner will determine if a new application must be submitted based on the changes made.

(Sections 70-1001.01, 70-1901 to 70-1909 and 77-2704.57, R.R.S. 2009. June 6, 2011.)

REG-1-110 CLAIMS FOR REFUND OF SALES OR USE TAX

110.01 Any person who has overpaid any sales or use tax may file a claim for a refund of the amount of tax overpaid. A claim for refund of sales or use tax (claim) must be filed with the Nebraska Department of Revenue (Department) in accordance with Reg-33-002.01A.

110.01A The Department will not accept a claim if the amount claimed is less than $2.

110.01B If the claimant desires a hearing, a request for hearing must be made when the claim is filed or prior to the Tax Commissioner taking action on the claim. A claim is not presumed to be a request for a hearing.

110.01C Only the person who made the overpayment, or the person’s attorney-in-fact, executor, personal representative, or administrator, may file a claim.

110.01D A claim must be filed within the time specified in Reg-33-002.01B.

110.02 The Tax Commissioner must allow or disallow a claim within 180 days after it has been filed.

110.02A A request for a hearing waives the 180-day period. The claimant and the Tax Commissioner may also mutually agree to extend the 180-day period.

110.02B If a hearing has not been requested, and the Tax Commissioner has not acted on the claim within 180 days or the period agreed to by the claimant and the Tax Commissioner, whichever is later, the claim is deemed to have been allowed.

110.02C Within 30 days after disallowing any claim in whole or in part, the Tax Commissioner will notify the claimant of the action taken in the same manner as a notice of deficiency determination.

110.03 The amount of overpayment may be credited or offset against any sales, use, income, or any other tax, and any fees, interest, or penalties then due and payable to the state from the claimant. Any remaining balance may be refunded to the claimant or its successor. Refunds of sales and use tax may be paid electronically.

110.04 Interest will not be allowed on claims if the tax was originally paid voluntarily.

(Neb. Rev. Stat. §§ 77-1784, 77-2708, 77-27,194.01, 77-4108.01, 77-5729, and 77-5804. July 3, 2013.)

History

• Effective 2017-06-24

Chapter 9 Local Sales and Use Taxes

Neb. Admin. Code tit. 316, ch. 9 Local Sales and Use Taxes {#sec-316-nac-9 omnilex-key=us-ne-regs-official--title-316--316 NAC 9}

REG-9-001 GENERAL PROVISIONS AND DEFINITIONS

001.01 General Authorization. Cities and counties in Nebraska are authorized to levy a local sales tax under the Local Option Revenue Act (applicable to cities) or Neb. Rev. Stat. §§ 13-319 to 13-326 (applicable to counties).

001.02 Definitions. For purposes of Title 316, Chapter 9 of these regulations:

001.02B The definition of retail sale and all other definitions provided in the Nebraska Revenue Act and Title 316 NAC Chapter 1, apply to all local sales and use taxes, unless inconsistent with the provisions of the Local Option Revenue Act or Neb. Rev. Stat. §§ 13-319 to 13-326.

001.02B Certified means attested to and signed by a person with authority to testify as to the accuracy of the materials provided, like the city or county clerk, county election commissioner, mayor, or chairperson of the city council or county board.

001.02C City means any incorporated municipality.

001.02D Department means the Nebraska Department of Revenue.

001.02E Local sales tax and local sales and use tax both mean a tax adopted by a city under the Local Option Revenue Act or a tax adopted by a county under Neb. Rev. Stat. §§ 13-319 to 13-326.

001.03 Local Sales Tax Base. The same transactions that are subject to taxation by the State of Nebraska under the provisions of the Nebraska Revenue Act are subject to taxation under the Local Option Revenue Act, and Neb. Rev. Stat. §§ 13-319 through 13-326 except;

001.03A The local sales and use tax does not apply to charges for direct-to-home satellite programming that is transmitted or broadcast by satellite directly to the subscriber’s premises even though the state sales and use tax applies to charges for direct-to-home satellite programming. For purposes of this section, premises means any residential, business, or commercial location.

001.03A(1) Retailers must collect and remit the local sales and use tax on all direct-to-home equipment (for example, dishes, receivers, and decoders) that is sold or leased to subscribers.

001.03A(2) Retailers who charge for equipment and direct-to-home programming and who do not separately state the charges on the sales invoice or contract, or do not separately invoice the charges, are required to collect and remit the local sales and use tax on the total charge.

001.04 Sourcing. For purposes of determining whether a taxable sale or rental occurs within or outside a city or county with a local sales tax, the sourcing rules of the Nebraska Revenue Act and Title 316 NAC Chapter 1 apply.

(Neb. Rev. Stat. §§ 13-319, 13-324, 77-2712.05, 77-27,142, 77-27,143, 77-27,144, and 77-27,147, and Public Law 104-104, Title VI, s. 652. November 17, 2013.)

REG-9-002 AUTHORIZATION FOR CITIES – UP TO 1½% .

002.01 Permissible Rates of Tax. Any city may authorize and impose a local sales and use tax at the rate of ½%, 1%, or 1½% on retail sales sourced within the boundaries of the city. The local sales and use tax must be approved by a majority of the votes cast in a regular election held within the city and adopted by ordinance.

002.02 Vote at an Election Required. The election required for approval of a local sales and use tax may be held as part of any city, county, or state general, primary, or special election held within the city.

002.02A The question authorizing adoption of a local sales and use tax must include the following language: “Shall the governing body of the incorporated municipality impose a sales and use tax upon the same transactions within such municipality on which the State of Nebraska is authorized to impose a tax?”

002.02B The question authorizing adoption of a local sales and use tax may be initiated either by a majority vote of the governing body or upon petition by qualified electors to the governing body. Notice of the question must be given by publication, as required by Neb. Rev. Stat. § 77-27,142.03.

002.02C If the majority of voters do not approve the imposition of a local sales and use tax, then the question cannot be submitted to the voters again for at least 23 months.

002.03 Ordinance Required. If the question is approved by a majority of the votes cast at the election, the city imposing the sales and use tax must adopt an ordinance in accordance with its municipal and statutory authority. If the ordinance states an operative date, the operative date must be the first day of a calendar quarter.

002.04 Notification to the Department Required. When the governing body of a city adopts a local sales and use tax:

002.04A The city must furnish the Department a certified copy of the ordinance imposing the tax, and a certified map of the city clearly showing its boundaries; and

002.04B The county election commissioner must furnish the Department a certified copy of the election results to the question submitted to the electors and a certified statement that the question of imposing the tax for the city has not failed in the previous 23 months.

002.04C For purposes of this regulation, the certified materials may be furnished by mail or by electronic means.

002.05 When Operative. The implementation of the sales and use tax cannot begin until the first day of the calendar quarter that is at least 120 days following receipt by the Department of the certified materials. The certified materials must be provided in the timelines provided in Reg-9-006, Cities and Counties – Timelines for Submitting Certified Materials to the Department.

002.06 Termination. For ordinances containing a termination date, the termination date must be the first day of a calendar quarter.

002.06A The city must furnish a certified statement to the Tax Commissioner at least 120 days and no more than 180 days prior to the termination date stating that the termination date in the ordinance is still valid.

002.06B If the certified statement is not furnished within this time, the tax will remain in effect, and the Department will continue to collect the tax until the first day of the calendar quarter that is at least 120 days after receipt of the certified statement, notwithstanding the termination date stated in the ordinance.

(Neb. Rev. Stat. §§ 77-27,142, 77-27,142.01, 77-27,142.02, 77-27,142.03, 77-27,142.04, 77-27,142.05, 77-27,143, and 77-27,144. November 17, 2013.)

REG-9-003 AUTHORIZATION FOR CITIES - IN EXCESS OF 1½%

003.01 Permissible Rates of Additional Tax, Restrictions on Proceeds. Any city, except a metropolitan class city, may authorize and impose a local sales and use tax at a rate of 1¾% or 2% on retail sales sourced within the boundaries of the city, after approval by at least 70% of the governing body of the city and a majority of the votes cast in a city, county, or state general or primary election held within the city, but only if the sales and use tax is levied in accordance with the following conditions.

003.01A The city must be a party to an agreement executed under the Interlocal Cooperation Act or Joint Public Agency Act with a political subdivision within the city or the county in which the city is located, which creates a separate administrative entity and which relates to a public infrastructure project. This separate administrative entity cannot have been in existence for more than one year before the question of the increased local sales and use tax was submitted to the voters.

003.01A(1) If the city is a city of the primary class, the proceeds from the rate greater than 1½% must be used for public infrastructure projects or voter approved public infrastructure projects related to an economic development program, except that up to 15% of the proceeds may be used for non-public infrastructure projects that are part of the agreement executed under the Interlocal Cooperation Act or Joint Public Agency Act.

003.01A(2) For any other city, the proceeds from the rate greater than 1½% must be used for public infrastructure projects or voter-approved public infrastructure projects related to an economic development program.

003.01B Any rate greater than 1½% must terminate no later than ten years after its effective date except that:

003.01B(1) If the proceeds from the rate greater than 1½% are pledged for payment of principal and interest on bonds issued for public infrastructure projects, the rate greater than 1½% will terminate with the retirement of the bonds;

003.01B(2) If proceeds equal to at least ⅛%, but less than ⅜%, of the rate greater than 1½% are imposed for the purpose of funding an agreement executed under the Interlocal Cooperation Act or Joint Public Agency Act for public or non-public infrastructure projects, there is no termination date for ¼% of the amount; or

003.01B(3) If proceeds equal to at least ⅜% of the rate greater than 1½% are imposed for the purpose of funding an agreement executed under the Interlocal Cooperation Act or Joint Public Agency Act for public or non-public infrastructure projects, there is no termination date for any of the increase.

003.02 Vote at an Election Required. The election required for approval of a local sales and use tax greater than 1½% may be held as part of any city, county, or state general or primary election held within the city.

003.02A The question authorizing adoption of a local sales and use tax must include the following language: “Shall the governing body of the incorporated municipality impose a sales and use tax upon the same transactions within such municipality on which the State of Nebraska is authorized to impose a tax?” The question must also include, but is not limited to:

003.02A(1) A list of reductions or limitations for any other taxes, if any;

003.02A(2) A description of the infrastructure projects to be funded from the sales and use tax proceeds in excess of 1½%;

003.02A(3) The length of time the proceeds in excess of 1½% will be imposed, or, if bonds will be issued for which the sales and use tax proceeds in excess of 1½% will be pledged, a statement that the revenue in excess of 1½% will be collected until repayment of the bonds; and

003.02A(4) The percentage of the proceeds in excess of 1½% that will be used for the purposes of an agreement executed under the Interlocal Cooperation Act or Joint Public Agency Act, the purpose of the agreement, and the name of all other political subdivisions which are parties to the agreement.

003.02B Notice of the question must be given by publication, as required by Neb. Rev. Stat. § 77-27,142.03.

003.02C If a majority of voters do not approve the imposition of a local sales and use tax, then the question cannot be submitted to the voters again for at least 23 months.

003.03 Ordinance Required. If the question is approved by a majority of the votes cast at the election, the city imposing the sales and use tax must adopt an ordinance in accordance with its municipal and statutory authority. If the ordinance states an operative date, the operative date must be the first day of a calendar quarter.

003.04 Notification to the Department Required. When the governing body of a city adopts a local sales and use tax in excess of 1½%:

003.04A The city must furnish the Department a certified copy of the ordinance imposing the tax, and a certified map of the city clearly showing its boundaries;

003.04B The county election commissioner must furnish the Department a certified copy of the election results to the question submitted to the electors, and a certified statement that the question of imposing the tax for the city has not failed in the previous 23 months.

003.04C For purposes of this regulation, the certified materials may be furnished by mail or by electronic means.

003.05 When Operative. The implementation of the sales and use tax cannot begin until the first day of the calendar quarter that is at least 120 days following receipt by the Department of the certified materials. The certified materials must be provided in the timelines provided in Reg-9-006, Cities and Counties – Timelines for Submitting Certified Materials to the Department.

003.06 Termination. For ordinances containing a termination date, the termination date must be the first day of a calendar quarter. If the proceeds from the rate greater than 1½% are pledged for payment of principal and interest on bonds issued for public infrastructure projects, the rate greater than 1½% will terminate on the first day of a calendar quarter after the repayment of the bonds.

003.06A The city must furnish a certified statement to the Department at least 120 days and no more than 180 days prior to the termination date stating that the termination date in the ordinance is still valid.

003.06B If the certified statement is not furnished within this time, the tax will remain in effect, and the Department will continue to collect the tax until the first day of the calendar quarter that is at least 120 days after receipt of the certified statement, notwithstanding the termination date stated in the ordinance.

(Neb. Rev. Stat. §§ 77-27,142, 77-27,142.01, 77-27,142.02, 77-27,142.03, 77-27,142.04, 77-27,142.05, 77-27,143, and 77-27,144. November 17, 2013.)

REG-9-004 AUTHORIZATION FOR COUNTIES

004.01 Permissible Rates of Tax, Restrictions on Proceeds. A county may authorize and impose a local sales and use tax at a rate of ½%, 1%, or 1½ % by resolution of the county board after the tax has been approved by a majority of votes cast in a county or state general, primary, or special election held within the county.

004.01A Any county sales and use tax applies to retail sales sourced within the boundaries of the county, except that a county sales and use tax does not apply within the boundaries of any incorporated city which has a local sales and use tax pursuant to Neb. Rev. Stat. § 77-27,142, even if:

004.01A(1) The rate imposed by the city is lower than the rate imposed by the county;

004.01A(2) The city adopted its local sales and use tax after the adoption of the county sales and use tax; or

004.01A(3) The city changed its boundaries.

004.01B Any sales and use tax imposed pursuant to this section must be used to finance public services provided by a public safety commission or to provide the county share of funds required under an agreement executed under the Interlocal Cooperation Act or Joint Public Agency Act.

004.01C Adoption of a local sales and use tax by a city, or annexation by a city with a local sales and use tax which occurs after the adoption of a local sales and use tax by a county, will reduce the area of the county subject to the existing county sales tax as of the effective date for local sales tax changes as provided in Reg-9-002.05, Reg-9-003.05, and Reg-9-007.02.

004.02 Vote at an Election Required. The election required for approval of a county sales and use tax may be held as part of any county or state general, primary, or special election held within the county.

004.02A The question authorizing adoption of a local sales and use tax must include the following language: “Shall the county impose a sales and use tax upon the same transactions within the county, other than in municipalities which impose a local option sales tax, on which the State of Nebraska is authorized to impose a tax to finance public safety services?”

004.02B The question authorizing adoption of a local sales and use tax must be initiated by vote of the governing body. Notice of the question must be given by publication, as required by Neb. Rev. Stat. § 13-323.

004.03 Resolution Required. If the question is approved by a majority of the votes cast at the election, the county must adopt a resolution imposing the sales and use tax in accordance with its statutory authority. If the resolution states an operative date, the operative date must be the first day of a calendar quarter.

004.04 Notification to the Department Required. When the governing body of a county adopts a local sales and use tax:

004.04A The county must furnish the Department a certified copy of the resolution imposing the tax; and

004.04B The county election commissioner must furnish the Department a certified copy of the election results to the question submitted to the electors.

004.04C For purposes of this regulation, the certified materials may be furnished by mail or by electronic means.

004.05 When Operative. The implementation of the sales and use tax cannot begin until the first day of the calendar quarter that is at least 120 days following receipt by the Department of the certified materials. The certified materials must be provided in the timelines provided in Reg-9-006, Cities and Counties – Timelines for Submitting Certified Materials to the Department.

004.06 Termination. For resolutions containing a termination date, the termination date must be the first day of a calendar quarter.

004.06A The county must furnish a certified statement to the Department at least 120 days and no more than 180 days prior to the termination date stating that the termination date in the resolution is still valid.

004.06B If the certified statement is not furnished within this time, the tax will remain in effect, and the Department will continue to collect the tax until the first day of the calendar quarter which is at least 120 days after receipt of the certified statement, notwithstanding the termination date stated in the resolution.

(Neb. Rev. Stat. §§ 13-319, 13-320, 13-322, 13,323, 13-324, and 13-326. November 17, 2013.)

REG-9-005 CITIES AND COUNTIES – CHANGE OF RATE

005.01 If any city or county changes the rate of its local sales and use tax, the city or county must furnish the Department a certified copy of the ordinance or resolution which changed the rate of tax, and the county election commissioner must provide a certified copy of the election results to the question submitted to the electors in the time frames provided in Reg-9-006, Cities and Counties – Timelines for Submitting Certified Materials to the Department.

005.02 If the ordinance or resolution changing the rate of a local sales and use tax states an operative date, the operative date must be the first day of a calendar quarter.

005.03 The local rate change is operative the first day of the calendar quarter that is at least 120 days following receipt by the Department of the certified materials.

005.04 For ordinances or resolutions containing a termination date, the termination date must be the first day of a calendar quarter.

005.04A The city or county must furnish a certified statement to the Department at least 120 days and no more than 180 days prior to the termination date stating that the termination date in the ordinance or resolution is still valid.

005.04B If the certified statement is not furnished within this time, the tax will remain in effect, and the Department will continue to collect the tax until the first day of the calendar quarter which is at least 120 days after receipt of the certified statement notwithstanding the termination date stated in the ordinance or resolution.

(Neb. Rev. Stat. §§ 13-324, 77-2712.05, and 77-27,143. November 17, 2013.)

REG-9-006 CITIES AND COUNTIES - TIMELINES FOR SUBMITTING CERTIFIED MATERIALS TO THE DEPARTMENT

006.01 If a city or county receives voter approval and adopts a local sales and use tax, terminates a local sales and use tax, or changes the rate of a local sales and use tax, the timelines for providing the certified materials required by this regulation are as follows:

| To be Operative | Certified Materials Must Be Furnished After | But No Later Than | | --- | --- | --- | | January 1 | June 3 | September 3 | | April 1 | September 3 | December 2 | | April 1 (of a leap year) | September 3 | December 3 | | July 1 | December 2 | March 3 | | July 1 (of a leap year) | December 3 | March 3 | | October 1 | March 3 | June 3 |

006.02 If the “But No Later Than” date falls on a Saturday, Sunday or holiday, the certified materials must be furnished no later than the Friday before the date in column 3.

(Neb. Rev. Stat. §§ 13-324, and 77-27,143, and McDonald’s Executive Offices v. Nebraska Department of Revenue, 243 Neb. 82 (1993). November 17, 2013.)

REG-9-007 CITIES - CHANGE OR ALTERATION OF CITY BOUNDARIES

007.01 If any city in which a local sales and use tax has been imposed changes or alters its boundaries in any manner, the city must furnish the Department a certified copy of the ordinance making the changes by mail or by electronic means.

007.01A The ordinance must state the effective date as determined by the statutory authority applicable to the particular class of city, even though the area affected may become subject to or removed from the local sales taxes on a later date as specified in Reg-9-007.02.

007.01B The ordinance must also be accompanied by a certified map of the city clearly showing the area added or detached and a list of all licensed retailers within the annexed or detached area.

007.02 For local sales and use tax purposes, the area affected is considered annexed to or detached from the city on the first day of a calendar quarter following the latest of:

007.02A One hundred and twenty days following receipt of the ordinance, map, and the list of all retailers by the Department,

007.02B Sixty days after the Department provided notice to the retailers, or

007.02C The effective date of the ordinance.

(Neb. Rev. Stat. §§ 77-2712.05, and 77-27,143, and McDonald’s Executive Offices v. Nebraska Department of Revenue, 243 Neb. 82 (1993). November 17, 2013.)

REG-9-008 CITIES – CERTIFIED REPRESENTATIVE AUTHORIZED TO EXAMINE CONFIDENTIAL SALES TAX RETURNS AND RETURN INFORMATION

008.01 Authority to Examine Returns. Upon written request, the Department will provide a city employee certified under this regulation, who represents the city that has adopted a local sales and use tax, confidential sales tax returns and sales tax return information regarding taxpayers that possess a sales tax permit and the amounts remitted by these permitholders at locations within the boundaries of the requesting city.

008.01A Each city seeking information must certify to the Department one of its employees who is authorized by the city to make the request and review the documents.

008.01B A municipality must execute a Municipal Request for Sales Tax Return Information and Inspection Memorandum of Understanding (MOU) prior to inspecting documents. The MOU determines the conditions of a municipality's right to inspect confidential sales tax returns and return information and the Department’s responsibilities in providing this information.

008.01C Any written request must provide the Department with no less than ten business days to gather and prepare the sales tax returns and sales tax return information requested.

008.01D The returns and return information cannot be viewed outside the premises of the Department.

008.02 Confidentiality Protected. City employees certified under this regulation cannot disclose to any person any information obtained pursuant to a review by that city employee under this regulation. A certified city employee is subject to all confidentiality requirements of the Department after he or she is no longer certified or is no longer employed by the certifying city.

008.02A The designated municipal employee must complete confidentiality training required by the Department and sign a Confidential Tax Information Agreement before submitting a request to inspect confidential sales tax returns and sales tax return information.

008.02B Any person who violates the provisions of this section is guilty of a Class I misdemeanor.

008.02C The Department is not liable for an impermissible disclosure by a city or any agent or employee of the city for any information obtained pursuant to a review under this regulation.

(Neb. Rev. Stat. §§ 77-2711 and 77-27,144. November 17, 2013.)

REG-9-011 DUTIES OF THE DEPARTMENT TO ADMINISTER LOCAL SALES AND USE TAXES

011.01 Collection Concurrent with State Sales and Use Taxes. The Department must collect the local sales and use tax imposed by any city or county concurrently with the state sales and use tax and in the same manner as the state sales and use tax is collected.

011.02 City Local Sales and Use Tax Distribution. Any city sales and use tax imposed under Reg-9-002 or Reg-9-003 will be collected and administered by the Department and remitted to the city, less any refunds made and 3% of the remainder, which is deposited in the Municipal Equalization Fund.

011.03 County Local Sales and Use Tax Distribution. Any county sales and use tax imposed under Reg-9-004 will be collected and administered by the Department, and remitted to the county, less any refunds made and 3% of the remainder as an administrative fee. The administrative fee is deposited in the State General Fund.

011.04 Notice to Retailers. The Department must provide 60 days’ notice to affected retailers of any adoption or termination of a local sales and use tax, a change in rate, or a change in city boundaries. The Department may provide notice to retailers using the website of the Department or by other electronic means.

011.04A Companies that publish a printed catalog that contains the local sales tax rates for each city or county are held harmless for any liability resulting from a change in local sales and use tax rates on purchases from the catalog when the purchaser computes the sales or use tax at the previous rate until the start of the quarter that is at least 120 days after the Department's notice of the change.

011.05 Rates and Boundaries Database. The Department will provide and maintain a database that assigns each five-digit and nine-digit zip code within the state to the proper tax rates and jurisdictions in accordance with the provisions of the Streamlined Sales and Use Tax Agreement.

011.05A The Department will provide and maintain a database that describes the boundary changes and effective date of any change for every city and county that imposes a local sales and use tax.

011.05B Retailers, or a retailer’s certified service provider, as defined in Neb. Rev. Stat. § 77-2701.09, will be held harmless for any liability resulting from the use of either database provided by the Department.

011.05C Purchasers relying on information contained in either database provided by the Department are relieved from liability for any penalty resulting from incorrect data in the databases.

(Neb. Rev. Stat. §§ 13-319, 13-324, 77-2712.05, 77-27,142, 77-27,143, 77-27,144, and 77-27,147. November 17, 2013.)

REG-9-012 DUTIES OF RETAILERS – COLLECTING, REPORTING, AND REMITTING LOCAL SALES AND USE TAXES

012.01 Collection and Remittance Governed by Revenue Act. Retailers operating or delivering property within the boundaries of a city or county that has imposed a local sales and use tax must collect, report, and remit the local sales and use tax along with the sales tax imposed by the Nebraska Revenue Act consistent with the Nebraska Revenue Act and Title 316 NAC Chapter 1.

012.02 Calculating the Amount of Tax. A bracket system correlating sales price to the appropriate state and local sales or use tax may be used by the retailer. The sales or use tax liability may also be computed by multiplying the sales price by the applicable tax rate. (Reg-1-011, Bracket System for Adding and Collecting Sales Tax)

012.03 Permits and Certificates of Exemption. Any permits and certificates of exemption which are authorized or required under the Nebraska Revenue Act, for state sales and use tax exemption purposes, satisfy the requirements of the Local Option Revenue Act and Neb. Rev. Stat. §§ 13-319 through 13-326. (Reg-1-013, Sale for Resale – Resale Certificate and Reg-1-014, Exempt Sale Certificate)

012.04 Returns. Retailers must file a return for each reporting period or portion of a reporting period. The return must be filed for every tax reporting period even if there have been no sales. The reporting frequency, due date, signature, and form requirements are as provided in Reg-1-010, The Sales and Use Tax Return.

012.05 Remittances. Remittance must be in the form of electronic funds transfer, check, credit card, draft, money order, or other payment method as approved by the Tax Commissioner, made payable to the Nebraska Department of Revenue.

012.06 Itinerant Salespersons. Where a distributor or home office reports sales tax for itinerant salespersons, and the sales are made for delivery in a city or county which imposes a local sales tax, it is the obligation of the distributor or home office to remit the local sales tax along with the state sales tax.

012.07 Records. Every retailer is required to keep records in order to determine the amount of sales and use tax due. These records must include the normal books of account ordinarily maintained by the average prudent businessperson engaged in a similar activity, together with all documents supporting entries in the books of accounts. Schedules and working papers used ithe preparation of the tax returns and all resale certificates and exemption certificates must be retained. (Reg-1-008, Records)

012.07A Records must be retained for a period not less than three years after the return is filed, or while any refund claim or redetermination of a deficiency is pending, unless the Department authorizes their destruction in writing at an earlier date. However, the Department may issue a deficiency determination within five years after any amount of tax is determined due and payable when a properly completed return has not been filed.

012.07B Retailers may use either the cash basis, accrual basis, or any other generally recognized accounting basis, which correctly reflects the operation of the business. When a basis of accounting has been adopted for reporting sales tax, the retailer may not change that basis of accounting without prior permission from the Department. (Reg-1-009, Accounting Methods)

012.08 Pre-existing Contracts. When a local sales and use tax is enacted or the rate is changed, the provisions of Reg-1-016, Changes in Rate of Tax, will determine the impact of these changes on pre-existing contracts or obligations.

012.09 Penalties. Failure to comply with the requirements of this regulation could result in the assessment of penalties as provided in Reg-1-010, The Sales and Use Tax Return.

(Neb. Rev. Stat. §§ 13-324, 77-2705, 77-2708, 77-2709, and 77-27,147. November 17, 2013.)

History

• Effective 2013-11-17

Chapter 15 Music Licensing Agencies

Neb. Admin. Code tit. 316, ch. 15 Music Licensing Agencies {#sec-316-nac-15 omnilex-key=us-ne-regs-official--title-316--316 NAC 15}

15-001 MUSIC LICENSING AGENCIES

001.01 TERMS

001.01(A) Gross receipts means the total amount of consideration received, valued in money, whether received in money or otherwise.

001.01(B) Nondramatic musical work means an original work of authorship consisting of music and any accompanying lyrics not created for use in musical theater or any other work that uses the music to tell a story or as part of the story or plot.

001.01(B)(1) Examples of nondramatic musical works include, but are not limited to, songs broadcast on the radio (other than recordings of dramatic musical works), songs or background music performed as part of a movie or other television program, or live or recorded performances of musical compositions in a bar, restaurant, hotel, sports or entertainment facility, store, or other place open to the public.

001.02 Beginning January 1, 2019, a music licensing agency must register annually, on or before February 15 each year, with the Nebraska Department of Revenue ("DOR") prior to licensing or attempting to license the use of, or collecting or attempting to collect any compensation with regard to, any sale, license, or other disposition of a performing right. The music licensing agency must register by filing a Music Licensing Agency Registration Application, Form 20M.

001.02(A) Music licensing agencies must submit, with the Form 20M, an electronic copy of each variation of the performing rights agreements, providing for the payment of royalties, made available from the music licensing agency to any proprietor within this state.

001.02(B) DOR will issue to the music licensing agency a letter evidencing receipt and acceptance of the Form 20M.

001.02(C) Music licensing agencies must make electronically available to proprietors the most current available list of members and affiliates represented by the music licensing agency and the most current available list of performed works that the music licensing agency licenses. This requirement can be satisfied by furnishing a copy of the lists to DOR to post on its website.

001.03 A music licensing agency is required to file a return and pay the tax specified in Neb. Rev. Stat. § 59-1403 annually on or before March 15 for each calendar year in which the music licensing agency has gross receipts from the sale, license, or other disposition of any performing rights in this state. The Music Licensing Agency Royalty Fees Tax Return, Form 65M, must be filed even if there have been no gross receipts from the sale, license or other disposition of performing rights.

001.03(A) Remittance payable to DOR must accompany the Form 65M and be in the form of a check, draft, money order, or other payment method as approved by the Tax Commissioner.

001.03(B) A properly signed Form 65M that is accompanied by remittance will be considered timely filed if actually received or if mailed, postage prepaid, on or before the fifteenth day of March each year for gross receipts of the preceding calendar year.

001.03(B)(1) When March 15 falls on a Saturday, Sunday, or an approved holiday, the Form 65M is considered timely filed if actually received or mailed, postage prepaid, on the next succeeding day which is not a Saturday, Sunday or an approved holiday.

001.03(B)(2) A United States Postal Service postmark is conclusive evidence of the date of mailing for the purpose of timely filing a Form 65M.

001.03(B)(3) A private postage meter date or a date stamped by a private delivery service will be considered the date of mailing if the date of the stamp is no more than four days before the date the Form 65M is received by the Department, excluding Saturdays, Sundays, or approved holidays. If the date of the stamp is more than four days before the date the Form 65M is received by the Department, the return is considered filed on the date received.

001.03(C) Failure to remit the tax due by the due date will impose interest at the specified rate in Neb. Rev. Stat. § 45-104.02 from the due date to the date payment is received.

001.04 Every registered music licensing agency is required to keep records in order to determine the amount of tax due. These records must include the normal books of account ordinarily maintained by the average prudent businessperson engaged in a similar activity, together with all documents supporting entries in the books of account. Schedules and working. papers used in preparing the tax returns must be retained.

001.04(A) The record created at the time of a payment for royalties must take the form of a written contract.

001.04(B) DOR may examine the books, papers, records, and equipment of any person to ascertain or verify the accuracy of any return filed, or, if no return is filed by the person, to ascertain and determine the amount to be paid. Records must be retained for a period of not less than three years after the return is filed, unless DOR, in writing, authorizes their destruction at an earlier date.

History

• Effective 2020-07-05

Chapter 17 Inheritance Tax Regulations

Neb. Admin. Code tit. 316, ch. 17 Inheritance Tax Regulations {#sec-316-nac-17 omnilex-key=us-ne-regs-official--title-316--316 NAC 17}

REG-17-001 SCOPE, APPLICATION, AND VALUATIONS

001.01 Nebraska inheritance tax applies to bequests, devises, or transfers of property or any other interest in trust or otherwise having characteristics of annuities, life estates, terms for years, remainders, or reversionary interests. Nebraska inheritance tax is computed on the fair market value of annuities, life estates, terms for years, remainders, and reversionary interests. The fair market value is the present value as determined under the provisions of the Internal Revenue Code of 1986, as amended, and its applicable regulations with respect to estate tax.

001.02 The present value of annuities, life estates, terms for years, remainders, and reversionary interests is determined under 26 C.F.R. 20.2031-7(d) (2008) or as subsequently revised using the appropriate interest rate in section 26 U.S.C 7520, and, if applicable, the mortality component for the valuation date of the interest that is being valued.

001.03 The value of a contract for the payment of an annuity issued by a company regularly engaged in their sale, and of insurance policies on the lives of persons other than the decedent, is determined under 26 C.F.R. 20.2031-8 (2008) or as subsequently revised.

001.04 If the interest to be valued is dependent upon the continuation or the termination of more than one life, or upon a term certain concurrent with one or more lives, a special factor must be used in determining this valuation. This factor should be computed on the basis of interest calculated at the same rate utilized by the Internal Revenue Service, compounded annually, and life contingencies determined as to each person involved.

001.05 If a special factor is required for an actual bequest, devise, or transfer and is furnished by the Commissioner of the Internal Revenue Service in accordance with Internal Revenue Service procedures, that factor may be employed for Nebraska inheritance taxation purposes.

001.06 For purposes of the computations described in this regulation, the age of a person is to be taken as the age of that person at his or her nearest birthday.

(Section 77-2008, R.R.S. 2009. June 6, 2011.)

History

• Effective 2011-06-06

Chapter 20 Estimated Income Tax Regulations

Neb. Admin. Code tit. 316, ch. 20 Estimated Income Tax Regulations {#sec-316-nac-20 omnilex-key=us-ne-regs-official--title-316--316 NAC 20}

REG-20-001 PAYMENT OF ESTIMATED TAX: INDIVIDUALS

001.01 Every resident and nonresident individual shall make payments of Nebraska individual estimated income tax if his or her estimated Nebraska individual income tax can reasonably be expected to be $300 or more after allowance for Nebraska standard or itemized deductions, and deducting the total estimated credits allowable for Nebraska income tax withheld from wages, pensions and annuities, and gambling winnings, Nebraska personal exemption credit, tax paid to another state,credit for the elderly and the permanently and totally disabled, Community Development Assistance Act credit, Nebraska dependent or child care credit, the Nebraska Employment and Investment Expansion Act credit, the Nebraska Employment and Investment Growth Act credit, the Beginning Farmer Tax credit, the Nebraska Advantage Rural Development Act credit, the Nebraska Advantage Microenterprise Tax credit, the Nebraska Advantage Research and Development Act credit, and the Nebraska Advantage Act credit.

001.01A An individual filing Nebraska estimated tax will use Form 1040N-ES to make his or her estimated payments.

001.02 A husband and wife who are eligible to file joint federal payments of estimated income tax may file joint payments of Nebraska individual estimated income tax. If joint payments of estimated tax are filed, the liability with respect to the estimated tax shall be joint and several. If the husband and wife later elect to determine their Nebraska income tax liability separately, the estimated tax paid for that year may be treated as the estimated tax of either spouse or it may be divided between them in the manner they select. If the husband or wife fail to agree to a division, then the portion of the payment to be allocated to a spouse shall be that portion of the aggregate of all such payments as the amount of tax shown on the separate return of the taxpayer bears to the sum of the taxes shown on the separate returns of the taxpayer and his or her spouse.

001.03 The payment of Nebraska individual estimated income tax for a minor or any other individual with a legal disability shall be filed by that person's guardian, conservator, agent, or fiduciary in the same manner as his or her income tax return is completed and filed.

001.04 The payment of Nebraska individual estimated income tax shall be amended if the federal payment of estimated income tax is amended. The payment of Nebraska individual estimated income tax shall also be amended if the tax rates for the current taxable year are increased during the year.

001.05 A taxpayer who is considered a farmer or fisherman by the Internal Revenue Service because his or her gross income from farming or fishing is at least two-thirds of his or her annual gross income for either the current or the past tax year does not have to make estimated tax payments if he or she files a current return and pays his or her Nebraska income tax by March 1 of the following year.

(Sections 77-2769 and 77-4106, R.R.S. 2003, and sections 77-2715.07 and 77-27,188, R.S.Supp, 2005. March 7, 2006.)

REG-20-002 PAYMENT OF ESTIMATED TAX: CORPORATIONS AND CERTAIN BUSINESSES; OVERPAYMENT OF ESTIMATED TAX

002.01 Every corporation or business which is taxed as a corporation under the Internal Revenue Code shall make payments of Nebraska corporation estimated income tax if the Nebraska tax liability for the taxable year can reasonably be expected to be $400 or more after deducting the total estimated allowable credits, which include the in lieu of intangible tax paid credit, the Community Development Assistance Act credit, the Nebraska Employment and Investment Expansion Act credit, the Nebraska Employment and Investment Growth Act credit, the Employment Expansion and Investment Incentive Act credit, the Invest Nebraska Act credit. the Beginning Farmer Tax credit, the Nebraska Advantage Rural Development Act credit, the Nebraska Advantage Microenterprise Tax credit, the Nebraska Advantage Research and Development Act credit, and the Nebraska Advantage Act credit.

002.02 If a unitary group is filing a combined return using the combined income approach, the group shall make its payment of Nebraska corporation estimated income tax on such basis. A statement should be attached to the Form 1120N-ES, setting forth the name, address and Nebraska identification number for each of the group members.

002.03 A corporation may, after the close of the taxable year and on or before the fifteenth day of the third month thereafter and before the day on which it files a return for such taxable year, file an application for an adjustment of an overpayment by it of estimated income tax for such taxable year. An application under this section shall not constitute a claim for credit or refund. The application shall be made by filing Form 4466N.

002.04 The Nebraska Department of Revenue will make a limited examination of the application to discover omissions and errors within forty-five days from the date on which an application for adjustment is filed. The Department of Revenue will determine the amount of the adjustment upon the basis of the application and the examination and may disallow, without further action, any application which it finds to contain material omissions or errors which it deems cannot be corrected within such forty-five days. The decision made by the Department of Revenue will be final and not subject to further review.

002.04A Upon approving the application, the Department of Revenue, within the forty-five day period, may credit the amount of the adjustment against any existing tax liability on the part of the corporation and will refund the remainder to the corporation. No application will be allowed unless the amount of the adjustment equals or exceeds (a) ten percent of the amount estimated by the corporation on its application as its income tax liability for the taxable year and (b) five hundred dollars.

002.05 Any adjustment shall be treated as a reduction in the estimated income tax paid, computed on the day the credit is allowed or the refund is paid. Any credit or refund of an adjustment shall be treated as if not made when determining whether there has been any underpayment of estimated income tax under Reg-20-008 and if there is an underpayment, the period during which the underpayment existed.

002.06 Income tax liability shall mean the excess of the income tax imposed under the Nebraska Revenue Act, as amended, reduced by the credits against the tax provided by state law. The amount of an adjustment authorized under this regulation shall be equal to the excess of the estimated income tax paid by the corporation during the taxable year reduced by the amount which, at the time of filing the application, the corporation estimates as its income tax liability for the taxable year.

002.07 If members of a unitary group paid their estimated income tax on a consolidated basis, the common parent corporation must file the Form 4466N. If members of the group paid estimated income tax separately, each member who claims an overpayment must file Form 4466N separately.

002.08 If any adjustment made by the Nebraska Department of Revenue is later found to be excessive, interest at the statutory rate will be due on the amount of the excessive adjustment, calculated from the date the adjustment was made until the original due date of the corporation's return.

002.09 The excessive amount is the lesser of:

002.09A The amount of the adjustment, or

002.09B The excess of the corporation's income tax liability as shown on its return over the estimated tax paid less the adjustment allowed.

(Sections 77-2769, 77-2769.01, 77-27,188, and 77-4106, R.R.S., 2003, and section 77-2734.03, R.S.Supp.,2005. March 7, 2006.)

REG-20-003 PAYMENT OF ESTIMATED TAX: EXEMPT ENTITIES

003.01 Partnerships, limited liability companies taxed as partnerships, estates, trusts, and small business corporations with an election in effect under subchapter S of the Internal Revenue Code are not required to make payments of Nebraska estimated income tax. A small business corporation will not be considered to have an election in effect under subchapter S as to an estimated tax installment date if such election is terminated before the end of the taxable year.

003.02 The partners, members, beneficiaries, and shareholders must file estimated tax payments in their separate capacity if they meet the requirements of Reg-20-001 or Reg-20-002.

003.03 Residents must combine their estimated income from all sources to determine their estimated Nebraska income tax. Nonresidents must combine their estimated income from the partnership, limited liability company, estate, trust, or electing small business corporation that is derived from or attributable to Nebraska sources with all other estimated income derived from or attributable to Nebraska sources to determine their estimated Nebraska income tax.

(Section 21-2633, R.R.S. 1997, and sections 77-2734.01, and 77-2769, R.R.S. 1996. November 11, 1998.)

REG-20-004 PAYMENT OF ESTIMATED TAX: SHORT TAXABLE YEARS

004.01 No payment of estimated tax is required if the short taxable year is:

004.01A A period of less than four months,

004.01B A period of at least four months but less than six months and the basic tax requirements ($300 for individuals, $400 for corporations) are met after the first day of the fourth month,

004.01C A period of at least six months, but less than nine months and the basic tax requirements ($300 for individuals, $400 for corporations) are met after the first day of the sixth month.

004.01D A period of nine months or more and the basic tax requirements ($300 for individuals, $400 for corporations) are met after the first day of the ninth month.

(Section 77-2769, R.R.S. 1996. November 11, 1998.)

REG-20-005 PAYMENT OF ESTIMATED TAX: TIME FOR FILING AND PAYMENT

005.01 The times for making payments of Nebraska estimated income tax shall be the same as those times prescribed by the laws of the United States for making payments of estimated federal income tax.

005.02 Payment of the estimated income tax, or any installment thereof, shall be considered a payment on account of the income tax imposed for the taxable year by the State of Nebraska. All payments shall be made to the Nebraska Department of Revenue.

(Section 77-2769, R.S.Supp., 1984. December 4, 1984.)

REG-20-006 CREDIT FOR ESTIMATED TAXES PAID

006.01 The amount of the current taxable year's estimated Nebraska income tax payments shall be allowed as a credit on the current taxable year's Nebraska income tax return. All payments of estimated income tax are deemed to be payments on account of the tax due.

006.02 If the current year's estimated tax payments plus the allowable credits exceed the amount of tax due, the taxpayer may have the overpayment refunded or he or she may apply it against the estimated income tax for the succeeding taxable year. If the taxpayer elects to have the overpayment credited to the succeeding year's estimated Nebraska income tax, then the overpayment shall not later be refunded or adjusted unless the taxpayer submits a written request to the Nebraska Department of Revenue. If such a request is approved, then the taxpayer must amend his or her succeeding year's payments of estimated Nebraska income tax accordingly. In any event, the amount of the overpayment that can be refunded or adjusted is limited to that part of the overpayment that has not already been credited on a Nebraska estimated income tax payment voucher for the succeeding year.

(Section 77-2791(4), R.R.S. 1943, and Section 77-2769, R.S.Supp., 1984. December 4, 1984.)

REG-20-007 PENALTY: UNDERPAYMENT OF ESTIMATED TAX--INDIVIDUALS

007.01 A penalty is due on any underpayment of estimated tax. For individuals, the amount of the underpayment for any installment date is the excess of 90% (66-2/3% in the case of farmers and fishermen) of the tax shown on the return for the taxable year or, if no return was filed, 90% (66-2/3% in the case of farmers and fishermen) of the tax for such year, or 100 % of the tax shown on the return for the preceding taxable year, whichever amount is lesser, divided by the number of installment dates prescribed for such year, over the amount, if any, of the installment paid on or before the last day prescribed for such payment. If federal adjusted gross income is more than $150,000, ($75,000 for married filing separately), then the applicable federal percentage of the tax for the preceding year must be used.

007.02 The term tax as used in Reg-20-007.01 of this regulation shall mean the individual income tax imposed under the provisions of the Nebraska Revenue Act of 1967, as amended, reduced by the allowable credits: elderly and disabled credit, Community Development Assistance Act credit, dependent or child care credit, personal exemption credit, credit for tax paid to another state, Nebraska Employment and Investment Expansion Act credit, Nebraska Employment and Investment Growth Act credit , Employment Expansion and Investment Incentive Act credit, Invest Nebraska Act credit, Beginning Farmer Tax credit, Nebraska Advantage Rural Development Act credit, Nebraska Advantage Microenterprise Tax credit, Nebraska Advantage Research and Development Act credit, and Nebraska Advantage Act credit.

007.03 The penalty is imposed at the same rate specified for interest in section 45-104.02 of the Nebraska Revised Statutes upon the underpayment of any installment from the date such installment is required to be paid to the due date of the return without regard to any extensions of time, or the date such underpayment is paid, whichever is earlier. The penalty is imposed in all circumstances except in the case of casualty, disaster, or other unusual circumstances, where imposition of a penalty would be inequitable or where the taxpayer retired after age 62 or became disabled and the underpayment was due to reasonable cause.

007.04 In determining the amount of the installment paid on or before the last day prescribed for payment thereof, the estimated tax shall be computed without any reduction for the amount which the taxpayer estimates as his or her credit under section 77-2753 of the Nebraska Revised Statutes, (relating to tax withheld at the source on wages). The amount of such credit shall be deemed a payment of estimated tax. An equal part of the amount of such credit shall be deemed paid on each installment date for the taxable year unless the taxpayer establishes the dates on which all amounts were actually withheld.

007.05 For nonresident individuals, in determining the amount of the installment paid on or before the last day prescribed for payment thereof, the estimated tax shall be computed without any reduction for the amount which the taxpayer estimates as his or her credit under sections 77-2717, 77-2727, or 77-2734.01 of the Nebraska Revised Statutes, (relating to tax withheld by small business corporations, partnerships, or fiduciaries). The amount of such credit shall be deemed a payment of estimated tax on the last day of the organization's taxable year unless the taxpayer establishes the dates on which all amounts were actually withheld.

007.06 Exceptions. The penalty will not be imposed for any underpayment of any installment of estimated tax if:

007.06A The tax liability for the preceding taxable year was zero, provided that the preceding tax return was, or would have been, had the taxpayer been required to file, for a full twelve month period, or

007.06B The total tax for the current year less any income tax withholding is less than $300.

007.07 If there has been an underpayment of estimated tax as of any installment date, the taxpayer shall complete and attach an Individual Underpayment of Estimated Tax, Form 2210N, to the Nebraska Individual Income Tax Return, Form 1040N, to determine the applicability of any of the exceptions described in Reg-20-007.06. The Department may request proof of federal acceptance of the waiver request or other documentation such as police reports, insurance company reports or documentation relating to retirement or disability status.

(Sections, 77-2769, 77-2788, 77-2790, and 77-4106, R.R.S., 2003, and sections 77-2715.07 and 77-27,188, R.S.Supp.,2005. March 7, 2006.)

REG-20-008 PENALTY: UNDERPAYMENT OF ESTIMATED TAX-CORPORATIONS

008.01 A penalty is due on any underpayment of estimated tax. For corporations, the amount of the underpayment for any installment date is the excess of the tax shown on the return for the taxable year or, if no return was filed, the tax for such year, divided by the number of installment dates prescribed for such year, over the amount, if any, of the installment paid on or before the last day prescribed for such payment.

008.02 The term tax as used in Reg-20-008.01 of this regulation shall mean the corporation income tax imposed under the provisions of the Nebraska Revenue Act of 1967, as amended, reduced by the credits allowable under section 77-2734.03 of the Nebraska Revised Statutes (in lieu of intangible tax paid credit), Community Development Assistance Act credit, Nebraska Employment and Investment Expansion Act credit, Nebraska Employment and Investment Growth Act credit, Employment Expansion and Investment Incentive Act credit, Invest Nebraska Act credit, Beginning Farmer Tax credit, Nebraska Advantage Rural Development Act credit, Nebraska Advantage Microenterprise Tax credit, Nebraska Advantage Research and Development Act credit, and Nebraska Advantage Act credit .

008.03 The penalty is imposed at the same rate specified for interest in section 45-104.02 of the Nebraska Revised Statutes upon the underpayment of any installment from the date such installment is required to be paid to the due date of the return without regard to any extensions of time, or the date such underpayment is paid, whichever is earlier. The penalty is imposed even if there was a reasonable cause for underpayment.

008.04 Exceptions. The penalty will not be imposed for any underpayment of any installments of estimated tax if, on or before the date prescribed for payment of the installment, the total amount of all payments of estimated tax made equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax were the least of the following amounts:

008.04A The tax shown on the return for the preceding taxable year, provided that the preceding taxable year was a year of 12 months and a Nebraska return showing a liability for tax was filed for such year,

008.04B An amount equal to a tax determined on the basis of the tax rate for the current taxable year but otherwise on the basis of the facts and law applicable to the return for the preceding taxable year,

008.04C An amount equal to 100% of a tax determined by placing on an annual basis the taxable income for the months preceding the month of an installment date, or

008.04D An amount equal to 100% of the amount determined under the adjusted seasonal installment rules set forth under Internal Revenue Service Code Section 6655(e)(3).

008.04E The exceptions in Reg-20-008.04A and Reg-20-008.04B are not available to those corporations deemed to be large corporations for federal estimated tax purposes other than for the first installment of its tax year. A large corporation is one which had, or its predecessor had, federal taxable income of at least one million dollars for any of the three taxable years immediately preceding the taxable year involved.

008.05 If there has been an underpayment of estimated tax as of any installment date, a Corporation Underpayment of Estimated Tax, Form 2220N, must be completed and attached to the Nebraska Corporation Income Tax Return, Form 1120N, to determine the applicability of any of the exceptions described in Reg-20-008.04.

(Sections 77-2769, 77-2769.01, 77-2788, 77-2790, and ,77-4106, R.R.S., 2003, and section 77-27,188, R.S.Supp.,2005. March 7, 2006.)

History

• Effective 2006-03-07

Chapter 21 Proposed Income Tax Withholding Regulations

Neb. Admin. Code tit. 316, ch. 21 Proposed Income Tax Withholding Regulations {#sec-316-nac-21 omnilex-key=us-ne-regs-official--title-316--316 NAC 21}

REG-21-001 REQUIREMENT TO WITHHOLD NEBRASKA INCOME TAX

001.01 The following payments to resident or nonresident individuals or businesses are subject to Nebraska income tax withholding.

001.02 Every employer paying any wages to a resident or nonresident individual must deduct and withhold for the Nebraska income tax if:

001.02A The employer is maintaining an office or transacting business in Nebraska;

001.02B The wages are taxable under the Nebraska Revenue Act; and

001.02C The wages are subject to withholding under the Internal Revenue Code (I.R.C.), as amended.

001.03 The income tax withheld for each payroll period must be an amount that will result in withholding from the employee's wages during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due as the result of including the employee's wages in his or her adjusted gross income.

001.04 Every payor who is paying for personal services performed or to be performed substantially in Nebraska must deduct and withhold income tax if the payments are to a nonresident individual who is not subject to withholding on the payment under the I.R.C., or to a corporation, partnership, or limited liability company (LLC) described Reg-21-001.04C through 001.04C(5).

001.04A Payments made by any person maintaining an office or transacting business in Nebraska to a nonresident individual for personal services are not subject to withholding if the payments made during the year total less than $600.

001.04B Payments made by any person who is neither maintaining an office, nor transacting business in Nebraska to a nonresident individual for personal services are not subject to income tax withholding if the payments made during the year total less than $5,000.

001.04C Payments to business entities for personal services performed by nonresident individuals are considered to be payments for personal services that are subject to income tax withholding.

001.04C(1) When a corporation is receiving a payment for personal services performed or to be performed substantially in Nebraska when all or substantially all of the shareholders are the persons performing personal services of the same type, the payment is considered to be wages of the individuals performing the personal services and subject to the income tax imposed on individuals by the Nebraska Revenue Act. The amount withheld is considered to be income tax withheld from the individuals.

001.04C(2) When a partnership is receiving a payment for personal services performed or to be performed substantially in Nebraska when all or substantially all of the partners are the persons performing personal services of the same type, the payment is considered to be wages of the individuals performing the personal services and subject to the income tax imposed on individuals by the Nebraska Revenue Act. The amount withheld is considered to be income tax withheld from the individuals.

001.04C(3) When a LLC is receiving a payment for personal services performed or to be performed substantially in Nebraska when all or substantially all of the members are the persons performing personal services of the same type, the payment is considered to be wages of the individuals performing the personal services and subject to the income tax imposed on individuals by the Nebraska Revenue Act. The amount withheld is considered to be income tax withheld from the individuals.

001.04C(4) When determining whether all or substantially all of the owners of a corporation, partnership, or LLC are providing personal services subject to withholding under this regulation, all or substantially all means:

001.04C(4)(i) Eighty percent or more of the voting stock of a corporation, 80% or more of the ownership of the partnership, or 80% or more of the ownership of the LLC.

001.04C(4)(ii) A shareholder, partner, or member is considered to own any share of stock, or part of the partnership or LLC that he or she owns directly and every share, or part of the partnership or LLC that he or she is considered to own under the attribution rules of either I.R.C. §§ 267, 318, or 1563(e).

001.04C(5) Personal services do not include services performed where capital furnished by the nonresident individual is a material income-producing factor. Capital is considered a material income-producing factor whenever the value of the use of the capital, or the value of the capital furnished, exceeds 50% of the amount of the payment.

001.04C(6) If more than one of the shareholders, partners, or members of the corporation, partnership, or LLC perform the personal services in Nebraska, the income tax withholding is considered to be divided between the nonresident individual owners performing the personal services in Nebraska in proportion to the ownership in the entity of each shareholder, partner, or member who performed the service in Nebraska.

001.04D Contractors making payments to any contractor or any person that is not an employee for construction services are not subject to the requirement to withhold income tax on these payments.

001.05 Every contractor who is maintaining an office or transacting business in Nebraska and making a payment or payments for construction services performed in Nebraska to any contractor or any person who is not an employee must deduct and withhold income tax equal to five percent of the payments if the recipient of the payment is not included in the Contractor Database. Payments to a contractor for construction services are not subject to withholding if:

001.05A The payments made during the year to the contractor or person total less than $600; or

001.05B The contractor or person receiving the payment is not subject to tax on the payment because of a treaty obligation of the U.S.

(Neb. Rev. Stat. § 77-2753. October 26, 2014.)

REG-21-002 DEFINITIONS FOR INCOME TAX WITHHOLDING PURPOSES

002.01 For the purposes of Reg-21-001 through Reg-21-019:

002.01A The definitions in Reg-21-002.02 through Reg-21-002.11 apply; and

002.01B The provisions of the I.R.C. and its applicable regulations regarding deductions and withholding of federal income tax by employers apply, (including the meaning of federal terms like payroll period and withholding allowances) except as otherwise specifically provided in these regulations or where the federal rules and definitions are clearly inconsistent with and inapplicable to the provisions of the Nebraska Revenue Act.

002.02 Construction services means services performed by a contractor.

002.03 Contractor means any person engaged in the business of constructing, altering, repairing, dismantling, or demolishing buildings, roads, bridges, viaducts, sewers, water and gas mains, streets, disposal plants, water filters, tanks and towers, airports, dams, levees and canals, water wells, pipelines, transmission and power lines, and every other type of structure, project, development, or improvement within the definition of real and personal property, including constructing, repairing, or altering property to be held either for sale or rental. Contractor also includes any subcontractor engaged in the business of these activities and any person who is providing or arranging for labor for these activities, either as an employee or as an independent contractor, for any contractor or person.

002.04 Contractor Database means the online database maintained by the Department of Labor of contractors registered under the Contractor Registration Act that provide construction services in the state.

002.05 Department means the Nebraska Department of Revenue.

002.06 Employee means any person defined as an employee under the I.R.C. and any pension recipient, contractor, corporate payee, partnership payee, or nonresident individual from whom Nebraska income tax withholding is required.

002.07 Employer means any person or organization qualifying as an employer for federal income tax withholding purposes and maintaining an office or transacting business in Nebraska.

002.07A The fact that an employer may not be subject to Nebraska income tax is not relevant to the obligation to withhold for income tax purposes.

002.07B Employer includes the state, any political subdivision of the state, the U.S., and any agency or instrumentality of the U.S.

002.07C Employer includes employee leasing companies, professional employer organizations, common paymasters, or any other organizations that provide payroll services for employees that are supervised by another organization.

002.07D For the purposes of these regulations, including filing returns and imposing penalties, employer includes any payor required to withhold under Reg-21-001.04, and any contractor required to withhold under Reg-21-001.05.

002.08 Native American Indian means any enrolled member of a recognized Native American Indian Tribe.

002.09 Payroll record means the payroll check stub, a Federal Form W-2, or any other payroll document the employer furnishes an employee.

002.10 Personal services means services performed by an individual who is not an employee under the I.R.C. for the payor, including, but not limited to: consultants; entertainers; performers; practicing professionals, athletes; public speakers; and service on a corporate or other entity board of directors.

002.11 Wages means any payments that are subject to federal income tax withholding including gambling winnings. For the purposes of these regulations, including filing returns and imposing penalties, the term wages also includes:

002.11A Amounts paid for personal services performed or to be performed in Nebraska from which income tax withholding is required;

002.11B Amounts paid for pensions and annuities when the recipient has requested or when the payor is required to withhold federal income tax from these payments;

002.11C Amounts paid by a contractor for construction services performed in Nebraska to;

002.11C(1) Another contractor, or

002.11C(2) Any person who is not an employee subject to withholding under Nebraska law.

002.11D Wages include severance payments made upon termination or retirement of an employee pursuant to an employment contract or employer policy if determining the amount of the payments does not require future administration by the employer, and if the payments that were made to the employee prior to termination or retirement were considered wages.

002.11E Wages do not include any employer contributions to retirement plans, such as I.R.C § 401(k) plans, made on behalf of persons subject to federal income tax withholding if the specific contributions are not subject to federal withholding.

(Neb. Rev. Stat. §§ 48-2103 and 48-2117, and 77-2753. October 26, 2014.)

REG-21-003 NEBRASKA EMPLOYER IDENTIFICATION NUMBER

003.01 Each employer will be identified by a Nebraska employer identification number, which will be obtained prior to the first payment of wages subject to Nebraska withholding. To request a Nebraska employer identification number, a Nebraska Tax Application must be completed and forwarded to the Nebraska Department of Revenue, Box 94818, Lincoln, Nebraska 68509-4818. Every application for said number must be completed in each detail and in no event will an employer be considered registered unless the employer has previously obtained or applied for a federal employer identification number. Each employer identification number issued to an employer is a permanent number and the same number will not be issued to any other business entity. Should the character of the business entity change, resulting in a new legal entity, e.g., conversion from a partnership to a corporation, a new identification number must be obtained.

003.02 A Nebraska Withholding Identification Certificate containing the employer’s name, address, and assigned Nebraska employer identification number will be issued by the Department of Revenue. This certificate should be maintained in the employer‘s permanent records. The Nebraska employer identification number is nontransferable and should be referred to on all reports, returns, and correspondence concerning the employer’s withholding account.

003.03 An employer who does not maintain centralized payroll records or who has regional pay centers may request an identification number for each separate location that prepares and maintains payroll records. An employer may also request a separate identification number for the nonresident withholding required by Reg-21-001.02.

(Section 77-2753, R.S.Supp., 1993. May 14, 1994.)

REG-21-004 DETERMINING THE AMOUNT OF INCOME TAX WITHHOLDING

004.01 The Nebraska income tax withheld by an employer from wages must be determined using one of the following income tax withholding methods:

004.01A Method I - The Percentage Method. The amount of income tax to be withheld is determined by subtracting the value of the withholding allowances claimed on the Federal Employee’s Withholding Allowance Certificate, Form W-4, from gross wages and taking the result to the withholding rate schedule or multiplied by a comparable flat percentage.

004.01A(1) The Tax Commissioner must publish withholding rate schedules for different pay periods.

004.01A(2) The income levels and rates must be established so that the withholding will approximate the actual income tax liability using the standard deduction and personal exemption credit.

004.01A(3) These rate schedules are published in the Nebraska Circular EN and must be used by the employer to properly calculate the correct amount of withholding on the amount of wages or payments subject to income tax by Nebraska, except payments subject to backup withholding as required by I.R.C. § 3406. The Nebraska Circular EN may be found on the Department’s website.

004.01B Method II - The Wage Bracket Method. The amount of income tax to be withheld is determined by taking the gross amount of wages and the number of withholding allowances claimed on the Federal Form W-4 on the appropriate table in the Nebraska Circular EN, and using the amount shown where the row and column intersect. The Nebraska Circular EN, which contains the income tax withholding tables based upon the amount of wages paid, the length of the pay period, the number of federal withholding allowances claimed, and reflecting the above Nebraska withholding schedules, may be found on the Department’s website.

004.01C If the calculation by an employer under either Method I or Method II results in income tax withholding from an employee that is less than 1½% of gross wages minus tax-qualified deductions, the employer must obtain from the employee satisfactory evidence that a lesser amount of withholding is justified. Satisfactory evidence includes marriage or birth certificates; Social Security information for dependents; or other evidence that reasonably assures the employer that the employee is not improperly or fraudulently evading or defeating the income tax by reducing or eliminating withholding.

004.02 If supplemental wages such as bonuses, commissions, overtime pay, and sales awards are paid at the same time as regular wages, the income tax to be deducted and withheld is determined as if the total of the supplemental and regular wages were a single wage payment for the regular payroll period. If these supplemental wages are paid at a different time, the employer may determine the amount of income tax withholding by adding the supplemental wages to either the regular wages for the current payroll period, or the regular wages for the last preceding payroll period within the same calendar year; or the employer may elect to withhold on the supplemental wages by using a flat withholding rate as determined and published in the Circular EN by the Tax Commissioner.

004.03 The Nebraska income tax must be withheld based on the same payroll period that is properly used for federal income tax withholding purposes.

004.04 In addition to the income tax required to be withheld under this regulation, an employer and employee may agree in writing that an additional amount will be withheld from the employee's wages.

004.04A The agreement is effective for any period that the parties agree to be bound.

004.04B If the agreement fails to provide a termination date, either party may terminate the agreement, by furnishing written notice to the other party. This notice is effective for the first payment subject to income tax withholding made on or after the beginning of the next calendar quarter occurring at least 30 days after the date the notice is furnished.

004.04C The amount deducted and withheld pursuant to an agreement will be considered income tax required to be deducted and withheld under the Nebraska Revenue Act. All provisions of law and regulations applicable to income tax withholding are also applicable to any amount of income tax deducted and withheld pursuant to the agreement. At no time may the parties agree to withhold an amount less than would be withheld using the established Nebraska withholding rate schedules or tables.

004.05 The amount of income tax withheld from gambling winnings is a flat withholding rate applied to the winnings. The flat withholding rate will be determined and published in the Circular EN by the Tax Commissioner.

004.06 The income tax withheld from pensions and annuities is based on the federal income tax withholding method. The amount of income tax withheld from periodic payments is calculated in the same manner as withholding from wages. The amount of income tax withheld from nonperiodic payments is a flat withholding rate as determined and published in the Circular EN by the Tax Commissioner. The recipient may also select an additional fixed amount to be withheld per periodic or nonperiodic payment. See Reg-21-004.04.

004.07 The amount of income tax withheld from payments for personal services performed or to be performed substantially in Nebraska by a nonresident individual other than an employee is determined under this section.

004.07A If the individual provides a statement of ordinary and necessary business expenses reasonably related to providing the service, the amount of expenses may be deducted for purposes of determining the amount of income tax withholding. The amount claimed for expenses may not exceed 50% of the total amount paid for personal services performed or substantially performed in Nebraska (Nebraska Withholding Certificate for Nonresident Individuals, Form W-4NA).

004.07B For amounts less than $28,000, paid throughout any calendar year for the same personal services, the rate of income tax withholding is four percent of the total amount after deduction of allowable expenses, if any.

004.07C For amounts of $28,000 or more, paid throughout any calendar year for the same personal services, the rate of income tax withholding is six percent of the total amount after deduction of allowable expenses, if any.

004.07D If the amount to be paid throughout the calendar year for the same personal services was expected to be less than $28,000 at the beginning of the calendar year, and the amount withheld was four percent, but the amount paid for the same personal services becomes $28,000 or more during the calendar year, the amount of income tax withholding for amounts greater than $28,000 must be increased until the total amount withheld equals six percent for all payments.

004.08 Corporate Directors. Except as provided in Reg-21-004.08B, if a corporation or other entity pays members of its board of directors fees for serving on its board, any amounts paid to nonresident directors is subject to income tax withholding.

004.08A If all meetings are held in Nebraska, the total amount taxable under the I.R.C. is subject to income tax withholding as calculated under this section. If the corporation or other entity holds its meetings both within and outside Nebraska, the total amount taxable under the I.R.C. to the nonresident board member must be multiplied by a fraction, the numerator of which is the number of meetings physically attended by the director in Nebraska or via electronic means while the director is physically located in Nebraska, and the denominator of which is all board meetings attended by the director either physically or electronically. The result is subject to income tax withholding as calculated under Reg-21-004.07.

004.08B The corporation or other entity may, in lieu of withholding under Reg-21-004.07, remit income tax withholding to the Department on behalf of the nonresident directors on the total paid, including the amounts remitted on behalf of the nonresident directors, multiplied by the highest individual income tax rate.

004.08B(1) If all meetings are held in Nebraska, the amount remitted to the Department is equal to the total amount taxable under the I.R.C., including the amount remitted to the Department on behalf of the nonresident director, multiplied by the highest individual income tax rate.

004.08B(2) If the corporation or other entity holds its meetings both within and outside Nebraska, the total amount taxable under the I.R.C. must first be multiplied by a fraction, the numerator of which is the number of meetings physically attended by the director in Nebraska or via electronic means while the director is physically located in Nebraska, and the denominator of which is all board meetings attended by the director either physically or electronically. The amount remitted to the Department is this result including the amount remitted to the Department on behalf of the nonresident director, multiplied by the highest individual income tax rate.

004.08B(3) If the corporation or other entity elects this option, the nonresident board member may choose not to file a return, and the amount remitted as income tax withholding will be retained in satisfaction of the liability. The nonresident board member may also choose to file a return and claim the withholding as a credit against any Nebraska income tax liability.

004.09 The amount of income tax to be withheld from payments made by a contractor for construction services performed in Nebraska to any contractor or any person that is not an employee is five percent of the total payments. A payment is exempt from withholding under this subsection if:

004.09A The payments made during the year to the person or contractor total less than $600;

004.09B The contractor making the payment determines that the contractor receiving the payment is registered in the Contractor Database; or

004.09C The contractor or person receiving the payment is not subject to tax on the payment because of a treaty obligation of the U.S.

004.10 Alternative Methods of Withholding. An employer using a federally-approved alternative method of calculating withholding may use the same method for computing the income tax withheld. These methods include annualized wages, average wages, cumulative wages, and other methods allowed under I.R.C. § 3402(h).

(Neb. Rev. Stat. § 77-2753. October 26, 2014.)

REG-21-005 DETERMINING INCOME TAX WITHHOLDING ON WAGES PAID TO A NEBRASKA RESIDENT - WHEN OTHER STATES' WITHHOLDING APPLIES

005.01 If an employer is required to withhold Nebraska income tax pursuant to Reg-21-001, all wages paid to a resident of Nebraska are subject to withholding even if some or all of his or her work for which the wages are paid was performed outside Nebraska.

005.02 If an employer is required to deduct and withhold income taxes of other states, political subdivisions of other states, or the District of Columbia, from wages paid to a resident of Nebraska, the employer must deduct and withhold the amount of Nebraska income tax withholding determined under these regulations minus the amount required to be deducted and withheld from those wages under the laws, rules, and regulations of another state, political subdivision of another state, or the District of Columbia.

Examples:

005.02A If a Nebraska resident is paid $1,000 per week by an employer who is required to deduct and withhold both Nebraska and Kansas income taxes from these wages, and the amount of income tax required to be withheld is $20 for Nebraska and $12.50 for Kansas, the amount of Nebraska tax required to be deducted and withheld is $7.50.

005.02B If a Nebraska resident is paid $1,000 per week by an employer who is required to deduct and withhold both Nebraska and Iowa income taxes from these wages and the amount of income tax required to be withheld is $20 for Nebraska and $25 for Iowa, no Nebraska income tax withholding is required.

(Neb. Rev. Stat. §§ 77-2753, and 77-2790. October 26, 2014.)

REG-21-006 DETERMINING INCOME TAX WITHHOLDING ON WAGES PAID TO A NONRESIDENT

006.01 An employer must deduct and withhold Nebraska income tax from all wages paid to an employee who is a nonresident of Nebraska for services performed in Nebraska. The income tax withholding to be deducted is determined according to the methods in Reg-21-004. If the work of a nonresident employee is performed entirely in Nebraska, his or her employer must deduct and withhold income tax from all wages paid to the employee. Wages paid to a nonresident employee for work performed entirely outside of Nebraska are not subject to Nebraska income tax withholding.

006.02 If a nonresident employee works partly in and partly outside Nebraska, the employee may file a Nebraska Nonresident Employee Certificate for Allocation of Withholding Tax, Form 9N, with his or her employer so that the correct amount of Nebraska income tax withholding may be determined. This section does not apply to income tax withholding on gambling winnings, pensions and annuities, nonresidents performing personal services substantially in Nebraska, or persons or contractors receiving payments from another contractor for construction services performed in Nebraska. The requirements of Reg-21-004.05 through Reg-21.004.09 apply in these situations.

006.03 The employer may withhold Nebraska income tax on the basis of the apportionment shown by the nonresident employee on his or her Form 9N, but must make necessary adjustments during the year so that the proper amount of income tax is withheld and deducted from the employee’s wages. For the purpose of making these adjustments, the portion of the employee’s wages which is paid for work performed in Nebraska is determined as follows:

006.03A If the work is performed by a traveling sales representative, agent, or other employee whose pay is based directly on the volume of business transacted by him or her, the amount attributable to work in Nebraska is that portion of the wages received from business transacted by the employee in Nebraska bears to the total volume of business transacted.

Example:

| Employee’s Nebraska sales = | $1,000 | | --- | --- | | Employee’s total sales = | $5,000 | | Nebraska’s portion of total sales = | 20% | | Nebraska withholding on total from tables = | $300 | | Multiplied by the Nebraska portion of total sales = | 20% | | Nebraska income tax withholding = | $60 |

006.03B For employees paid on an hourly basis, the amount of wages attributable to work in Nebraska is that portion of the total wages, which the total number of hours worked in Nebraska bears to the total number of hours worked.

Example:

| Employee’s monthly Nebraska hours = | 80 | | --- | --- | | Employee’s monthly total hours = | 160 | | Nebraska portion of hours = | 50% | | Nebraska withholding from tables = | $300 | | Multiplied by the Nebraska portion of hours = | 50% | | Nebraska income tax withholding = | $150 |

006.03C For employees who are paid on a per-mile basis, the amount of wages attributable to work in Nebraska is that portion of the total wages, which the total number of miles traveled monthly in Nebraska bears to the total number of miles traveled monthly.

Example:

| Employee’s monthly Nebraska mileage = | 2,000 | | --- | --- | | Employee’s monthly total mileage = | 10,000 | | Nebraska portion of mileage = | 20% | | Nebraska withholding from tables = | $300 | | Multiplied by Nebraska portion of mileage = | 20% | | Nebraska income tax withholding = | $60 |

006.03D For all other employees, the portion of wages attributable to work in Nebraska is that portion of the total wages paid for working days in Nebraska bears to the total wages paid, not counting nonworking days. Nonworking days means all days given off work, for example weekends, holidays, and days absent because of illness, personal injury, vacation, or leave with or without pay.

Example:

| Employee days worked in Nebraska in the month = | 10 | | --- | --- | | Total employees days worked in the month = | 20 | | Nebraska portion of the total days = | 50% | | Nebraska withholding from tables = | $300 | | Multiplied by the Nebraska portion of the days = | 50% | | Nebraska income tax withholding = | $150 |

006.03E The apportionment calculations and examples in this section do not apply to income tax withholding on gambling winnings, pensions and annuities, nonresidents performing personal services substantially in Nebraska, or persons or contractors receiving payments from another contractor for construction services performed in Nebraska. The requirements of Reg-21-004.05 through Reg-21.004.09 apply in these situations.

006.04 If an employee expects the portion of work performed in Nebraska to remain approximately the same as the prior year, the employee may compute the percentage of income applicable to the prior years’ experience and use that percentage on the Form 9N.

(Neb. Rev. Stat. §§ 77-2733 and 77-2753. October 26, 2014.)

REG-21-007 EMPLOYER'S RETURNS AND PAYMENT OF WITHHELD INCOME TAXES

007.01 Every employer required to deduct and withhold Nebraska income tax from an employee's wages must file a withholding return and pay to the Department the amount required to be deducted and withheld, or the amount actually deducted and withheld, whichever is larger. The return must be filed using the Nebraska Withholding Return, Form 941N.

007.01A A Form 941N is required for each filing period or portion of a filing period. A return must be filed for every filing period, even if there has been no income tax withholding.

007.01B The filing period is the reporting frequency as assigned by the Department. For most employers, it will be quarterly, but employers who have liabilities of $500 or less for a calendar year, and employers that are allowed to file their federal returns annually may be assigned an annual filing frequency.

007.01C The Form 941N must be received by the Department, or postmarked, on or before the last day of the month following the close of each filing period.

007.01D Employers who file a Form 941N must file the form and pay the Department in the manner and method that the Tax Commissioner prescribes for the efficient and proper administration of the Nebraska Revenue Act, including filing and paying electronically. Taxpayers may access the electronic filing (e-file) program and the electronic payment options from the Department’s website.

007.02 When the total amount to be deducted and withheld by any employer for either the first or second month in a calendar quarter exceeds $500, the employer must make monthly deposits by filing a Nebraska Monthly Withholding Deposit, Form 501N, with the Department. The Form 501N must be filed on or before the 15th day of the second and third month of each calendar quarter. The amounts paid are allowed as a credit against any liability shown on the employer's next quarterly Form 941N.

007.02A Form 501N is not required when monthly payments are made electronically.

007.03 On or before February 1 of each year, each employer must file with the Department a copy of each statement furnished to each of its employees showing the total Nebraska income taxes withheld from wages during the prior calendar year. This statement is the state copy of Federal Form W-2. Any employer who furnishes more than 50 statements for any year must electronically file (e-file) the required copies in the manner approved by the Department. Taxpayers may access the e-file program from the Department’s website.

007.04 The employer must also file a Nebraska Reconciliation of Income Tax Withheld, Form W-3N, on or before February 1 of each year in accordance with Reg-21-013.

007.05 The last Form 941N for any employer who discontinues business or permanently ceases to pay wages must be clearly marked “Final Return.” This Form 941N and the full payment for amounts deducted and withheld must be sent to the Department. The employer must also file a completed Form W-3N, and the state copies of Federal Form W-2, for the part of the calendar year that the employer operated its business or paid wages.

007.06 An employer who ceases to pay wages temporarily, including an employer engaged in seasonal activities, must continue to file all applicable Form 941Ns.

007.07 Every employer which is considered to be a successor of another employer under the I.R.C., is a successor for Nebraska income tax withholding purposes and must file returns and make payments for Nebraska in a similar manner.

(Neb. Rev. Stat. §§ 77-1784 and 77-2756. October 26, 2014.)

REG-21-008 INFORMATION STATEMENTS

008.01 Every employer required to deduct and withhold income tax from an employee’s wages must furnish to each employee a statement, on a Federal Form W-2, showing the amount of wages paid by the employer to the employee during the calendar year, the amount deducted and withheld, and all other information required to be shown on the Federal Form W-2. To meet this requirement, an employer must furnish his or her employee with a "state copy" and an "employee’s copy" of the completed Federal Form W-2.

008.02 The required statement must be furnished to the employee on or before February 1 following the close of the calendar year. If his or her employment is terminated before the close of the calendar year, the employer must provide the employee a copy of the Federal Form W-2 within 30 days after the last payment of wages is made.

008.03 Every payor required to deduct and withhold income tax from a payment to a nonresident individual under Reg-21-001.04A or Reg-21-001.04B must furnish a statement showing the amount of the payments and withholding on a Federal Form 1099-MISC to the payee.

008.04 Every payor required to deduct and withhold income tax from a payment to a corporation, partnership, or limited liability company (LLC) under Reg-21-001.04C must furnish a statement showing the amount of the payments and withholding on a Federal Form 1099-MISC to each shareholder, partner, or member of the corporation, partnership, or LLC who performed services in Nebraska.

008.04A The total amount of the payment must be divided among the shareholders, partners, or members performing the service in Nebraska according to each of their ownership interests in the corporation, partnership, or LLC. The amount of income tax withheld is computed on the total payment to the corporation, partnership, or LLC, and must be divided among the shareholders, partners, or members in a similar manner. The amount of withholding will be allowed as a credit on the Nebraska individual income tax returns of the shareholders, partners, or members.

008.04B If the corporation, partnership, or LLC fails to furnish the payor the information necessary to prepare the Federal Form 1099-MISC for the shareholders, partners, or members, the payor must prepare the Federal Form 1099-MISC in the name of the corporation, partnership, or LLC and deliver the copies normally given to the employee to the Department in the same manner as forms that cannot be delivered under Reg-21-013.02.

008.05 Every contractor required to deduct and withhold income tax from a payment to a person or contractor performing construction services in Nebraska under Reg-21-001.05 must furnish a statement showing the amount of the payments and withholding on Federal Form 1099-MISC to the payee.

(Neb. Rev. Stat. §§ 77-2754 and 77-2756. October 26, 2014.)

REG-21-009 PAYMENTS THAT ARE NOT SUBJECT TO INCOME TAX WITHHOLDING

009.01 The income tax withholding requirement does not apply to wages paid to a Native American Indian who resides in Nebraska in Indian country, as defined in federal law, for services performed in Indian country in Nebraska. If the services are performed both in and outside Indian country in Nebraska, the allocation procedure in Reg-21-006.02 must be used or the employer must withhold from the entire amount of the wages.

009.02 The income tax withholding requirement does not apply to a Nebraska nonresident employee for services performed in more than one state who is exempted from Nebraska income tax by federal law covering certain railroad, motor carrier, and airline employees.

009.03 The income tax withholding requirement does not apply to nonresident members of the U.S. Uniformed Forces, or spouses of these servicemembers who are residents of the same state as the servicemember and are in Nebraska to accompany the servicemember.

(Neb. Rev. Stat. § 77-2753, 49 U.S.C. 11502, & 14503, Oklahoma Tax Com’n v. Sac and Fox Nation, 508 U.S. 114 (1993), McClanahan v Arizona State Tax Comm’n, 411 U.S. 164 (1973), and Bryan v Itaska County, Minnesota, 426 U.S. 373 (1976). October 26, 2014.)

REG-21-010 INCOME TAX WITHHOLDING EXEMPTIONS

010.01 Except as provided in Reg-21.010.01B, when determining the proper amount of income tax to be deducted and withheld from an employee’s wages, the employer will allow the number of exemptions claimed by the employee on his or her Employee’s Withholding Allowance Certificate, Federal Form W-4, for federal income tax purposes.

010.01A An employer must retain a completed copy of the Federal Form W-4 for audit purposes.

010.01B If the calculation by an employer using the number of claimed exemptions results in income tax withholding from an employee that is less than 1½% of gross wages minus qualified tax deductions, the employer must obtain satisfactory evidence from the employee that a lesser amount of withholding is justified. Satisfactory evidence includes birth certificates or Social Security information for dependents or other evidence that reasonably assures the employer that the employee is not improperly or fraudulently evading or defeating the income tax by reducing or eliminating withholding.

010.02 Nebraska income tax withholding is not required if the employer properly accepts a Federal Form W-4 claiming an exemption from federal income tax withholding because the employee had no federal income tax liability the previous year and expects no federal income tax liability for the current year.

010.03 Any employee who receives a state income tax credit, except the personal exemption credit, that is not based on a federal income tax credit may request the employer to apply for permission from the Tax Commissioner for an alternative method of calculating the proper amount of income tax withholding.

010.03A The application must be made in writing by the employer. The application must include:

010.03A(1) A proposed alternative method of determining the income tax withholding;

010.03A(2) The identification of the specific employee for whom the method will be used; and

010.03A(3) The type and expected amount of the credit.

010.03B The income tax withholding must exceed the estimated tax liability by more than $300 for the Tax Commissioner to consider an alternative method of calculation.

(Neb. Rev. Stat. § 77-2753(2). October 26, 2014.)

REG-21-011 NEBRASKA INCOME TAX WITHHOLDING TO BE SEPARATELY STATED

011.01 In each payroll record furnished to an employee by the employer for any purpose, the amount of Nebraska wages and income tax withholding must be stated separately from the wages and withholding for any other jurisdiction.

(Neb. Rev. Stat. §§ 77-2753 and 77-2772. October 26, 2014.)

REG-21-012 CREDIT FOR INCOME TAX WITHHELD BUT NOT REMITTED TO THE DEPARTMENT

012.01 Any amount of income tax actually deducted and withheld from a payment to an employee by an employer is deemed to have been paid to the Department on behalf of the employee, and may be taken as a credit on the employee’s income tax return even if the employer subsequently fails to remit the withheld income tax to the Department. To claim the credit on the income tax return for the taxable year, the employee must attach the state copy of Federal Form W-2 or 1099-MISC.

(Neb. Rev. Stat. § 77-2755. October 26, 2014.)

REG-21-013 MANNER OF FILING NEBRASKA RECONCILIATION OF INCOME TAX WITHHELD AND STATE COPIES OF FEDERAL FORMS W-2

013.01 Electronic Filing. Any employer who furnishes more than 50 Federal Forms W-2, Forms 1099-MISC, or other statements reporting withholding for a year must electronically file (e-file) the required copies in a manner approved by the Tax Commissioner that is compatible with federal e-file requirements or methods.

013.02 Undeliverable Forms. If an employer cannot deliver any employee copies of Federal Forms W-2 or 1099-MISC to employees after reasonable effort, these employee copies must be transmitted with the Nebraska Withholding Return, Form 941N, due the following July accompanied by a signed letter explaining that they were submitted because they could not be delivered to the employees.

013.03 Corrected or Reissued Forms. When Federal Forms W-2 or 1099-MISC are corrected by the employer or are reissued, these forms must be clearly marked either “corrected by employer” or “reissued by employer” and copies must be furnished to the employee and to the Department. If a correction is necessary, the employer may also use Federal Form W-2c to make the correction.

013.04 All Copies to be Complete and Legible. All copies of any forms prepared by the employer and furnished to the employee or to the Department must be completed in full, including the ID of the employer and the state income tax withholding, and must be legible. If the copies are not fully completed or are not legible, they will not be considered furnished by the employer in compliance with the law, and the employer may be subject to the penalties for noncompliance as provided in Reg-21-016.

013.05 Retention of Records Every employer must retain copies of all forms filed with the Department and copies of all documents furnished to employees for at least three years. If the employer reports information electronically, the employer may retain the supporting documentation or an electronic copy. If the Department issues a balance due notice or a notice of proposed deficiency determination for a taxable year, the taxpayer must retain all records relating to that taxable year until the balance due or proposed deficiency determination has been satisfied, abated, settled, or disallowed, and has become final.

013.06 Availability of Records. The Department, or its agents, has the right to examine, inspect, or make and retain copies of any records, electronic media, and equipment of any person to audit or review the accuracy of any income tax withholding return filed; or if no return is filed by the person, to ascertain and determine the amount that must be paid.

013.07 Administrative Subpoena. The Tax Commissioner may require any person to provide records that are necessary to make a proper determination of any person’s compliance with and the liability under the laws of this state. If a reasonable request to produce records is refused, the Tax Commissioner may issue an administrative subpoena.

013.07A An administrative subpoena must clearly state the scope of the demand for records and any other requirements, and state when, where, and how to comply with the administrative subpoena.

013.07B An administrative subpoena may be enforced by the Attorney General, acting on behalf of the Tax Commissioner, in an action filed in the district court for Lancaster County.

013.07C The Tax Commissioner may also apply to the district court of the county of residence for an individual, for an order directing compliance with the request for records. If the records are in the custody of a corporation, partnership, or LLC the order may be directed to any principal officer of the corporation, or any principal officer, responsible partner, or responsible member of the partnership or LLC. If any individual refuses an order from the district court, he or she is guilty of contempt of court.

013.08 Records Reconstruction. Records that are destroyed by a natural disaster should be reconstructed by the taxpayer to the greatest extent possible from records kept by financial institutions, employers, vendors, and others.

(Neb. Rev. Stat. §§ 77-375, 77-2756, 77-2771, 77-2772, 77-2786(1), 77-27-109, 77-27,115, and 77-27,119(3). October 26, 2014.)

REG-21-014 EMPLOYER'S LIABILITY FOR INCOME TAX WITHHOLDING

014.01 Every employer required to deduct and withhold Nebraska income tax from the wages of an employee is liable for payment of the withholding whether or not it is collected from the employee. For purposes of assessment and collection, any amount required to be withheld and paid to the Department, plus any additions, penalties, or interest, is considered a tax obligation of the employer.

014.02 Any amount of income tax actually withheld from employees constitutes a special fund held in trust for the Department.

014.03 No employee has any right of action against an employer regarding any income tax deducted and withheld from wages and paid to the Department in compliance with or intended to be in compliance with the Nebraska Revenue Act.

(Neb. Rev. Stat. § 77-2757. October 26, 2014.)

REG-21-015 EMPLOYER'S FAILURE TO WITHHOLD INCOME TAX

015.01 If any employer fails to deduct and withhold income tax as required under the Nebraska Revenue Act, but the employee ultimately pays any income tax that is due when he or she files the return that relates to the withholding, the employer will not be assessed a deficiency for the withholding, but may be assessed penalties, interest, or other additions related to the failure to deduct and withhold income tax.

015.02 The employer is not relieved from liability for payment of the income tax withholding unless he or she can prove that the employee’s individual income tax has been paid.

(Neb. Rev. Stat. § 77-2758. October 26, 2014.)

REG-21-016 PENALTIES FOR FAILURE TO WITHHOLD AND REMIT INCOME TAXES, FILE RETURNS, OR FILE FEDERAL FORM W-2

016.01 Any employer who fails to file any income tax withholding return by the required due date is subject to a penalty of 5% of the amount required to be shown on the return for each month or portion of a month the return is late, up to 25%, or $25, whichever is greater.

016.01A Penalties assessed under Reg-21-016.01 are due and payable at the time the assessment is final. If the amounts due are not paid when final, an additional penalty of 10% of the total amount due, excluding interest and other penalties, will be added to the amount due.

016.01B The penalty may be abated if the employer can show that there was a reasonable cause for the late filing and that it was not the result of willful neglect.

016.01C For purposes of determining the amount of the penalty, the amount shown on the return is reduced by the amount paid prior to the due date and any credit properly claimed on the return.

016.02 If an employer withholds income tax from employees’ wages but fails to file a Form 941N and remit the amount withheld, the employer is liable for those taxes and interest at the rate specified in Neb. Rev. Stat. § 45-104.02 from the due date of the return until the date payment is received. In addition, the employer is liable for a penalty of 5% of the amount unpaid. If the penalty is not paid within 10 days of the notice and demand for payment, interest also applies to the amount of the penalty.

016.03 If the employer fails to withhold the proper amount of income tax withholding as required under the Nebraska Revenue Act interest will be imposed at the rate specified in Neb. Rev. Stat. § 45-104.02, on the amount which should have been withheld and paid. The employer is also subject to a 5% penalty on the amount which should have been withheld and paid to the Department.

016.04 If the nonpayment of income tax withholding to the Department is a result of fraud by the employer, the amount of penalty is 50% of the unpaid amount instead of 5%.

016.05 If the employer willfully fails to collect the proper amount of income tax withholding, account for and pay over the proper amount of income tax withholding, or willfully attempts to evade or defeat the income tax withholding obligation, the penalty is 100% of the amount evaded, not collected, or not accounted for and paid, instead of 5% or 50%.

016.06 If it can be determined that the employer acted with fraudulent intent, the Department may assess an additional penalty of up to $1,000.

016.07 In situations described by Reg-21-016.04 through Reg-21-016.06, the employer is subject to interest at the rate specified in Neb. Rev. Stat. § 45-104.02, on the amount due and on any penalty not paid within 10 days of notice and demand for payment.

016.08 A penalty of $500 for each occurrence may be assessed if any person, for frivolous or groundless reasons, or with intent to delay or impede the administration of the Nebraska income tax:

016.08A Fails to file a return or to pay any income tax due; or

016.08B Files what purports to be a return that does not contain sufficient information to calculate the liability or indicates that the self-assessed liability is substantially incorrect.

016.08C This penalty is in addition to any other penalties that may be imposed.

016.09 If any employer fails to file the state copy of Federal Form W-2 with the Department, or fails to provide the statement of income tax withholding to the payee, on or before the due date, or on or before the due date resulting from an extension, the employer is subject to a penalty of $2 for each statement not filed. If the employer can prove that the failure to properly file was the result of a reasonable cause and not negligence, the Department will not assess this penalty. The maximum penalty assessable under this regulation on any one employer during any calendar year is $2,000.

016.10 If any employer employing 25 or more employees fails to either: (a) withhold at least one and one-half percent of the wages of any employee; or (b) obtain satisfactory evidence from the employee justifying a lower withholding amount as required by Neb. Rev. Stat. § 77-2753(1)(b), the employer may be assessed a penalty of not more than $1,000 per violation.

016.11 If any nonresident individual provides false information to an employer or payor regarding wages subject to Nebraska income tax withholding, which resulted or would result in the amount of income tax withholding being less than 75% of the correct amount, or if any employer knowingly uses this false information, the employer or individual may be assessed a penalty equal to the total amount of income tax withholding evaded and $1,000.

016.12 Willful failure to keep, retain, or make available any records as required under this regulation is a Class II misdemeanor. If records are destroyed in a natural disaster, the failure to retain those records is not considered willful.

016.13 Criminal Penalties

016.13A Any taxpayer, with intent to evade or defeat the Nebraska income tax, who claims an excessive number of exemptions is guilty of a Class II misdemeanor.

016.13B Any person who willfully attempts in any manner to evade the Nebraska income tax is guilty of a Class IV felony, in addition to any other penalties.

016.13C Any person required to withhold, deduct, and truthfully account for and pay over any income tax withholding who willfully fails to withhold, deduct, or truthfully account for and pay over is guilty of a Class IV felony, in addition to other penalties.

016.13D Any person who willfully makes and signs any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and who does not believe the return, statement, or document to be true and correct as to every material matter, is guilty of a Class IV felony.

016.13E Any person who willfully aids or procures the preparation or presentation of a return, affidavit, claim, or other document, which is fraudulent or which is false as to any material matter, is guilty of a Class IV felony.

016.13F Statute of Limitations. The statute of limitations for criminal prosecution for the offenses in this section is four years after the commission of the offense except that any violation of Reg-21-016.12A or C is three years after the commission of the offense.

(Neb. Rev. Stat. §§ 77-2757, 77-2758, 77-2788, 77-2789, 77-2790, 77-27,113, 77-27,114 and 77-27,116. October 26, 2014.)

REG-21-017 REPEALED

REG-21-018 DEPARTMENT MAY REQUIRE AN EARLY RETURN AND PAYMENT OF INCOME TAX WITHHELD

018.01 The Department may, after notice is given to the employer, require the employer to file a return and pay the income tax deducted and withheld by the employer at any time, or at frequent intervals, if the Department determines this action is necessary to assure that the income tax withheld is remitted to the Department.

018.02 Whenever any employer fails to collect, trustfully account for, pay, or file a return as required by the Nebraska Revenue Act, the Department may give notice requiring the employer to collect any income tax withholding which becomes collectible after receiving the notice, and pay the withholding immediately to the Department electronically, by certified check, or by bank draft. The interval of this collection and remittance may be as frequent as the end of each payroll period. The Department may require that the payment must be received as early as the next business day following the close of the payroll period. A notice of these requirements remains in effect until the Department serves a notice of cancellation on the employer.

018.03 All notices described in this regulation may be served personally or by first class mail, to the last known address of the employer in the records of the Department.

(Neb. Rev. Stat. § 77-2756. October 26, 2014.)

REG-21-019 CORRECTING MISTAKES IN INCOME TAX WITHHOLDING

019.01 If less than the correct amount of income tax withholding is paid by the employer to the Department, a proper adjustment must be made on the first return filed after the error is discovered. If no withholding is deducted, or if less than the correct amount is withheld from any wages, the employer may deduct the amount of undercollection from later wages paid to the employee. The employer is liable to the Department for any underpayment, and reimbursement of the employer is between the employer and the employee.

019.02 In any filing period, if more than the correct amount of income tax withholding is deducted from any wages and paid to the Department, the excess deducted will not be repaid directly to the employer or to the employee. The Department may credit any overpayment against any income tax liability of the employee. Any balance will be refunded pursuant to the law regarding refunds.

019.03 If there has been an overpayment of income tax withholding to the Department by the employer, a refund will be made to the employer, but only to the extent that the amount of overpayment was not actually deducted and withheld by the employer from any wages.

(Neb. Rev. Stat. §§ 77-2753, 77-2757, and 77-2791. October 26, 2014.)

REG-21-020 REPEALED

History

• Effective 2014-10-26

Chapter 22 Individual Income Tax Regulations

Neb. Admin. Code tit. 316, ch. 22 Individual Income Tax Regulations {#sec-316-nac-22 omnilex-key=us-ne-regs-official--title-316--316 NAC 22}

REG-22-001 DEFINITION OF RESIDENT INDIVIDUAL

001.01 At any given time, every individual is either a resident or a nonresident of Nebraska.

001.01A The term resident individual means every individual who is domiciled in this state, even though absent for temporary or transitory purposes, and every individual who for an aggregate of more than six months both maintains a permanent place of abode within this state and who is present in this state.

001.01B A nonresident is every individual who is not a resident individual.

001.01C Nebraska residence will be determined by Nebraska law.

001.02 For the purpose of filing returns and computing the tax due for the taxable year, the terms resident and nonresident apply to those persons who were residents or nonresidents for the entire taxable year. Any person who is not a resident or a nonresident for the entire year is a partial-year resident. Except when the context clearly requires otherwise, the terms resident, nonresident and partial-year resident will be used in these regulations as defined in this subsection.

001.03 The question of domicile is a question of fact rather than law, frequently depending upon a variety of circumstances. The term domicile shall mean the place where an individual has his or her true, fixed, and permanent home and principal establishment, and to which whenever he or she is absent he or she has the intention of returning. Actual residence is not necessarily domicile.

001.03A Any citizen residing outside the United States (U.S.) whose last domicile within the U.S. was within Nebraska will continue to be a Nebraska resident until the person ceases to be a citizen of the U.S., establishes residence as a permanent resident alien in a foreign country, or reestablishes another domicile within the U.S.

001.03B An unemancipated minor's domicile is usually the same as that of the custodial parent.

001.04 A permanent place of abode means a dwelling place permanently maintained by the taxpayer. A dwelling place includes a house, apartment, room, or other accommodation suitable for human occupation. An individual who for an aggregate of six months both maintains a permanent place of abode in Nebraska and is present within Nebraska, is considered to be a resident of Nebraska regardless of whether or not such place of abode within Nebraska is actually used by such individual during such period. Such a person shall become a resident of this state as of the date the permanent place of abode was established, shall cease to be a resident of this state as of the date the permanent place of abode is abandoned, or shall be considered a resident for the entire year if the person has a permanent place of abode at the beginning and at the end of the year.

001.05 An individual establishes residence in Nebraska on the date he or she arrives in the state for other than temporary or transitory purposes. Residence in Nebraska is terminated on the date an individual leaves the state, abandons any intention of returning to the state, and establishes a residence in another state while present in the other state for other than temporary or transitory purposes.

001.06

001.06A An individual who is a resident of Nebraska does not terminate residency upon entering the services of the United States. A member of the services domiciled in Nebraska at the time he or she entered such service generally retains his or her status as a domiciliary of Nebraska throughout his or her stay in the service, regardless of where he or she may be assigned to duty or how long.

001.06B For purposes of this regulation, an individual shall not be deemed to be a resident of Nebraska, nor will he or she lose his or her status as a resident of the state in which he or she formerly resided, solely because of a transfer into Nebraska under military orders. Such individual may, however, become a resident of Nebraska for purposes of this regulation by the performance of some overt acts which would constitute a termination of his or her residence in such former state and the establishment of a residence in Nebraska.

001.06C The spouse of an individual in Nebraska solely because of a transfer into Nebraska under military orders, if not a member of the services, will become a resident of Nebraska in the same manner as any other nonservice member after moving into the state.

(Section 77-2715(2), R.R.S. 1996. November 11, 1998.)

REG-22-002 COMPUTING THE NEBRASKA INDIVIDUAL INCOME TAX

002.01 Resident individuals. The Nebraska individual income tax is imposed for each taxable year on the entire income of every resident individual. The tax is a percentage of the taxpayer's Nebraska taxable income for the taxable year plus a percentage of the federal alternative minimum tax and the federal tax on premature or lump-sum distributions from qualified retirement plans. Taxpayers whose federal adjusted gross income is larger than the threshold amount determined under section 68 of the Internal Revenue Code (IRC) will recalculate their tax on taxable income by multiplying the maximum tax rate by ten per cent of the excess amount above the section 68 threshold and subtracting from the result the amount of tax from the tax table. This result will be added to the tax from the tax table.

002.02 Nonresident individuals. The Nebraska individual income tax is imposed for each taxable year on the income of every nonresident individual which is derived from sources within Nebraska. The tax is a percentage of the tax owed by a resident individual with the same total income. The percentage is determined by dividing the taxpayer's Nebraska adjusted gross income as determined in Reg-22-003 by the taxpayer's federal adjusted gross income after the adjustments provided in Reg-22-002.04.

002.03 Partial-year resident individuals. The Nebraska individual income tax is imposed for each taxable year on all of the income of every partial-year resident which is earned while a resident of Nebraska and is not taxed by another state, and the income derived from sources within Nebraska while a nonresident. The tax is a percentage of the tax owed by a resident individual with the same taxable income. The percentage is determined by dividing the taxpayer's Nebraska adjusted gross income as determined in Reg-22-004 by the taxpayer's federal adjusted gross income after the adjustments provided in Reg-22-002.04.

002.04 Determining Nebraska taxable income. Nebraska taxable income is the taxpayer's federal adjusted gross income after Nebraska adjustments and after the deduction provided in either Reg-22-002.08 or Reg-22-002.09.

002.05 The Nebraska adjustments which are subtracted from federal adjusted gross income are as follows:

002.05A Income from federal obligations. Any interest and dividends received on United States obligations to the extent such interest and dividends are included in federal adjusted gross income but exempt from state income taxes under the laws of the United States shall be subtracted. The amount subtracted on account of such interest and dividends must be reduced by any interest on indebtedness incurred to carry such obligations and by any expense incurred in the production of such income to the extent such expense or interest was deducted in determining federal taxable income.

002.05A(1) United States obligations which are exempt include the following:

002.05A(1)(a) Series E, F, G, H, and I savings bonds;

002.05A(1)(b) United States Treasury bills;

002.05A(1)(c) U.S. Government notes;

002.05A(1)(d) U.S. Government bonds;

002.05A(1)(e) U.S. Government certificates;

002.05A(1)(f) Interest on debentures issued to mortgages of mortgagees foreclosed under provisions of the National Housing Act if insured after February 3, 1938;

002.05A(1)(g) Retirement bond as provided by IRC section 409;

002.05A(1)(h) Federal Farm Credit Bank consolidated systemwide bonds;

002.05A(1)(i) Federal Land Banks and Associations;

002.05A(1)(j) Federal Intermediate Credit Bank;

002.05A(1)(k) Commodity Credit Corporation;

002.05A(1)(l) Federal Farm Mortgage Corporation;

002.05A(1)(m) Federal Home Loan Banks;

002.05A(1)(n) Reconstruction Finance Corporation;

002.05A(1)(o) General Services Administration Participation Certificates;

002.05A(1)(p) Central Bank for Cooperatives (interest only);

002.05A(1)(q) Federal Reserve Banks;

002.05A(1)(r) Federal Savings and Loan Insurance Corporation;

002.05A(1)(s) Production Credit Association (interest only);

002.05A(1)(t) Tennessee Valley Authority bonds;

002.05A(1)(u) Postal Service bonds ;

002.05A(1)(v) Federal Deposit Insurance Corporation (interest only); and

002.05A(1)(w) Student Loan Marketing Association (interest only).

002.05A(2) Income from Regulated Investment Companies investing directly in U.S. Government obligations is subtracted to the extent they represent U.S. Government obligations.

002.05A(3) Interest income from repurchase agreements involving U.S. Government obligations is not deductible.

002.05B Refund of State and Local Income Tax. Any refund of state or local income tax which was included in federal adjusted gross income shall be subtracted.

002.05C Income from S corporations and LLCs.

002.05C(1) Any income from S corporations and limited liability companies (LLCs) which was not connected with or derived from Nebraska sources shall be subtracted.

002.05D Dividends Received from a Corporation not Subject to the IRC. Any dividend which was received from a corporation which was not subject to the Internal Revenue Code shall be subtracted.

002.05E Amount Repaid for Which a Reduction in Federal Income Tax was Taken. Any amount which was repaid and for which the taxpayer received a reduction in federal tax under IRC section 1341(a)(5) shall be subtracted.

002.05F Railroad Retirement Board payments. Railroad Retirement Board payments to retired railroad employees or their families that are included in federal adjusted gross income, including Tier I and II, Supplemental Annuity, and Dual Vested Benefits as reported on Forms RRB-1099 and RRB-1099-R issued by the Federal Railroad Retirement Board, shall be subtracted.

002.05G. Special Capital Gains Exclusion. Capital gains excluded due to an election exercised under provisions of section 77-2715.08 of the Nebraska Revised Statutes shall be subtracted as provided in Reg-22-020.

002.05H. Nebraska Net Operating Losses. A Nebraska net operating loss carryback or carryover shall be subtracted as provided in Reg-22-005.

002.05I. Native American Indian Reservation Income. The income earned within the boundaries of a recognized Indian reservation by a Native American Indian who is an enrolled member of an Indian tribe and who resides in Nebraska on an Indian reservation shall be subtracted.

002.05I(1) No income tax return is required if a reservation Indian's income is earned entirely within the boundaries of an Indian reservation in Nebraska.

002.05J Long-Term Care Savings Plan. Deposits into qualifying long-term care savings plan accounts at participating Nebraska banks of up to $2,000 for married-filing-joint filers or $1,000 for all other filers, to the extent not deducted for federal income tax purposes, shall be subtracted.

002.05J(1) Any interest or dividends earned from a qualifying long-term care savings plan account within the taxable year, to the extent not deducted for federal income tax purposes, shall be subtracted.

002.05K Nebraska College Savings Plan. Contributions by a participant in the Nebraska Educational Savings Plan Trust shall be subtracted to the extent not deducted for federal tax purposes.

002.05K(1) For tax years beginning on or after January 1, 2007, the deduction may not be more than $2,500 for a married filing separate tax return and $5,000 for single, head of household, and married joint returns. Only the participant owner may claim the subtraction.

002.05K(2) For tax years beginning on or after January 1, 2000,and before January 1, 2007, the deduction may not be more than $500 for a married filing separate tax return and $1,000 for single, head of household, and married joint returns. Only the participant owner may claim the subtraction.

002.05K(3) Any gift, grant, or donation made to the Nebraska Educational Savings Plan Trust for deposit in the endowment fund of the trust, to the extent not deducted for federal income tax purposes, shall be subtracted.

002.05L Bonus Depreciation Subtraction. A portion of the amount of bonus depreciation added for assets placed in service between September 10, 2001 and December 31, 2005 shall be subtracted.

002.05L(1) Twenty percent of the total amount of bonus depreciation added back for tax years beginning or deemed to begin before January 1, 2003, may be subtracted in the first taxable year beginning or deemed to begin on or after January 1, 2005, under the Internal Revenue Code of 1986, as amended, and twenty percent in each of the next four following taxable years.

002.05L(2) Twenty percent of the total amount of bonus depreciation added back for tax years beginning or deemed to begin on or after January 1, 2003, may be subtracted in the first taxable year beginning or deemed to begin on or after January 1, 2006, under the Internal Revenue Code of 1986, as amended, and twenty percent in each of the next four following taxable years.

002.05M. Enhanced Section 179 Subtraction. A portion of the amount added for capital investment expensed under IRC section 179 in excess of twenty-five thousand dollars for taxable years beginning or deemed to begin on or after January 1, 2003, and before January 1, 2006 shall be subtracted.

002.05M(1) Twenty percent of the total amount of expensing added back for tax years beginning or deemed to begin on or after January 1, 2003, may be subtracted in the first taxable year beginning or deemed to begin on or after January 1, 2006, and twenty percent in each of the next four following tax years.

002.06 The Nebraska adjustments which are added to federal adjusted gross income are as follows:

002.06A Income from state and local obligations. Any interest and dividends received from state and local obligations, other than obligations issued by the State of Nebraska or its political subdivisions, to the extent such interest and dividends are excluded from federal gross income shall be added. The amount added on account of such interest and dividends may be reduced by any interest on indebtedness incurred to carry such obligations and by any expense incurred in the production of such income to the extent such expense or interest was not deducted in determining federal taxable income.

002.06A(1) Dividends and income received from Regulated Investment Companies which are attributable to obligations described in Reg-22-002.06A shall be added.

002.06B Losses from S corporations and LLCs. Any loss from S corporations and Limited Liability Companies (LLCs) which was not connected with or derived from Nebraska sources shall be added.

002.06C Federal Net Operating Losses. A Federal net operating loss carryback or carryover shall be added as provided in Reg-22-005.

002.06D Long-Term Care Savings Plan Nonqualified Withdrawals. Any withdrawal of deposited funds or interest or dividends from a long-term care savings plan account shall be added to the extent that the amount was previously deducted under Reg-22-002.05J or Reg-22-002.05J(1) upon cancellation or termination of the plan or if the withdrawal is:

22-002.06D(1) Not made to pay or reimburse for long-term care expenses during the taxable year, for the participant, the participant’s spouse, or another person for whom the participant has an insurable interest;

22-002.06D(2) Not made by a participant who is over 50 years of age or who turned 50 years of age during the taxable year to pay or reimburse for long-term care insurance premiums during the taxable year for the participant, the participant’s spouse, or another person for whom the participant has an insurable interest;

22-002.06D(3) Not due to the death of the participant; or

22-002.06D(4) Not made to transfer funds to a long-term care savings plan of the participant’s spouse.

002.06E Financial Institution Tax of a Shareholder. A shareholder of a financial institution organized as an S corporation who claims the Nebraska credit for financial institution tax must add to income the amount of the credit taken.

002.06F Federal Bonus Depreciation. For taxable years beginning or deemed to begin before January 1, 2006, federal adjusted gross income shall be increased by eighty-five percent of the amount of any federal bonus depreciation received under section 168(k) or section 1400L of the Internal Revenue Code of 1986, as amended, for assets placed in service after September 10, 2001, and before December 31, 2005.

002.06G Section 179 Expense in excess of twenty-five thousand dollars. For taxable years beginning or deemed to begin on or after January 1, 2003, and before January 1, 2006, federal adjusted gross income shall be increased by the amount of any capital investment that is expensed under section 179 of the Internal Revenue Code of 1986, as amended, that is in excess of twenty-five thousand dollars that is allowed under the federal Jobs and Growth Tax Act of 2003.

002.06H Nebraska College Savings Plan. Any nonqualified withdrawals or any amounts withdrawn because of cancellation of a participation agreement, including a withdrawal for the purpose of a rollover to an IRC §529 plan in another state, shall be added to income, to the the extent not included for federal income tax purposes.

002.07 Determining Nebraska minimum tax. The Nebraska minimum tax is computed as a percentage of the federal alternative minimum tax which is adjusted by substituting Nebraska taxable income (federal AGI less Nebraska standard or itemized deductions) for federal taxable income, and adjusting for any items which are reflected differently in the determination of federal taxable income for Nebraska purposes.

002.07A Items which are reflected differently include:

002.07A(1) Nebraska standard deduction;

002.07A(2) Substituting Nebraska itemized deductions for federal itemized deductions, including using the Nebraska itemized deductions calculated on the Nebraska Itemized Deduction Worksheet;

002.07A(3) Using only Nebraska-source private activity bond income when reporting post-August 7, 1986 private activity bond tax-exempt interest;

002.07A(4) Deducting any state or local income tax from the reported taxes;

002.07A(5) Substituting the Nebraska net operating loss for any federal net operating loss;

002.07A(6) Substituting zero (0) for any alternative minimum tax foreign tax credit.

002.07B The federal credit for prior year minimum tax, after the recomputations noted above, is allowed as a credit against any tax calculated by the taxpayer.

002.07B(1) The rate used to calculate the current year's Nebraska minimum tax shall also be used to calculate the credit.

002.07C The Nebraska tax also includes a tax computed as a percentage of the federal tax on premature or lump-sum distributions from qualified retirement plans. This includes those taxes reported on Federal Forms 5329 (Tax on Early Distributions (including an IRA)) and 4972 (Tax on Lump-Sum Distributions).

002.08 Standard Deduction. Every taxpayer who is allowed a federal standard deduction is allowed a deduction for state purposes except as provided in Reg-22-002.08A.

002.08A. For tax years beginning on or after January 1, 1993 and before January 1, 2007, the standard deduction for a taxpayer whose federal adjusted gross income is greater than the threshold amount determined under IRC section 68 for the disallowance of itemized deductions will be reduced by the following amount. The amount of federal adjusted gross income in excess of the threshold amount is multiplied by 10%, and the result is subtracted from the taxpayer's state standard deduction.

002.08B For tax years beginning on or after January 1, 2003 and before January 1, 2007, every individual who did not itemize deductions on his or her federal return is allowed to subtract from federal adjusted gross income a standard deduction based on the filing status used on the federal return as the amount is adjusted under Reg-22-002.08A. The standard deduction is the smaller of the federal standard deduction actually allowed or the Nebraska standard deduction.

002.08B(1)Taxpayers who are allowed additional federal standard deduction amounts because of age or blindness are allowed an increase in the Nebraska standard deduction for each additional amount allowed on the federal return.

002.08C For tax years beginning or deemed to begin on or after January 1, 2004 and before January 1, 2007, the state standard deduction amounts in this regulation will be adjusted for inflation by the method provided in section 151 of the Internal Revenue Code. If any amount is not a multiple of ten dollars, the amount shall be rounded to the next highest multiple of ten dollars except that the standard deduction for married filing separate taxpayers may be a multiple of five dollars.

002.08D For tax years beginning on or after January 1, 2007, every individual who did not itemize deductions on his or her federal return is allowed to subtract from federal adjusted gross income a standard deduction based on the filing status used on the federal return.

002.08D(1) The standard deduction amounts, including the additional standard deduction amounts, shall be adjusted for inflation by the method provided in section 151 of the Internal Revenue Code of 1986, as amended. If any amount is not a multiple of fifty dollars, the amount shall be rounded to the next lowest multiple of fifty dollars.

002.08D(2) The standard deduction is the smaller of the federal standard deduction actually allowed or the Nebraska standard deduction.

002.09 Itemized deductions. Every taxpayer who used federal itemized deductions is allowed to deduct the greater of the standard deduction as provided in Reg-22-002.08 and Reg-22-002.08A and the itemized deductions after subtracting any state or local income taxes and as limited by Reg-22-002.09A.

002.09A Taxpayers whose federal adjusted gross income is greater than the threshold amount determined under IRC section 68 for the disallowance of itemized deductions will calculate the excess amount which is over the threshold for the purpose of determining itemized deductions. For tax years beginning on or after January 1, 1993 and before January 1, 2007, if an individual's adjusted gross income exceeds the statutory threshold amount, the amount allowable for itemized deductions must be reduced by the lesser of (1)10% of the excess of adjusted gross income over the threshold amount, or (2) 80% of the amount of the itemized deductions otherwise allowable for the taxable year. The limitation does not apply to deductions for medical expenses, casualty and theft losses, investment interest expenses, charitable contributions (after tax year 1994), or certain gambling losses. State and local income tax is not allowed as an itemized deduction under Nebraska law and is therefore not subject to further limitation.

002.09A(1) For tax years beginning on or after January 1, 2007, Nebraska itemized deductions for taxpayers whose federal adjusted gross income is greater than the threshold amount determined under IRC section 68 for the disallowance of itemized deductions, shall be the amount of the federal itemized deductions actually allowed minus the total amount of state and local income tax before any limitation.

002.09B A taxpayer who itemizes deductions and elects to deduct state and local sales taxes in lieu of state income tax on his or her federal return will not add back the amount of this deduction.

002.09C A taxpayer deducting state income tax as a federal itemized deduction cannot elect to deduct sales and use taxes for state purposes.

002.10 Alternative method--nonresidents or partial-year residents. If the above provisions attribute more or less income tax to Nebraska than is reasonably attributable to income derived from sources within this state, the taxpayer may petition for, or the State Tax Commissioner may require, the employment of any other method to attribute to Nebraska an amount of income tax which is reasonable and equitable under the circumstances.

(Section 77-2715 R.R.S., 2003, and sections 77-2716, 77-2716.01, 77-2716.03, R.S.Supp., 2008. Nebraska Department of Revenue v. John Loewenstein, 513 U.S. 123 (1994). February 22, 2009.)

REG-22-003 INCOME OF NONRESIDENT INDIVIDUALS SUBJECT TO NEBRASKA INCOME TAX

003.01 Nebraska adjusted gross income for a nonresident individual is the nonresident's income from Nebraska sources after the adjustments provided in Reg-22-003.02. Income derived from Nebraska sources shall include, but not be limited to, items relating to real and tangible personal property, a business, trade, profession, or occupation, compensation for services, intangible property, small business corporations, partnerships, estates and trusts, and lottery and gambling winnings.

003.01A Real or tangible personal property. The ownership of any interest in real or tangible personal property located in Nebraska shall be sufficient to qualify any income, gain, or loss from such real or tangible personal property as derived from or connected with Nebraska sources. This would include rents or royalties from property located in Nebraska for any period of time during the taxable year, and any gain or loss from the sale of property located in Nebraska.

003.01B Business, trade, profession, or occupation. Income from sources in Nebraska as it relates to a business, trade, profession, or occupation carried on in Nebraska shall mean that portion of an individual's gross income that is reasonably and equitably attributable to Nebraska, irrespective of the accounting method employed.

The Nebraska source income of a business, trade, profession, or occupation shall be determined by use of the apportionment factor as provided for the taxing of corporations under the Nebraska Revenue Act and Reg-24-023. If the portion of taxable income derived from sources in Nebraska so determined does not reasonably and equitably reflect Nebraska source income, the Tax Commissioner may allow alternative methods of determining income from Nebraska sources.

003.01C Compensation for Services.

003.01C(1) Generally. Compensation received by a nonresident for services performed which are directly related to a business, trade, or profession carried on within Nebraska shall constitute income derived from Nebraska.

Compensation received by a nonresident will be considered Nebraska source income if the nonresident's services are performed entirely within Nebraska, if such services performed without Nebraska are incidental to the services performed within Nebraska, or if the services that have to be performed in Nebraska are an essential part of the services performed.

If the nonresident's service is performed without Nebraska for his or her convenience, but the service is directly related to a business, trade, or profession carried on within Nebraska and except for the nonresident's convenience, the service could have been performed within Nebraska, the compensation for such services shall be Nebraska source income.

When a taxpayer has performed some service in this state and the base of operations, or, if there is no base of operations, the place from which the services are directed or controlled is in this state, the compensation paid by a business, trade, or profession for all services of the taxpayer shall be income from Nebraska sources.

003.01C(2) Commissions. Income from commissions earned by a nonresident traveling salesman, agent, or other employee for services performed or sales made whose compensation depends directly on the volume of business transacted by him or her, may be allocated to Nebraska based upon specific identification of each item of income and expense. Allocation may be used only when the books and records of either the nonresident or his or her employer accurately reflect the business transacted and expenses incurred in Nebraska by the nonresident in connection therewith. If the books and records do not accurately reflect the business transacted and expenses incurred in Nebraska by the nonresident, the nonresident will include that proportion of the compensation received which the volume of business transacted by such employee within the State of Nebraska bears to the total volume of business transacted by him, or her, both within and without the state. (See Reg-21-006.01)

003.01C(3) Periodic employment in Nebraska. If a nonresident employee is employed in this state at intervals throughout the year and is paid on an hourly, daily, weekly, or monthly basis, the gross income from sources within this state must include that portion of the total compensation for personal services which the total number of working hours, days, weeks, or months employed within Nebraska compare to the total number of such working intervals both within and without the state. If the majority of the interval is spent within this state, then the entire interval is within this state. (See Reg-21-006.02 and Reg-21-006.04)

If a nonresident employee is paid on a mileage basis, the gross income from sources within Nebraska must include that portion of the total compensation for services which the number of miles traveled in Nebraska bears to the total number of miles traveled both within and without Nebraska. (See Reg-21-006.03)

If the nonresident employee is paid on some other basis, the total compensation for personal services must be apportioned between this state and other states and foreign countries in such manner as to attribute to Nebraska that portion of the total compensation which is reasonably attributable to personal services performed in the state.

003.01C(4) Services of fiduciary. Compensation paid by a resident trust or estate, as defined in Reg-23-001, for services by a nonresident fiduciary shall constitute income from sources within Nebraska.

003.01C(5) Professional services. Nonresident attorneys, physicians, engineers, architects, nurses, or any other professional people, even though not regularly employed in carrying on their profession in Nebraska, must include as income from sources within this state the entire amount of fees or compensation received for services performed in Nebraska as defined in Reg-21-003.01C(1) on behalf of their clients.

003.01C(6) Entertainers and athletes. Nonresident actors, singers, performers, wrestlers, boxers, professional athletes, etc., must include as income from sources within Nebraska the gross amount received from performances within the state.

003.01C(7) Military service members. Income derived from or connected with Nebraska sources does not include compensation paid to nonresidents for active duty service in the armed forces of the United States, even though such service is performed within Nebraska. If the service member has elected to file a joint Nebraska return with a Nebraska resident or partial-year resident, the nonresident's military income is deducted as an adjustment on the Nebraska return. (See Reg-22-013).

The term "service" means the service of an individual who is a member of the Army, Navy, Air Force, Marine Corps, or Coast Guard who is on active duty, as defined in section 101(d)(1) of title 10, United States Code, and in the case of an individual who is a member of the National Guard, includes service under a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days under section 502(f) of title 32, United States Code, for purposes of responding to a national emergency declared by the President and supported by Federal funds. The term also includes active service by an individual who is a commissioned officer of the federal Public Health Service or the National Oceanic and Atmospheric Administration.

The term service as used herein does not include service of a civilian in the employ of any branch of the armed forces nor does it include any individual, partnership, corporation or other association which, as an independent contractor, is performing service or supplying tangible property to any branch of the armed forces. All other nonresident federal employees who perform their services in Nebraska shall be deemed to have income derived from or connected with Nebraska sources.

003.01C(8) Pensions. Nonresidents who are receiving pensions, deferred compensation, or annuities based on services performed within Nebraska in an earlier tax year do not have income from Nebraska sources.

003.01C(9) Employees of Rail Carriers. Compensation paid by a rail carrier to a nonresident employee who performs regularly assigned duties on a railroad in more than one state is not included in Nebraska source income.

003.01C(10) Employees of Motor Carriers or Private Carriers. Compensation paid by a private carrier or a motor carrier providing transportation in interstate commerce subject to federal regulation to a nonresident employee who performs regularly assigned duties with respect to a motor vehicle in more than one state is not included in Nebraska source income.

003.01C(11) Employees of Air Carriers. Compensation paid by an air carrier to a nonresident employee who is regularly assigned duties on aircraft in more than one state is not included in Nebraska source income if the employee's scheduled flight time in Nebraska is fifty percent or less of the total scheduled flight time of the employee during the calendar year.

003.01D Intangible property.

003.01D(1) Interest and dividends. No tax is to be imposed on a nonresident receiving income which arises from annuities, interest on bank deposits, interest on bonds, notes or other interest bearing obligations, or dividends from corporations, except to the extent to which the same shall be a part of the taxable income from any business, trade, profession, or occupation carried on in Nebraska by the nonresident. Income from intangible property shall be a part of taxable income of a business, trade, profession, or occupation carried on within Nebraska when such property is acquired or used in the course of such business, trade, profession, or occupation.

003.01D(2) Gains and losses. Gains or losses from the sale, exchange, or other disposition of intangibles are not subject to tax by Nebraska, except to the extent to which the same shall be a part of the income from a business, trade, profession, or occupation carried on in the State of Nebraska by the nonresident taxpayer, even though the sale or disposition thereof may have been consummated within the state.

Likewise, losses sustained from the sale, exchange, or other disposition of stocks, bonds, or other intangibles under like conditions are not deductible from the Nebraska source income of the nonresident taxpayer, except to the extent that they are losses incurred in a business, trade, profession, or occupation carried on within Nebraska by the nonresident taxpayer.

003.01E S corporations.

003.01E(1) Nebraska source income. A nonresident stockholder of a small business corporation having an election in effect under Subchapter S of the Internal Revenue Code shall file a Nebraska income tax return and shall include as Nebraska source income that portion of the S corporation's income derived from or attributable to Nebraska. The nonresident shareholder shall file a Nebraska income tax return even though the income derived from the S corporation is the nonresident's only income derived from or attributable to Nebraska except as allowed under Reg-22-003.01E(3).

003.01E(2) Agreement to pay tax. A nonresident shareholder of an S corporation which has Nebraska income, may execute and forward to the corporation a Nebraska Nonresident Income Tax Agreement, Form 12N, which states that the nonresident will file a Nebraska income tax return and pay tax on all income derived from or connected with Nebraska sources. This agreement must be forwarded to the S corporation before the filing of the original corporate return.

003.01E(3) Withholding by an S corporation. In the absence of the above agreement, the S corporation must remit to the Nebraska Department of Revenue a percentage of the nonresident shareholder's Nebraska income. The percentage shall be the highest rate applicable to individuals. Upon request by any nonresident shareholder, the S corporation must complete a Statement of Nebraska Income Tax Withheld for Nonresident Individual, Form 14N. When an S corporation has made a remittance to the Nebraska Department of Revenue on behalf of a nonresident shareholder, such nonresident may choose not to file a return, and the amount withheld shall be retained in satisfaction of the liability, or such nonresident may file a return and claim the corporation's remittance as a credit against his or her Nebraska income tax liability.

003.01F Partnerships.

003.01F(1) Nebraska source income. A nonresident partner of a partnership shall file a Nebraska income tax return and shall include his or her distributive share of partnership income, gain, loss, and deduction from sources within Nebraska, except as allowed under Reg-22-003.01F(3).

003.01F(2) Agreement to pay tax. A nonresident partner of a partnership which has Nebraska income may execute and forward to the partnership a Nebraska Nonresident Income Tax Agreement, Form 12N, which states that the nonresident will file a Nebraska income tax return and pay tax on all income derived from or connected with Nebraska sources. This agreement must be forwarded to the partnership before the filing of the original partnership return.

003.01F(3) Withholding by partnership. In the absence of the above agreement, the partnership must remit to the Nebraska Department of Revenue a percentage of the nonresident partner's Nebraska income. The percentage shall be the highest rate applicable to individuals. Upon request by any nonresident partner, the partnership must complete a Statement of Nebraska Income Tax Withheld for Nonresident Individual, Form 14N. When a partnership has made a remittance to the Nebraska Department of Revenue on behalf of a nonresident partner, the nonresident partner may choose not to file a return and the amount withheld shall be retained in satisfaction of the liability, or such nonresident partner may file a return and claim the partnership's remittance as a credit against his or her Nebraska income tax liability.

003.01G Limited Liability Companies (LLC's).

003.01G(1) Nebraska source income. A nonresident member of an LLC shall file a Nebraska income tax return and shall include as Nebraska source income that portion of the LLC's income derived from or attributed to Nebraska, except as allowed under Reg-22-003.01G(3).

003.01G(2) Agreement to pay tax. A nonresident member of an LLC which has Nebraska income may execute and forward to the LLC a Nebraska Nonresident Income Tax Agreement, Form 12N, which states that the nonresident will file a Nebraska income tax return and pay tax on all income derived from or connected with Nebraska sources. This agreement must be forwarded to the LLC before the filing of the original partnership return.

003.01G(3) Withholding by LLC. In the absence of the above agreement, the LLC must remit to the Nebraska Department of Revenue a percentage of the nonresident member's Nebraska income. The percentage shall be the highest rate applicable to individuals. Upon request by any nonresident member, the LLC must complete a Statement of Nebraska Income Tax Withheld for Nonresident Individual, Form 14N. When an LLC has made a remittance to the Nebraska Department of Revenue on behalf of a nonresident member, the nonresident member may choose not to file a return and the amount withheld shall be retained in satisfaction of the liability, or such nonresident member may file a return and claim the LLC's remittance as a credit against his or her Nebraska income tax liability.

003.01H Estates and trusts.

003.01H(1) Nebraska source income. A nonresident beneficiary of a trust or estate shall be taxed only on items of income, gain, loss, or deduction which were derived from or connected with sources within Nebraska and which were taxable to him or her for federal income tax purposes. If a trust is classified as a Grantor Trust for federal income tax purposes, the nonresident grantor thereof shall be taxed on all items of income, gain, loss, or deduction which were derived from or connected with Nebraska sources, regardless of whether or not actually received. (See Reg-23-003 and Reg-23-004.04A(1)).

The residence of the fiduciary of an estate or trust will not be determinative as to whether income from intangibles is Nebraska source income. Nor shall the classification of a trust or estate as resident or nonresident have any effect upon the taxation of a nonresident beneficiary for his or her share of trust income, gain, or loss.

The character of income, gain, or loss from intangible personal property held in a trust or estate shall be the same with regard to a nonresident beneficiary (or a nonresident grantor of a Grantor Trust) as if said beneficiary (or grantor) had received the income, gain, or loss without the trust or estate.

003.01H(2) Agreement to pay tax. A nonresident beneficiary deriving Nebraska income from a trust or estate may execute and forward to the trust or estate a Nebraska Nonresident Income Tax Agreement, Form 12N, which states that the nonresident will file a Nebraska income tax return and pay tax on all income derived from or connected with Nebraska sources. This agreement must be forwarded to the trust or estate before the filing of the original fiduciary return.

003.01H(3) Withholding by fiduciary. In the absence of the above agreement, the estate or trust must remit to the Nebraska Department of Revenue a percentage of the nonresident beneficiary's income which was derived from or attributable to Nebraska sources. The percentage shall be the highest rate applicable to individuals. Upon request by any nonresident beneficiary, the estate or trust must complete a Statement of Nebraska Income Tax Withheld for Nonresident Individual, Form 14N. When a trust or estate has made a remittance to the Nebraska Department of Revenue on behalf of a nonresident beneficiary, the nonresident beneficiary may choose to file a return and the amount withheld shall be retained in satisfaction of the liability, or such nonresident beneficiary may file a return and claim the remittance made by the trust or estate as a credit against his or her Nebraska income tax liability.

003.01I Lottery and gambling winnings. All lottery winnings from a lottery game conducted pursuant to a Nebraska lottery are Nebraska source income. All winnings from any game or operation licensed under the Nebraska Bingo Act, the Nebraska Lottery and Raffle Act, the Nebraska County and City Lottery Act, the Nebraska Pickle Card Lottery Act, the Nebraska Small Lottery and Raffle Act or the State Lottery Act are Nebraska source income. All winnings from any other licensed or unlicensed operation involving any game of chance are Nebraska source income if the wager was placed in Nebraska, or any ticket, chance, or any other entry fee was purchased in Nebraska.

003.02 In determining Nebraska adjusted gross income of a nonresident individual, the following adjustments are made to the nonresident's income from Nebraska sources:

003.02A Payment as a self-employed person or partner to a ( self-employed SEP, SIMPLE, or other qualified retirement plan. A nonresident who is self-employed or a partner who pays into a qualified pension, profit sharing, annuity, or bond purchasing plan shall be allowed this federal deduction only to the extent of the ratio of the Nebraska self-employed or partnership income to the total self-employed or partnership income.

003.02B Payment to an IRA. A nonresident who pays into an IRA shall be allowed the federal deduction only to the extent of the ratio of the Nebraska self-employed income and wages to total self-employed income and wages.

003.02C One-half of self-employment tax. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska self-employed income to the total self-employed income.

003.02D Penalty on early savings withdrawal. A nonresident individual shall be allowed this deduction only to the extent that the penalty relates to interest reported as Nebraska source income.

003.02E Moving expenses. A nonresident individual may not deduct moving expenses allowed on the federal return.

003.02F Domestic production activities. A nonresident individual shall be allowed this deduction to the extent it is directly related to Nebraska source income.

003.02G Alimony paid. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

003.02H Educator expenses. A nonresident individual shall be allowed this deduction only as it relates to educational wages reported as Nebraska source income.

003.02I Student Loan Interest. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

003.02J Tuition and fees. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

003.02K Health Savings Account. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

003.02L Certain business expenses of reservists, performing artists, and fee-basis government officials. A nonresident individual shall be allowed this deduction to the extent it is directly related to Nebraska source income.

003.02M Domestic Production Activities Deduction. A nonresident individual shall be allowed this deduction to the extent it is directly related to Nebraska source income.

(Sections 77-2724, 77-2729, 77-2733, and 77-2768, R.R.S. 2003 and sections 77-2717, 77-2727, and 77-2734.01, R.S.Supp., 2008. February 22, 2009.)

REG-22-004 INCOME OF PARTIAL-YEAR RESIDENT INDIVIDUALS SUBJECT TO NEBRASKA INCOME TAX

004.01 Nebraska adjusted gross income for a partial-year resident individual is all income not taxed by another state which is earned while a resident and all income derived from Nebraska sources according to Reg-22-003, while a nonresident, after the adjustments provided in Reg-22-004.03.

004.02 Income taxed by another state. Income is taxed by another state if the income is subject to tax in the other state, a tax is actually imposed by the other state, and the tax is not satisfied by exemptions or credits, other than credits for estimated payments, withholding, or other taxes paid.

004.03 In determining Nebraska adjusted gross income of a partial-year resident, the following adjustments are made to the partial-year resident's income from Nebraska sources:

004.03A Payment as a self-employed person or partner to a ( self-employed SEP, SIMPLE, or other qualified retirement plan. A partial-year resident who is self-employed or a partner who pays into a qualified pension, profit sharing, annuity, or bond purchasing plan shall be allowed this federal deduction only to the extent of the ratio of the Nebraska self-employed or partnership income to the total self-employed or partnership income.

004.03B Payment to an IRA. A partial-year resident who pays into an IRA shall be allowed this federal deduction only to the extent of the ratio of the Nebraska self-employed income and wages to total self-employed income and wages.

004.03C One-half of self-employment tax. A partial-year resident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska self-employed income to the total self-employed income.

004.03D Penalty on early savings withdrawal. A partial-year resident individual shall be allowed this deduction only to the extent that the penalty relates to interest reported as Nebraska source income.

004.03E Moving expenses. A partial-year resident individual may only deduct moving expenses for a move into Nebraska.

004.03F Domestic production activities. A partial-year resident individual shall be allowed this deduction to the extent it is directly related to Nebraska source income.

004.03G Alimony paid. A partial-year resident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

004.03H Educator expenses. A nonresident individual shall be allowed this deduction only as it relates to educational wages reported as Nebraska source income.

004.03I Student Loan Interest. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

004.03J Tuition and fees. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

004.03K Health Savings Account. A nonresident individual shall be allowed this deduction only to the extent of the ratio of the Nebraska adjusted gross income to federal adjusted gross income after Nebraska adjustments.

004.03L Certain business expenses of reservists, performing artists, and fee-basis government officials. A nonresident individual shall be allowed this deduction to the extent it is directly related to Nebraska source income.

(Sections 77-2715, 77-2733.01, and 77-2772, R.R.S.2003. March 7, 2006.)

REG-22-005 LOSS CARRYOVER AND CARRYBACK

005.01 Nebraska Net Operating Losses. Losses realized on or after January 1, 1968, by an individual may be included for purposes of computing the Nebraska income tax. The appropriate federal rules will be used, except that no loss shall be carried back to income earned before January 1, 1968.

005.02 Federal Net Operating Losses and Capital Losses. Individual taxpayers who have deducted a federal net operating loss or a federal capital loss in computing their federal adjusted gross income shall add such deduction to their federal adjusted gross income in order to determine Nebraska taxable income.

005.03 Net Operating Loss Carryback and Carryover. An individual, who has incurred a Nebraska net operating loss, shall be allowed to carry back such loss for the period allowed by the Internal Revenue Code as an adjustment decreasing federal adjusted gross income in the prior year. If the taxable income for this period is not sufficient to absorb the entire loss, the individual is then entitled to a carryover of the remaining amount of the loss to the taxable years allowed by the Internal Revenue Code following the loss year. The loss will be absorbed in the earliest year of the above period that has taxable income. The provisions of the Internal Revenue Code shall be used in computing the amount of the loss available for carryover.

005.03A If an individual elects to forego the entire carryback period for a federal net operating loss and only deduct the losses during the carryover period, the election for federal purposes will be followed for Nebraska purposes with regard to a Nebraska net operating loss.

005.03B When an individual has incurred a Nebraska net operating loss, but has no federal net operating loss, the individual may elect to relinquish the carryback period for Nebraska purposes when the Internal Revenue Code provides for a similar election for federal purposes. The election must be made by attaching a statement to the Nebraska return and filing the return by the due date, including extensions, for the tax year of the net operating loss. Failure to timely file the election with the original return for the loss year will require the use of the carryback period. The election cannot be changed once it has been made.

005.04 Computation of Nebraska Net Operating Loss. In order to be deducted from income subject to Nebraska income tax under Reg-22-002, the net operating loss must be a Nebraska net operating loss which has been reported on a return filed for the loss year.

005.04A For a resident during the loss year, the Nebraska net operating loss is the reported federal net operating loss as adjusted within this paragraph.

005.04A(1) The loss will be increased by the amount of allowable adjustments to federal adjusted gross income, such as deductions for interest or dividend income from U.S. government bonds or other U.S. obligations and decreased by the amount of adjustments to federal adjusted gross income, such as additions for interest or dividends from obligations issued by states other than Nebraska.

005.04A(2) A loss may be created when the allowable adjustments exceed the federal adjusted gross income.

005.04B For tax years beginning before January 1, 1987, for a nonresident during the loss year, the Nebraska net operating loss is the loss that was derived from activities which would have generated Nebraska source income under Reg-22-003.

005.04C For tax years beginning before January 1, 1987, for a partial-year resident individual during the loss year, the Nebraska net operating loss is the loss that was derived from activities which would have generated Nebraska source income under Reg-22-004.

005.04D For tax years beginning on or after January 1, 1987, the net operating loss of a nonresident is the lesser of his or her federal net operating loss as adjusted pursuant to paragraph 005.04A(1) and his loss derived from Nebraska sources.

005.04E For tax years beginning on or after January 1, 1987, the net operating loss of a partial-year resident is the lesser of his or her federal net operating loss as adjusted pursuant to paragraph 005.04A(1) and the loss derived from Nebraska sources.

005.05 Nebraska Capital Losses. Individual taxpayers who have incurred, after December 31, 1967, a capital loss, may carry over the loss until the loss has been exhausted. Nonresident individuals and partial-year resident individuals who move out of the state will be allowed the same carryover period except that only net capital losses attributable to Nebraska sources may be carried forward and used to offset Nebraska source income. The appropriate federal capital loss carryover rules apply in reducing long term capital gains, short term capital gains, and ordinary income in the carryover year.

005.06 Any unused loss carryover or other deductions, which, under federal rules, may be passed on to beneficiaries because of the termination of an estate or trust, shall be recognized for Nebraska income tax purposes only if they were realized in the estate or trust on or after January 1, 1968. The termination date of the estate or trust shall not determine whether such losses or deductions were realized on or after January 1, 1968.

(Section 77-2716(2), R.S.Supp., 1998, and section 77-2714, R.R.S. 1996, and Altsuler v. Peters, 190 Neb. 113, 206 N.W.2nd 570 (1973). November 11, 1998.)

REG-22-006 Repealed .

REG-22-007 Repealed .

REG-22-008 Repealed .

REG-22-009 Repealed .

REG-22-010 Repealed .

REG-22-011 CREDIT FOR INCOME TAXES PAID BY A RESIDENT TO ANOTHER STATE, POLITICAL SUBDIVISION OF ANOTHER STATE, OR THE DISTRICT OF COLUMBIA

011.01 Residents are allowed a credit against the Nebraska individual income tax for income taxes paid to another state of the United States, or local subdivision. The amount of the credit allowable cannot exceed the Nebraska individual income tax due on the income subject to tax in the other state. The portion of the Nebraska tax that is due on the income subject to tax in the other state is calculated by multiplying the Nebraska individual income tax liability by a fraction, the numerator of which is the adjusted gross income subject to tax in both states and the denominator of which is the entire federal adjusted gross income as modified by the adjustments in Reg-22-002.04.

011.02 The credit is limited to income taxes actually paid to the other state. The credit may not be claimed on account of interest or penalties paid or for any nonrefundable credits used to satisfy the liability to another state. The credit may not be applied against any interest or penalties due. The credit may be applied against the Nebraska individual income taxes due for the same year.

011.03 The credit may be taken either at the time of filing the Nebraska returns or later and may be applied against the entire tax until the credit is exhausted. However, no credit will be allowed on account of income taxes imposed by another state until those taxes are actually paid.

011.03A A copy of the return or returns, upon which the taxes are assessed must be filed with the Nebraska Department of Revenue at the time the credit is claimed.

011.03B A statement showing the taxes withheld may be used for any jurisdiction that does not require a return.

011.03C If credit is claimed on account of a deficiency assessment made by another state, a certified copy of the notice assessing or proposing to assess a deficiency, a receipt showing the payment of the deficiency, and a statement conceding the accuracy of the deficiency, must be filed.

011.04 If, for any reason, the Nebraska taxes due have been paid before the credit is claimed, a refund claim accompanied by a copy of the return or returns upon which the taxes were assessed must be filed. If the refund claim is approved, the amount of the claim will either be allowed as a credit against the taxes due or refunded to the taxpayer.

011.05 If the taxpayer's return is changed, corrected, or amended, the taxpayer must file an amended return with the Nebraska Department of Revenue. See Reg-22-018.

011.06 A credit is only allowable for taxes that are properly paid to another state. If a taxpayer voluntarily files and pays a tax when not required to do so by the laws of the other state, the taxpayer has not properly paid a tax in another state.

011.07 If a husband and wife file separate Nebraska returns and also file separate returns in another state, neither may claim a credit on account of taxes paid by the other spouse to such state. If a husband and wife file a joint Nebraska return, the entire amount of taxes, subject to the limitations in this regulation, paid by either or both to another state may be claimed as a credit, regardless of whether the husband and wife file a joint return or separate return in such other state. If husband and wife file separate Nebraska returns but file a joint return in another state, each is entitled to credit for that portion of the total tax paid to such other state as the net income of each spouse that is taxed by such other state bears to the total net income taxed by such other state.

(Sections 77-2730, and 77-2788(8), R.R.S. 1996. November 11, 1998.)

REG-22-012 INDIVIDUAL INCOME TAX RETURNS; DUE DATE, PAYMENT OF TAX, AND SCHOOL DISTRICT INFORMATION

012.01 The due date for the Nebraska Individual Income Tax Return, and the date for payment of the Nebraska individual income tax is the 15th day of the fourth month following the close of the taxable year, or April 15 for calendar year taxpayers. If such due date falls on a Saturday, Sunday, or legal holiday, the filing of the return on the next day that is not a Saturday, Sunday, or legal holiday will be considered timely filed.

012.02 The date of a United States Postal Service postmark stamped on the envelope is the date of filing if the return was deposited in the mail, postage prepaid, and properly addressed to the Nebraska Department of Revenue. If there is no United States Postal Service postmark, the return must be received by the prescribed date to be timely filed. A postmark from a private postage meter is not a United States Postal Service postmark.

012.03 A taxpayer with a permanent place of abode or a domicile in Nebraska on the last day of the taxable year must enter the county in which the district is located, and the school identification number in the space provided on the return.

(Section 77-27,119(2)(a), R.S.Supp., 1998, and section 77-2768, R.R.S. 1996. November 11, 1998.)

REG-22-013 JOINT OR SEPARATE RETURNS

013.01 When a husband and wife, both of whom are either residents or nonresidents for the entire taxable year, have elected to file a joint federal return, they must file a joint Nebraska return; or if they have elected to file separate federal returns, they must file separate Nebraska returns.

013.01A If a military service member has elected to file a joint Nebraska return with a Nebraska resident or partial-year resident, the nonresident's military income for active duty service is deducted as an adjustment on the Nebraska return. (See Regulation 22-003)

013.02 If for some part of the year one spouse is a resident and the other is a nonresident and they have elected to file a joint federal return, they may either file separate Nebraska returns or they may elect to file a joint Nebraska return, in which case all income must be included as if both were residents during those parts of the year when either spouse was a resident. Where the resident and the nonresident spouses elect to file separate Nebraska returns, all amounts on the separate Nebraska returns must be computed as if they had filed separate federal returns.

013.03 When a husband and wife have elected to file a joint Nebraska return, they may revoke the election and file separate returns in the following manner:

013.03A Both spouses must file a separate Nebraska return with a “married, filing separate” status. The spouse whose social security number was listed first on the original Nebraska return must file an Amended Nebraska Individual Income Tax Return. The spouse whose social security number was listed as the "spouse's social security number” on the original return will file a Nebraska Individual Income Tax Return;

013.03B A copy of the actual federal joint return and copies of federal returns recomputed on a married filing separate basis must be attached to each of the spouses' returns;

013.03C Each Nebraska return as required in Reg-22-013.03A above must include the full name and social security number of the other spouse; and

013.03D Both spouses must sign each Nebraska return required in Reg-22-013.03A.

(Section 77-2732, R.R.S. 2003. March 7, 2006.)

REG-22-014 INDIVIDUAL INCOME TAX; EXTENSION OF TIME FOR FILING RETURN AND PAYMENT OF TAX

014.01 An extension of time granted by the Internal Revenue Service (IRS) to file a federal individual income tax return automatically extends the time for filing a Nebraska individual income tax return. An individual who has been granted an extension from the IRS is required to attach a copy of the federal application for automatic extension of time or the approved application for additional extension of time to the Nebraska return when filed.

014.02 The Nebraska Department of Revenue may grant an extension of time to file the Nebraska return even though an extension has not been granted to file the federal return. The Nebraska Application for Extension of Time to File a Nebraska Individual, Fiduciary, or Partnership Return, Form 2688N, must be filed on or before the original due date of the return.

014.02A The Nebraska Department of Revenue may grant additional extensions of time for filing a Nebraska return when the conditions warrant. However, no such additional extension will be granted for a period exceeding seven months from the original due date of the return.

014.02B U.S. citizens or residents, including military personnel, living outside the U.S. and Puerto Rico are granted an automatic extension up to and including the 15th day of the sixth month following the close of their tax year. A statement must be attached to the return noting entitlement to this automatic extension.

014.02C Members of the Armed Forces and civilians serving in support of the Armed Forces who serve in a designated combat zone or who are hospitalized outside the United States as a result of an injury received while in a combat zone can receive an extension of time to file and pay tax for the period of the combat service or hospitalization plus 180 days. This extension also applies to a taxpayer's spouse who wishes to file a joint return. A statement must be attached to the return noting entitlement to this extension.

014.02D Federal disaster areas. Any extension of time granted by the IRS to a taxpayer affected by a disaster may receive an extension of time to file a state individual income tax return.

014.03 An extension of time granted for filing an individual return also extends the time for payment of the tax, except as noted in Reg-22-014.02C above. However, interest will be imposed at the rate specified in section 45-104.02 of the Nebraska Revised Statutues, from the due date of the return until the date payment is received.

(Sections 77-2770, and 77-2788(1) and (2), R.R.S. 2003. March 7, 2006.)

REG-22-015 ADJUSTMENTS OF FEDERAL INDIVIDUAL INCOME TAX

015.01 Any changes made by the Internal Revenue Service in the taxpayer's federal income tax return must be reported to the Nebraska Department of Revenue by filing the appropriate Amended Nebraska Individual Income Tax Return for the taxable year involved. The amended return for Nebraska must be filed within ninety days of the final determination of the change. Reportable changes include all changes made to the federal return by the Internal Revenue Service Processing Center or any other Internal Revenue Service office.

015.02 Any adjustments made on federal amended returns which do not result in a federal refund or credit must be reported to the Nebraska Department of Revenue within ninety (90) days of the filing of the federal amended return. Any adjustments made on federal amended returns which result in a federal credit or refund must be reported to the Nebraska Department of Revenue within ninety (90) days of the taxpayer's receipt of proof that the federal credit or refund was accepted by the Internal Revenue Service or within any other applicable period provided by law, whichever is later.

015.02A Adjustments made on federal amended returns or by the Internal Revenue Service shall be reported to the Tax Commissioner by filing an Amended Nebraska Individual Income Tax Return, Form 1040XN, for the taxable year involved. The amended return for Nebraska must include copies of the federal amended return, Internal Revenue Service report, or other document which substantiates the adjustments claimed.

015.02B A taxpayer who files an amended return with the Internal Revenue Service as a protective claim is not required to file an amended return with Nebraska. The acceptance of the claim, or the payment of the refund, constitutes a federal change that must be reported. A protective claim is a claim filed to protect the taxpayer from the expiration of the statute of limitations while a separate action challenging a position of the Internal Revenue Service is pending.

015.03 The amended return for Nebraska must be filed separately and should not be attached to or filed with a return for another taxable year. Payment of any additional tax must accompany the amended return. In reporting any change to or amendment of the federal income tax return, the taxpayer must furnish the Nebraska Department of Revenue complete information regarding the amount of income reported and taxes paid to the United States. The report must also concede the accuracy of the final determination or give a statement outlining the specific errors of the final determination.

015.04 For the purpose of determining when adjustments in federal income tax constitute a final determination, the following acts will be considered to be a final determination even though the taxpayer and the Internal Revenue Service may still be contesting the amount due:

015.04A A decision by the tax court or a judgment, decree, or other order by a court of competent jurisdiction which has become final.

015.04B A closing agreement authorized by Section 7121 of the Internal Revenue Code which relates either to the total tax liability of the taxpayer for a particular taxable year or years or to one or more separate items affecting tax liability. A closing agreement becomes final for purposes of this regulation on the date of its approval by the Internal Revenue Service.

015.04C The final disposition by the Internal Revenue Service of a taxpayer's claim for a refund.

015.04D Any informal agreement between the taxpayer and the Internal Revenue Service made for the express purpose of serving as a determination in respect to the adjusted gross income, taxable income, or tax liability of the taxpayer. Such an agreement must include a waiver by the taxpayer of restrictions on assessment and the collection of any deficiencies resulting from the agreement.

015.04E The acceptance of an examining officer's findings in regard to the income of a partnership or a fiduciary.

015.04F The payment of any additional tax by the taxpayer. Any deposit made with the IRS that can be returned at the request of the taxpayer is not considered a payment of the tax by the taxpayer until the deposited amount is applied. The additional tax will be considered paid when the IRS applies the deposit.

015.04G Any other final judgment effecting changes in reported federal taxable income.

015.05 If a taxpayer fails to file an amended Nebraska return, the Nebraska Department of Revenue may mail to the taxpayer a notice of deficiency at any time. If a taxpayer properly files an amended return and reports any change in his or her federal adjusted gross income, taxable income, or tax liability, the Nebraska Department of Revenue may make an assessment relating only to the change at any time within two years after the report or amended return was filed.

015.06 Any change in the federal adjusted gross income, taxable income, or tax liability which has not been reported to the Internal Revenue Service cannot be used as the basis for a reduction in the Nebraska liability.

015.07 The amended return reporting a change that results in an overpayment of tax for Nebraska is a claim for credit or refund.

015.07A The amount of the credit or refund shall not exceed the amount of the Nebraska tax attributable to such federal change, correction, or the items amended on the federal return.

015.07B If the amended return is not filed within ninety days of the final determination of the change, interest shall not accrue after the ninetieth day.

015.07C If the amended return is not filed within two years and ninety days from the final determination of the change, no credit or refund shall be granted.

(Section 77-2793(4), R.R.S. 2003, and sections 77-2775(1), (3), and (4), and 77-2786(4), and (5), R.S.Supp., 2005. March 7, 2006.)

REG-22-016 METHODS OF ACCOUNTING

016.01 In computing income tax imposed under the Nebraska Revenue Act of 1967, as amended, the taxpayer's method of accounting must be the same as his or her method of accounting used for federal income tax purposes.

(Sections 77-2760, and 77-2772, R.R.S. 1943. September 15, 1975.)

REG-22-017 RECORDS

017.01 In general. Any person subject to tax under the Nebraska Revenue Act of 1967, as amended, or any person required to file an information return for the taxable year, shall keep such permanent books of account or records, including inventories and all supporting documents, as are sufficient to establish the amount of gross income, deductions, credits, or other matters which may be required to support any income tax or information return. Records of all fuel purchases must be retained if a credit for nonhighway use motor vehicle fuels was claimed.

017.02 Availability of books and records. Such books or records shall be kept available at all times for inspection by the Nebraska Department of Revenue or its agents for the purpose of ascertaining the correctness of any return or other document required to be filed under the Nebraska Revenue Act.

017.03 Retention of records. Each taxpayer shall retain all of his or her records relating to a taxable year as long as their contents may become material in the administration of any Nebraska tax laws. If the Nebraska Department of Revenue serves a notice of deficiency for a taxable year, the taxpayer shall retain all of his or her records relating to that taxable year until the deficiency has been satisfied, abated, settled, or disallowed.

(Section 77-2772, R.R.S. 1943, and section 77-27,119(3), R.S. Supp., 1980. February 14, 1981.)

REG-22-018 ADJUSTMENTS OF ANOTHER STATE’S INDIVIDUAL INCOME TAX

018.01 Any taxpayer who has claimed credit for tax paid to another state, and who receives changes made by another state in the taxpayer's state income tax return must report the changes to the Nebraska Department of Revenue within ninety days of the final determination of the change. Reportable changes include changes made to the state’s return by any competent authority of the state. In reporting any change to the other state’s tax return, the taxpayer must furnish the Nebraska Department of Revenue complete information regarding the amount of income reported and taxes paid to the other state. The report must also concede the accuracy of the final determination or give a statement outlining the specific errors of the final determination.

018.02 Any adjustments made by filing the other state’s amended returns or by the other state’s revenue service must be reported to the Nebraska Department of Revenue by filing an Amended Nebraska Individual Income Tax Return, for the taxable year involved. The amended return for Nebraska must be filed within ninety days of the filing of the amended return for the other state, and must include copies of any reports issued by state authorities. A taxpayer who files an amended return with the other state as a protective claim is not required to file an amended return with Nebraska. The acceptance of the claim, or the payment of the refund, constitutes a state change that must be reported. A protective claim is a claim filed to protect the taxpayer from the expiration of the statute of limitations while a separate action challenging a position of the other state is pending.

018.03 The amended return for Nebraska must be filed separately and should not be attached to or filed with a return for another taxable year. Payment of any additional tax must accompany the amended return.

018.04 For the purpose of determining when adjustments in state income tax constitute a final determination, the following acts will be considered to be a final determination even though the taxpayer and the other state may still be contesting the amount due:

018.04A A decision by a state tax court or a judgment, decree, or other order by a court of competent jurisdiction which has become final.

018.04B A closing agreement authorized by state law which relates either to the total tax liability of the taxpayer for a particular taxable year or years or to one or more separate items affecting tax liability. A closing agreement becomes final for purposes of this regulation on the date of its approval by the other state.

018.04C The final disposition by the other state of a taxpayer's claim for a refund.

018.04D Any informal agreement between the taxpayer and the other state made for the express purpose of serving as a determination in respect to the adjusted gross income, taxable income, or tax liability of the taxpayer. Such an agreement must include a waiver by the taxpayer of restrictions on assessment and the collection of any deficiencies resulting from the agreement.

018.04E The acceptance of an examining officer's findings in regard to the income of a partnership or a fiduciary.

018.04F The payment of any additional tax by the taxpayer. Any deposit made with the other state that can be returned at the request of the taxpayer is not considered the payment of the tax by the taxpayer. The additional tax will be considered paid when the other state applies the deposit.

018.04G Any other final judgment effecting changes in the reported taxable income in the other state.

018.05 If a taxpayer fails to report any change or correction which increases his or her federal adjusted gross income from the other state, taxable income, or tax liability, or fails to report any change or correction which is treated as a deficiency for the other state’s income tax purposes, or fails to file an amended Nebraska return, the Nebraska Department of Revenue may mail to the taxpayer a notice of deficiency at any time. If a taxpayer properly reports any change in his or her other state’s adjusted gross income, taxable income, or tax liability, the Nebraska Department of Revenue may make an assessment relating to the change at any time within two years after the report or amended return was filed.

018.06 Any change in the other state’s adjusted gross income, taxable income, or tax liability which has not been reported to the other state cannot be used as the basis for a reduction in the Nebraska liability.

018.07 The amended return reporting a change that results in an overpayment of tax for Nebraska is a claim for credit or refund.

018.07A The amount of the credit or refund shall not exceed the amount of the Nebraska tax attributable to such state’s change, correction, or the items amended on the other state’s return.

018.07B If the amended return is not filed within ninety days of the final determination of the change, interest shall not accrue after the ninetieth day.

018.07C If the amended return is not filed within two years and ninety days from the final determination of the change, or within then years of the original due date of the return, whichever is earlier, no credit or refund shall be granted.

(Section 77-2775(2), R.S.Supp., 1998, and sections 77-2786(4), and (5), and 77-2793(5), R.R.S. 1996. November 11, 1998.)

REG-22-019 CREDITS AGAINST THE NEBRASKA INDIVIDUAL INCOME TAX

019.01 Personal Exemption Credit. Beginning with the 1993 tax year, individuals are allowed a nonrefundable credit for each federal personal exemption allowed on the taxpayer's federal income tax return.

019.01A Indexing. The credit will be indexed by the method provided in Internal Revenue Code section 151 (IRC 151).

019.01B Higher income taxpayers. The credit will be reduced by five dollars, but not below zero, for every five thousand dollar increment of federal adjusted gross income (AGI) which exceeds a threshold. The threshold amounts will be adjusted for inflation by the method provided in IRC section 151. The Tax Commissioner shall provide a table for calculating the phase out of the credit.

019.02 Tax Paid to Another State. Nebraska resident individuals are allowed a nonrefundable credit for income tax they paid to another state or a local subdivision within another state. (See Reg-22-011).

019.03 Credit for Child and Dependent Care Expenses. A nonrefundable credit for Child and Dependent Care Expenses can be claimed by residents and partial-year residents. The credit is twenty-five per cent of the amount allowed on the federal return under IRC section 21. Taxpayers with AGI of twenty-nine thousand dollars or less can receive the credit under Reg-22-019.11.

019.03A A taxpayer whose federal credit is limited to his or her federal tax liability shall use the lesser amount when computing the Nebraska credit.

019.04 Credit for the Elderly or Disabled. Residents or partial-year residents may claim a nonrefundable credit for the elderly or disabled equal to one hundred per cent of the federal credit claimed under IRC section 22.

019.05 Community Development Assistance Act (CDAA) Credit. A nonrefundable credit may be claimed by individuals for contributions to approved projects of community betterment organizations under Chapter 13 of the Nebraska Revised Statutes.

019.05A The credit is allowed to any individual who or whose business firm has applied to the Department of Economic Development (DED) for authorization for a tax credit for a contribution to a certified program of a community betterment organization. This includes sole proprietors, partners of partnerships, members of limited liability companies, and shareholders of S corporations whose business has made the qualified contribution. DED may authorize a tax credit not to exceed forty percent of the total amount contributed by the business during its taxable year.

019.05A(1) The contribution must qualify as a charitable contribution under the Internal Revenue Code.

019.05A(2) A taxpayer claiming a CDAA credit must attach to his or her individual tax return a copy of the Statement of Nebraska Tax Credit, Form 1099NTC, received from DED that includes the amount of the credit granted by DED for the contribution made to the community betterment organization.

019.05A(3) Any tax credit may be carried over to the next five tax years immediately following the tax year in which the credit was first allowed.

019.06 . Nebraska Advantage Rural Development Act Credit. Individuals may claim a refundable credit if their business qualifies for such credit. Applications will be accepted for this credit on and after January 1, 2006. Taxpayers who submitted applications before January 1, 2006 under the Employment Expansion and Investment Incentive Act will receive any applicable credits under the rules and regulations of such Act.

019.06A. A taxpayer creating less than seventy-five percent of the jobs in the project agreement must repay one hundred percent of the job creation credits. In addition, a taxpayer creating less than seventy-five percent of the investment in the project agreement must repay one hundred percent of the investment tax credits.

019.07 Employment and Investment Growth Act Credit. Individuals may claim a nonrefundable credit if their business has a signed agreement with the Department of Revenue and qualifies for such credit.

019.07A Any income tax credit may be recaptured if the taxpayer fails to meet the required levels of employment or investment.

019.08 Wage Benefit Credit. Individuals may claim a nonrefundable credit for any wage benefit credit to which they are entitled under the Quality Jobs Act.

019.09 Income Tax Withholding. Individuals may claim a refundable credit for withholding.

019.10 Estimated Taxes. Individuals may claim a refundable credit for estimated taxes paid.

019.11 Refundable Credit for Child and Dependent Care Expenses. If federal adjusted gross income is twenty-nine thousand dollars or less, Nebraska residents or partial-year residents may claim a refundable credit for child and dependent care expenses equal to a percentage of the federal credit allowable under IRC section 21, whether or not the credit was limited by the federal tax liability.

019.11A The percentage of the federal credit allowed will be one hundred per cent if the taxpayer's federal adjusted gross income is not more than twenty-two thousand dollars. The percentage will be reduced by ten percent for each one thousand dollars, or fraction thereof, by which the reported AGI exceeds twenty-two thousand dollars.

019.11B Taxpayers filing for a refundable credit under Reg-22-019.11 may be required to attach a copy of the Child and Dependent Care Expenses, Form 2441 (Form 1040), or Child and Dependent Care Expenses, Schedule 2 (Form 1040A) filed with the Internal Revenue Service in order to document the credit that the taxpayer has claimed.

019.12 Nonhighway Use Motor Vehicle Fuel Tax Credit. For tax years through 2004, a taxpayer is entitled to the nonhighway use motor vehicle fuel credit on an individual income tax return in an amount determined under Reg-84-001 through Reg-84-006. This credit is refundable.

019.13 Refunds of Overpayment. Any overpayment of tax as a result of the refundable credits found in Reg-22-019.09 through Reg-22-019.12 will be refunded to the taxpayer upon filing a return and claiming the overpayment.

019.13A An overpayment of tax may be credited to the taxpayer's estimated tax for the following year if requested by the taxpayer on a timely filed return.

019.14 Nebraska Advantage Microenterprise Tax Credit. Individuals may claim a refundable credit if their business qualifies for such credit. Applications will be accepted for this credit on and after January 1, 2006.

019.15 Nebraska Advantage Act Credit. Individuals may claim a nonrefundable credit if their business has a signed agreement with the Department of Revenue and qualifies for such credit.

019.16 Nebraska Advantage Research and Development Act Credit. Individuals may claim a refundable credit if their business qualifies for such credit. Applications will be accepted for this credit on and after January 1, 2006.

019.17 Beginning Farmer Tax Credit. Individuals may claim a refundable credit on the Nebraska Individual Income Tax Return, if they qualify for such credit.

019.18 Nebraska Charitable Endowment Tax Credit. For tax years beginning on or after January 1, 2006, individuals may claim a nonrefundable credit for a percentage of planned gifts made to qualified endowments for charitable purposes. The credit may only be applied to the tax year in which the contribution is made.

019.18A A planned gift is an irrevocable contribution to a permanent qualified endowment using one of the following techniques authorized under the Internal Revenue Code of 1986, as amended:

019.18A(1) Charitable remainder trust (unitrust or annuity trust) that does not terminate or the beneficiaries interest in the trust is not assigned or contributed to the qualified endowment before the date of death of the beneficiaries or five years after the date of the contribution, whichever is earlier;

019.18A(2) Pooled income fund trust;

019.18A(3) Charitable lead trust (unitrust or annuity trust);

019.18A(4) Charitable gift annuity (current or deferred) contribution where the interest of the annuitants in the gift annuity cannot be assigned to the qualified endowment before the date of death of the annuitants, or five years after the date of the contribution; whichever is earlier;

019.18A(5) Charitable life estate agreement; or

019.18A(6) Paid-up life insurance policy.

019.18B A qualified endowment is a permanent, irrevocable endowment fund used for Nebraska charitable purposes and held by a Nebraska incorporated or established organization which is a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code, or held by a Nebraska incorporated or established bank or trust company holding the fund on behalf of a Nebraska tax-exempt organization.

019.19 Financial Institution Shareholder Credit. A shareholder of a financial institution organized as an S corporation may claim a credit for the financial institution tax paid by the corporation. The credit must be distributed by the corporation to the shareholders in the same manner as the income of the corporation is distributed.

019.20 Biodiesel Credit. A taxpayer who invests after January 1, 2008 and before January 1, 2015, in a biodiesel facility that manufactures B100 will receive a nonrefundable credit. The credit is thirty percent of the investment. The investment must be at risk in the form of an ownership interest or right to receive dividends and must remain invested for at least three years. The credit is limited to ten percent of the allowable credit in the first two years of production, and fifty percent of the allowable credit in the third year. The credit cannot exceed more than fifty percent of the taxpayer’s liability and may be carried over for up to fifteen years after the investment was made.

019.21 Earned Income Credit. For the tax year beginning on or after January 1, 2006, qualified resident individuals may claim a refundable credit of 8% of the federal credit allowed under section 32 of the Internal Revenue Code. For tax years beginning on or after January 1, 2007, qualified resident individuals may claim a refundable credit of 10% of the federal credit allowed under section 32 of the Internal Revenue Code.

(Sections 77-2730 and 77-2791, R.R.S 2003, section 13-207, R.R.S. 2007, and sections , 77-2715.07, 77-2716.01, 77-27,188, 77-27,188.01, 77-27,188.02 77-27,228 through 77-27,234, and 77-4105, R.S.Supp 2008. February 22, 2009.)

REG-22-020 SPECIAL CAPITAL GAINS

020.01 Any resident individual may make an election to subtract from federal adjusted gross income the capital gain from the sale of stock which meets the following conditions:

020.01A The stock must be the stock of a qualified corporation;

020.01B The stock must have been acquired by the individual while employed or on account of employment by the qualified corporation; and

020.01C The individual has not previously made an election for stock of a different qualified corporation.

20.02 A qualified corporation is a corporation which, at the time of the first sale or exchange for which the election was made, was in existence and actively doing business in Nebraska for at least three years and had at least five shareholders and at least two groups of unrelated shareholders, with not more than ninety percent of the stock being held by a single related group of shareholders.

020.02A A qualified corporation includes a predecessor or successor corporation which was a party to a reorganization during or after the employment of the person making the election and which reorganization was entirely or substantially tax free.

020.02B A qualified corporation includes a member of a unitary group of corporations if any member of the unitary group meets the conditions listed in Reg-020.02 above.

020.02C Two shareholders are considered to be related when one shareholder owns stock, either directly or indirectly, which if owned directly would be attributed to the other person under Internal Revenue Code section 318. In addition, the shareholders are related if one is the brother, sister, aunt, uncle, cousin, niece, or nephew of the other person who owns capital stock either directly or indirectly.

020.02C(1) Two shareholders who are otherwise unrelated are considered related if they are each related to the same person.

020.03 An employee of a corporation is a person who is paid wages or other payments which are subject to withholding under the Internal Revenue Code and are payments made by employers to employees.

020.04 If a person who has acquired stock of a qualified corporation while an employee of the corporation has died without making an election, the surviving spouse or the oldest surviving issue, if there is no surviving spouse, may make an election for such stock.

020.05 After an election has been made, the following persons and entities may subtract the capital gains from the sale of qualifying stock from federal adjusted gross income:

020.05A The employee,

020.05B The spouse and issue of the employee to the extent the capital gain is from the sale or exchange of stock received from the employee through an intervivos gift, and

020.05C A trust which received the stock from the employee in an intervivos transfer for the benefit of the employee's spouse or issue.

020.06 Capital gains from the sale of stock which has been received by the spouse or issue of the employee through inheritance or which was sold by a testamentary trust does not qualify.

020.07 The amount of capital gain subtracted from federal adjusted gross income cannot exceed the amount of capital gain reported on the taxpayer's income tax return by more than three thousand dollars ($3,000.00) or one thousand five hundred dollars ($1,500.00) if a married filing separate return is filed. On a joint return, if both spouses have capital gains which qualify as special capital gains, the total amount of capital gains subtracted by both spouses cannot exceed the total capital gains reported on their joint return by more than three thousand dollars ($3,000.00).

020.07A To the extent that the capital gain attributable to the sale of qualified stock cannot be subtracted because of the limitation provided in Reg-22-020.07, the excess can be carried forward to the next succeeding year and used to the extent that it does not exceed the limitation found in Reg-22-020.07. Any remaining excess can be carried forward until it has been used.

(Sections 77-2715.08 and 77-2715.09, R.R.S. 2003. March 7, 2006.)

History

• Effective 2009-02-22

Chapter 23 Fiduciary Income Tax Regulations

Neb. Admin. Code tit. 316, ch. 23 Fiduciary Income Tax Regulations {#sec-316-nac-23 omnilex-key=us-ne-regs-official--title-316--316 NAC 23}

REG-23-001 Definition of the Term Resident Estate or Trust

001.01 A resident estate or trust includes:

001.01A The estate of a decedent who at his or her death was domiciled in Nebraska,

001.01B A trust or portion of a trust which consists of property transferred by the last will and testament of a decedent, who, at his or her death, was domiciled in Nebraska,

001.01C A trust or portion of a trust which was created by or which consists of property of a person domiciled in this state at the time the trust became irrevocable.

001.02 A trust or portion of a trust becomes irrevocable when the person whose property constitutes such trust may no longer exercise the power to revest the title to such property in himself or herself.

001.03 If the settlor of a trust is domiciled in Nebraska when the trust becomes irrevocable, the trust will be considered a resident trust for the entire life of the trust. Such a trust is a resident trust even though the situs of the trust, the property held in trust, or the trustee are located in another state. (For further discussion of the term domicile, see Reg-23-002.)

001.04 If a trust is one resulting from the dissolution of a Nebraska corporation, it is a resident trust.

001.05 No trust shall be deemed to be a resident trust merely because the governing instrument or a rule of conflict of law adopts the law of Nebraska with respect to the interpretation or administration of the trust. If a trust meets the requirements of the definition of a resident trust, it shall not be deemed to be a nonresident trust only because the governing instrument or a rule of conflicts of law adopts the law of a state other than Nebraska with respect to the interpretation or administration of the trust.

(Section 77-2714.01(6), R.R.S. 1996. November 11, 1998.)

REG-23-002 Definition of the Term Nonresident Estate or Trust Domicile

002.01 A nonresident estate or trust is every estate or trust which is not a resident estate or trust and includes:

002.01A The estate of a decedent who was not domiciled in Nebraska at his or her death,

002.01B A trust which consists of property transferred by the last will and testament of a decedent who at his or her death was not domiciled in Nebraska,

002.01C A trust which consists of property of, or was created by, a person not domiciled in Nebraska at the time the trust became irrevocable.

002.02

002.02A The term domicile shall mean the place where a person has his or her true, fixed, and permanent home and principle establishment and to which, whenever he or she is absent, he or she has the intent to return. Once a domicile is acquired, it is presumed to continue until a new domicile is acquired. A change of domicile requires an actual change of residence coupled with the intention to permanently abandon the former domicile.

002.02B It is possible for an individual to be a resident of another state for the purposes of voting, paying taxes, attending schools of higher education as a resident, or exercising other privileges of a resident of that state and still be domiciled in Nebraska if he or she did not have the intent to permanently abandon his or her former home in Nebraska.

002.02C An unemancipated minor's domicile is usually the same as his or her parents and the domicile of the parents is usually the same as the residence of their minor children.

002.02D An estate or trust, once established as a resident estate or trust, cannot be changed to a nonresident estate or trust because of the change of residence of any of the parties involved, or of the change in location of any of the property involved.

002.03 In determining whether an estate or trust is resident or nonresident, the residence of the executor or administrator or trustee shall not be considered. Neither the residence of the beneficiaries (unless one is the settlor also) nor the situs of the trust or estate shall be determinative as to the residence or nonresidence of the trust or estate.

002.04 If the governing instrument or a rule of conflicts of law adopts the law of a state other than Nebraska for purposes of interpretation or administration of a trust, the trust does not become a nonresident trust.

(Section 77-2714.01 R.R.S. 1996. November 11, 1998.)

REG-23-003 Entities which are not Included in the Taxation of Estates and Trusts

003.01 The term estate refers only to the estates of deceased persons and does not include such estates as those which are maintained for minors, persons adjudicated incompetent, or for any person who is suffering from some other legal disability. The Nebraska income tax liability for these persons shall be computed on the same form (Form 1040N or Form 1040NS) as that used for any other individual taxpayer but it may be prepared in the name of the disabled individual and signed by the guardian or conservator. None of the particular provisions of the act which refer to trusts and estates apply to these situations.

003.02 Trusts, which are taxed as corporations under the Internal Revenue Code, shall be taxed as corporations under the Nebraska Revenue Act of 1967, as amended. A trust which, by reason of its purposes or activities, is exempt from federal income tax, is also exempt from Nebraska income tax except as to unrelated business taxable income.

003.03 Receivers and trustees in bankruptcy shall have the same duties with respect to Nebraska income tax as they have under the Internal Revenue Code, and they shall file the Nebraska income tax return that corresponds to the income tax return required for federal income tax purposes.

(Section 77-2717 R.R.S. 1996. November 11, 1998.)

REG-23-004 Taxation of Resident and Nonresident Estates and Trusts

004.01 Resident trusts and estates. The Nebraska income tax is imposed for each taxable year on the adjusted federal taxable income of the fiduciary. The tax is a percentage of the taxpayer's adjusted federal taxable income for the taxable year plus a percentage of the federal alternative minimum tax and the federal tax on premature or lump-sum distributions from qualified retirement plans.

004.02 Nonresident trusts and estates. The Nebraska income tax is imposed for each taxable year on the income of every nonresident trust or estate which is derived from sources within Nebraska. The tax is a percentage of the tax owed by a resident estate or trust with the same adjusted federal taxable income. The percentage is determined by dividing Nebraska source income as determined in paragraph 004.04 by adjusted federal taxable income after the adjustments provided in paragraph 004.03.

004.03 Determining adjusted federal taxable income. Adjusted federal taxable income is the amount of federal taxable income of the fiduciary after the adjustments provided in paragraphs 004.03A through 004.03G.

004.03A Income from federal obligations. There shall be subtracted any interest and dividends received on United States obligations to the extent such interest and dividends are included in federal taxable income but exempt from state income taxes under the laws of the United States. The amount subtracted on account of such interest and dividends must be reduced by any interest on indebtedness incurred to carry such obligations and by any expense incurred in the production of such income to the extent such expense or interest was deducted in determining federal taxable income.

004.03A(1) United States obligations which are exempt include the following:

004.03A(1)(a) Series E, F, G, and H savings bonds;

004.03A(1)(b) United States Treasury bills;

004.03A(1)(c) U.S. Government notes;

004.03A(1)(d) U.S. Government bonds;

004.03A(1)(e) U.S. Government certificates;

004.03A(1)(f) Interest on debentures issued to mortgages of mortgagees foreclosed under provisions of the National Housing Act if insured after February 3, 1938;

004.03A(1)(g) Retirement bond as provided by I.R.C. 409;

004.03A(1)(h) Federal Farm Credit Bank Consolidated System wide bonds;

004.03A(1)(i) Federal Land Banks and Associations;

004.03A(1)(j) Federal Intermediate Credit Bank;

004.03A(1)(k) Commodity Credit Corporation;

004.03A(1)(l) Federal Farm Mortgage Corporation;

004.03A(1)(m) Federal Home Loan Banks;

004.03A(1)(n) Reconstruction Finance Corporation;

004.03A(1)(o) General Services Administration Participation Certificates;

004.03A(1)(p) Central Bank for Cooperatives (interest only);

004.03A(1)(q) Federal Reserve Banks;

004.03A(1)(r) Federal Savings and Loan Insurance Corporation;

004.03A(1)(s) Production Credit Association (interest only);

004.03A(1)(t) Tennessee Valley Authority Bonds;

004.03A(1)(u) Postal Service Bonds;

004.03A(1)(v) Federal Deposit Insurance Corporation (interest only); and

004.03A(1)(w) Student Loan Marketing Association (interest only).

004.03A(2) Income from Regulated Investment Companies investing directly in U.S. Government obligations is subtracted to the extent it represents income from U.S. Government obligations.

004.03A(3) Interest income from repurchase agreements involving U.S. Government obligations shall not be subtracted.

004.03B Income from State and Local Obligations. There shall be added any interest and dividends received from state and local obligations, other than obligations issued by the state of Nebraska or its political subdivisions, to the extent such interest and dividends are excluded from federal gross income. The amount added on account of such interest and dividends may be reduced by any interest on indebtedness incurred to carry such obligations and by any expense incurred in the production of such income to the extent such expense or interest was not deducted in determining federal taxable income.

004.03B(1) Dividends and income received from Regulated Investment Companies which are attributable to obligations described in paragraph 004.03B shall be added.

004.03C Income and Losses from S Corporations and Limited Liability Companies (LLCs). Income and losses from S Corporations and LLCs shall be treated in the following manner.

004.03C(1) There shall be subtracted any income from S Corporations and LLCs which was not connected with or derived from Nebraska sources.

004.03C(2) There shall be added any loss from S Corporations and LLCs which was not connected with or derived from Nebraska sources.

004.03D Dividends Received from a Corporation not Subject to the Internal Revenue Code (IRC). There shall be subtracted any dividend which was received from a corporation which was not subject to the IRC.

004.03E Special Capital Gains. There shall be subtracted capital gains for which an election has been exercised under Reg-22-020.

004.03F Nebraska Net Operating Losses. A net operating loss carry back or carryover shall be subtracted as provided in Reg-23-013.

004.03G Federal Net Operating Loss Deduction. A federal net operating loss carry back or carry forward used to compute federal taxable income shall be added.

004.04 Income attributable to Nebraska Sources Nonresident Trusts and Estates. The income attributable to Nebraska sources includes those items directly associated with:

004.04A Real or tangible personal property located within the state,

004.04B A business, trade, profession, or occupation carried on within the state,

004.04C Services performed within the state,

004.04D Intangible personal property, including annuities, dividends, interest, and gains from the sale or exchange of intangible personal property, to the extent that such income is from property employed in a business, trade, profession, or occupation carried on within the state.

004.05 IRC Section 443. The annualization of tax for short period returns is not required for computing regular tax liability.

004.05A The method used for computing federal alternative minimum tax, including annualization as provided under IRC Section 443, must also be used to recompute the federal tax for Nebraska purposes.

(Sections 77-2717, 77-2724, and 77-2725, R.R.S. 1996. Nebraska Department of Revenue v. John Loewenstein, 513 U.S. 123 (1994). November 11, 1998.)

REG-23-006 Fiduciaries for Nonresident Alien Beneficiaries

006.01 A fiduciary or other person charged with the care of the personal property of a nonresident alien individual shall make a Nebraska income tax return for that individual and pay any tax due unless:

006.01A The nonresident alien individual files a Nebraska income tax return and pays the income tax on income derived from the personal property,

006.01B A responsible representative or agent in the United States of the nonresident alien individual files a Nebraska income tax return and pays the Nebraska income tax on the income of the nonresident alien individual, or

006.01C The nonresident alien individual has appointed a person in the United States to act as his or her agent for the purpose of making a return of income and, if such fiduciary is required to file a Form 1041N for an estate or trust of which such alien individual is a beneficiary, such fiduciary attaches a copy of the agency appointment to his or her return on Form 1041N.

006.02 The tax reported pursuant to paragraph 006.01 shall be computed in the same manner as is the tax for any other Nebraska nonresident individual.

006.03 In general, the federal rules and regulations shall apply for Nebraska purposes.

(Section 77-2724, R.R.S. 1996. November 11, 1998.)

REG-23-007 Nonresident Beneficiaries - Agreements to Pay - Withholding from Beneficiary

007.01 Nebraska Nonresident Income Tax Agreement. A nonresident beneficiary deriving Nebraska taxable income from a trust or estate is required to execute and forward to the trust or estate a Nebraska Nonresident Income Tax Agreement, Form 12N, which states that the nonresident will file a Nebraska income tax return and pay tax on all income derived from or connected with Nebraska sources. This agreement should be forwarded to the trust or estate before the original due date of the fiduciary return which is the 15th day of the fourth month following the close of its taxable year. The fiduciary shall attach the completed Form 12N to the fiduciary return. Any nonresident who files Form 12N to avoid withholding must file a Nebraska income tax return.

007.02 Nonresident Withholding. In the absence of the above agreement, the estate or trust shall withhold and remit to the Nebraska Department of Revenue an amount equal to the highest individual income tax rate multiplied by the nonresident beneficiary's share of distributable income which was derived from or attributable to Nebraska sources. The fiduciary must report the amount withheld from each beneficiary on a Statement of Nebraska Income Tax Withheld for Nonresident Individual, Form 14N, with one copy attached to the fiduciary return. The full amount of the withholding is, at the taxpayer's option, retained in lieu of the filing of an income tax return. Any nonresident who so desires can still file a return and claim a refund if there is one due. When a trust or estate has made a remittance to the Nebraska Department of Revenue on behalf of a nonresident beneficiary, the nonresident beneficiary will be allowed his or her share of the remittance made by the trust or estate as a credit against his or her Nebraska income tax liability.

(Section 77-2717, R.R.S. 1996. November 11, 1998.)

REG-23-008 Credits Against the Nebraska Tax

008.01 Credit for tax paid to another state. Only resident estates or trusts can claim credit for income tax paid to another state, political subdivision of another state, or the District of Columbia.

008.01A The maximum credit allowed for taxes paid to another state is the lesser of the computed tax credit or the actual tax paid, not to exceed the Nebraska income tax. The computed tax credit is calculated by dividing the taxable income from the other state by the Nebraska adjusted federal taxable income of the fiduciary, and multiplying the quotient by the Nebraska income tax.

008.01B The only acceptable supporting document for the credit claimed for income tax paid to another state is a signed copy of the income tax return filed with the state for which the credit is claimed. If the estate or trust is claiming credit for income tax paid to a political subdivision of another state in which no annual income tax return is required, then a W-2 statement supporting the credit claim should be attached to the return.

008.02 Nonhighway use motor fuel credit. For tax years ending before January 1, 2005, an estate or trust may claim a refundable credit for nonhighway use motor fuel pursuant to the provisions of Reg-84-001 through Reg-84-006. For tax years ending after December 31, 2004, estates and trusts may obtain a direct refund of the fuels tax paid by filing a refund claim with the Department of Revenue's Motor Fuels Division.

008.03 Community Development Assistance Act (CDAA) Credit. A nonrefundable credit may be claimed by a fiduciary for an estate which operates a business firm with contributions to approved projects of community betterment organizations under Chapter 13 of the Nebraska Revised Statutes .

008.03A The credit is allowed where a business firm has applied to the Department of Economic Development (DED) for authorization for a tax credit for a contribution to a certified program of a community betterment organization. DED may authorize a tax credit not to exceed forty percent of the total amount contributed by the business during its taxable year.

008.03A(1) The contribution by the business must qualify as a charitable contribution under the Internal Revenue Code.

008.03A(2) A taxpayer claiming a CDAA credit must attach to its fiduciary income tax return a copy of the Statement of Nebraska Tax Credit, Form 1099NTC, received from DED that includes the amount of the credit granted by DED for the contribution made to the community betterment organization.

008.03A(3) Any tax credit may be carried over to the next five tax years immediately following the tax year in which the credit was first allowed.

008.04 Nebraska Advantage Rural Development Act Credit. Fiduciaries may claim a refundable credit if their business has a signed agreement with the Department of Revenue and qualifies for such credit. Applications will be accepted for this credit on and after January 1, 2006. Taxpayers who submitted applications before January 1, 2006 under the Employment Expansion and Investment Incentive Act will receive any applicable credits under that Act.

008.04A A taxpayer creating less than seventy-five percent of the jobs in the project agreement must repay one hundred percent of the job creation credits. In addition, a taxpayer creating less than seventy-five percent of the investment in the project agreement must repay one hundred percent of the investment tax credits.

008.05 Employment and Investment Growth Act Credit. Fiduciaries may claim a nonrefundable credit if their business has a signed agreement with the Department of Revenue and qualifies for such credit. Applications under this Act will be accepted through December 31, 2005. Agreements pending, approved, or entered into before January 1, 2006 will remain in full force and effect.

008.05A Any income tax credit may be recaptured if the taxpayer fails to meet the required levels of employment or investment.

008.06 Wage Benefit Credit. Fiduciaries may claim a nonrefundable credit for any wage benefit credit to which they are entitled under the Quality Jobs Act.

008.07 Income tax withholding. Fiduciaries may claim a refundable credit for withholding.

008.08 Nebraska Advantage Act Credit. Fiduciaries may claim a nonrefundable credit if their business has a signed agreement with the Department of Revenue and qualifies for such credit. Applications will be accepted beginning January 1, 2006. Taxpayers who fail to meet the terms of the agreement shall be subject to recapture or disallowance of the Nebraska Advantage Act incentives.

008.09 Nebraska Advantage Microenterprise Tax Credit Act. Fiduciaries which are actively engaged in the creation or operation of a microbusiness in a distressed area may claim a refundable credit if their business has a signed agreement with the Department of Revenue and qualifies for such credit. Applications may be filed under this Act beginning January 1, 2006. Tax credits will not be allowed for taxpayers receiving benefits under the Employment and Investment Growth Act, the Nebraska Advantage Act, or the Nebraska Advantage Rural Development Act.

008.10 Nebraska Advantage Research and Development Act Credit. Fiduciaries operating a business which is subject to Nebraska sales tax may claim a refundable credit for expenditures in research and experimental activities defined in section 174 of the Internal Revenue Code. Fiduciaries which are exempt from income tax under section 501(a) of the Internal Revenue Code do not qualify for this credit.

008.10A The credit may be claimed for a maximum of five consecutive tax years. The fiduciary may make its first claim for tax years beginning on and after January 1, 2006 through tax years beginning prior to January 1, 2011. The credit may also be claimed in the four tax years immediately following the year in which the credit was first claimed.

008.11 Planned Gift and Contribution Credit. For tax years beginning on or after January 1, 2006, fiduciaries may claim a nonrefundable credit for planned gifts and contributions to qualified endowments. The credit cannot include any contribution claimed as a deduction on the state tax return. The credit may only be applied to the tax year in which the contribution is made.

008.12 Beginning Farmer Tax Credit Act. A resident trust may claim a refundable credit on the Nebraska Fiduciary Income Tax Return, if it qualifies for such credit.

(Section 77-2725, and 77-2730, R.R.S. 2003, sections 66-4,124, and 66-726, R.S.Supp., 2004, and sections 77-2715.07, 77-2717, 77-27,188, 77-27,233, and 77-5726, R.S.Supp., 2005. March 7, 2006.)

REG-23-009 Filing of Returns and Payment of Tax

009.01 Filing Date. The Nebraska Fiduciary Income Tax Return, Form 1041N, must be filed on or before the fifteenth day of the fourth month following the close of the taxable year of the estate or trust.

009.01A Simple trusts do not have to file a fiduciary return if all of the trust’s beneficiaries are residents of the State of Nebraska, all of the trust’s income is derived from sources within Nebraska, and the trust has no federal tax liability.

009.02 Extension of Filing Date. The fiduciary return may be filed at a later date if the fiduciary has obtained an extension of time.

009.02A The Tax Commissioner may grant a reasonable extension of time, not to exceed seven (7) months, for the filing of the return. Such an extension must be requested prior to the prescribed due date for the filing of the return or during the period of a federal extension to avoid levy of penalty. Application should be made on the Application for Automatic Extension of Time to File a Nebraska Corporation, Fiduciary, or Partnership Return, Form 7004N.

009.02B Form 7004N is not required to be filed if the Internal Revenue Service has already granted an extension of time for filing the return. In this instance the due date for filing the comparable Nebraska return is automatically extended for the same period as the federal extension. However, a copy of the federal application for automatic extension of time or other documentation showing the Internal Revenue Service granted an extension of time to file must be attached to the Nebraska return when filed.

009.03 Effect of Extension on Payment of Tax. An extension of time granted for filing a fiduciary return also extends the time for payment of the tax. However, interest will be imposed at the rate specified in section 45-104.02, from the due date of the return until the date payment is received.

(Sections 77-2768, 77-2770, and 77-2788(1) and (2), R.R.S. 2003, and section 77-2717(2),R.S.Supp., 2008. February 22, 2009.)

REG-23-010 Adjustments of Federal Income Tax

010.01 Requirements as to reporting changes made by the Internal Revenue Service. Any changes made by the Internal Revenue Service in the estate's or trust's federal income tax return must be reported by filing the appropriate amended Nebraska fiduciary income tax return for the taxable year involved. The amended return for Nebraska must be filed within ninety (90) days of the final determination of the change. Reportable changes include all changes made to the federal return by the Internal Revenue Service Processing Center or any other Internal Revenue Service office.

010.02 Method of reporting changes. Any adjustments made on a federal amended return which do not result in a federal refund or credit must be reported to the Nebraska Department of Revenue within ninety (90) days of the filing of the federal amended return. Any adjustments made on a federal amended return which result in a federal credit or refund must be reported to the Nebraska Department of Revenue within ninety (90) days of the taxpayer's receipt of proof that the federal credit or refund was accepted by the Internal Revenue Service or within any other applicable period provided by law, whichever is later.

010.02A Adjustments made on a federal amended return or by the Internal Revenue Service shall be reported to the Tax Commissioner by filing an amended Nebraska Fiduciary Income Tax Return for the taxable year involved.

010.02A(1) The amended return for Nebraska must be filed separately and should not be attached to a return for another taxable year. Payment of any additional tax must accompany the amended return. In reporting any change to, or amendment of, the federal income tax return, the taxpayer must furnish the Nebraska Department of Revenue complete information regarding the amount of income reported and taxes paid to the United States. The report must include copies of the federal amended return, Internal Revenue Service report, or other document which substantiates the adjustments claimed and concede the accuracy of any final determination or give a statement outlining the specific errors of the final determination.

010.03 Final determination. For the purpose of determining when adjustments in federal income tax constitute a final determination, the following acts will be considered to be a final determination even though the taxpayer and the Internal Revenue Service may still be contesting the amount due:

010.03A A decision by the tax court or a judgment, decree, or other order by a court of competent jurisdiction which has become final;

010.03B A closing agreement authorized by Section 7121 of the Internal Revenue Code which relates either to the total tax liability of the taxpayer for a particular taxable year or years or to one or more separate items affecting tax liability. A closing agreement becomes final for purposes of this regulation on the date of its approval by the Internal Revenue Service;

010.03C The final disposition by the Internal Revenue Service of a taxpayer's claim for a refund;

010.03D Any informal agreement between the taxpayer and the Internal Revenue Service made for the express purpose of serving as a determination in respect to the tax liability of the taxpayer. Such an agreement must include a waiver by the taxpayer of restrictions on assessment and the collection of any deficiencies resulting from the agreement;

010.03E The acceptance of an examining officer's findings in regard to the income of a partnership or a fiduciary;

010.03F The payment of any additional tax by the taxpayer. Any deposit made with the IRS that can be returned at the request of the taxpayer is not considered the payment of the tax by the taxpayer until the deposited amount is applied. The additional tax will be considered paid when the IRS applies the deposit; or

010.03G Any other final judgment effecting changes in reported federal taxable income.

010.04 Failure to report changes. If the fiduciary fails to file an amended Nebraska return, the Tax Commissioner may mail to the taxpayer a notice of deficiency at any time. If the fiduciary properly files an amended Nebraska return and reports any change in federal taxable income or federal tax liability, the Tax Commissioner may make an assessment relating only to the change at any time within two (2) years after the report or amended return was filed.

010.05 Claim for Credits or Refunds. The amended return reporting a change that results in an overpayment of tax for Nebraska is a claim for credit or refund.

010.05A The amount of the credit or refund shall not exceed the amount of the Nebraska tax attributable to such federal change, correction, or the items amended on the federal return.

010.05B If the amended return is not filed within ninety days of the final determination of the change, interest shall not accrue after the ninetieth day.

010.05C If the amended return is not filed within two years and ninety days from the final determination of the change, no credit or refund shall be granted.

(Section 77-2793(4), R.R.S. 2003, and sections 77-2775 77-2786(4), and (5) R.S.Supp., 2005. March 7, 2006.)

REG-23-011 Methods of Accounting

011.01 In computing income tax imposed under the Nebraska Revenue Act of 1967, as amended, the taxpayer’s method of accounting must be the same as his method used for federal income tax purposes.

(Sections 77-2760, and 77-2772, R.R.S. 1943. September 15, 1975.)

REG-23-012 Records

012.01 In general. Any person subject to tax under the Nebraska Revenue Act of 1967, as amended, or any person required to file an information return for the taxable year, shall keep such permanent books of account or records, including inventories and all supporting documents, as are sufficient to establish the amount of gross income, deductions, credits, or other matters which may be required to support any income tax or information return.

012.02 Availability of books and records. Such books or records shall be kept available at all times for inspection by the Tax Commissioner or any agent or representative designated by him for the purpose of ascertaining the correctness of any return or other document required to be filed under the Nebraska Revenue Act.

012.03 Retention of records. Each taxpayer shall retain all of his records relating to a taxable year as long as their contents may become material in the administration of any Nebraska tax laws. If the Tax Commissioner serves a notice of deficiency for a taxable year, the taxpayer shall retain all of his records relating to that taxable year until the deficiency has been satisfied, abated, settled, or disallowed.

(Sections 77-2772, R.R.S. 1943 and Section 77-27,119(3), R.S.Supp., 1974. September 15, 1975.)

REG-23-013 Loss Carryover and Carryback

013.01 Deduction of Net Operating Losses. Losses realized on or after January 1, 1968, by an estate or trust may be included for purposes of computing the Nebraska income tax. The appropriate federal rules will be used, except that no loss shall be carried back to income earned before January 1, 1968.

013.02 Period of Carryback or Carryover. An estate or trust, which has incurred a Nebraska net operating loss, shall be allowed to carry back such loss for the period allowed by the Internal Revenue Code (IRC) as an adjustment decreasing federal taxable in the prior year. If the taxable income for this period is not sufficient to absorb the entire loss, the estate or trust is then entitled to a carryover of the remaining amount of the loss to the taxable years allowed by the IRC following the loss year. The loss will be absorbed in the earliest year of the above period that the estate or trust has taxable income. The provisions of the IRC shall be used in computing the amount of the loss available for carryover.

013.02A If an estate or trust elects to forego the entire carryback period for a federal net operating loss and only deduct the losses during the carryover period, the election for federal purposes will be followed for Nebraska purposes with regard to a Nebraska net operating loss.

013.02B When an estate or trust has incurred a Nebraska net operating loss, but has no federal net operating loss, the estate or trust may elect to relinquish the carryback period for Nebraska purposes when the IRC provides for a similar election for federal purposes. The election must be made by attaching a statement to the Nebraska return and filing the return by the due date, including extensions, for the tax year of the net operating loss. Failure to timely file the election with the original return for the loss year will require the use of the carryback period. The election cannot be changed once it has been made.

013.03 Computation of a Net Operating Loss. In order to be deducted from income subject to Nebraska income tax under Reg-23-004, the net operating loss must be a Nebraska net operating loss which has been reported on a return filed for the loss year.

013.03A For a resident estate or trust, the Nebraska net operating loss is the reported federal net operating loss as adjusted within this paragraph.

013.03A(1) The loss will be increased by the amount of allowable adjustments decreasing federal taxable income, such as deductions for interest or dividend income from U.S. government bonds or other U.S. obligations and decreased by the amount of adjustments increasing federal taxable income, such as increases for interest or dividends from obligations issued by states other than Nebraska.

013.03A(2) A loss may be created when the allowable adjustments decreasing federal taxable income exceed the adjusted federal taxable income.

013.03B For tax years beginning before January 1, 1987, for a nonresident estate or trust during the loss year, the Nebraska net operating loss is the loss that was derived from activities which would have generated Nebraska source income under Reg-23-004.04.

013.03C For tax years beginning on or after January 1, 1987, the net operating loss of a nonresident estate or trust is the lesser of its federal net operating loss as adjusted pursuant to Reg-23-004.03 and its loss derived from Nebraska sources.

013.04 Capital Losses. Estates or trusts who have incurred, after December 31, 1967, a capital loss, may carry over the loss until the loss has been exhausted. The appropriate federal capital loss carryover rules apply in reducing long term capital gains, short term capital gains, and ordinary income in the carryover year.

013.05 Federal Net Operating Losses and Capital Losses. Estates or trusts which have deducted a federal net operating loss or a federal capital loss in computing their adjusted federal taxable income shall add such deduction to their adjusted federal taxable income in order to determine Nebraska taxable income.

(Section 77-2716(2), R.S.Supp., 1998, and section 77-2714, R.R.S. 1996. November 11, 1998.)

REG-23-014 Adjustments of Another State's Fiduciary Income Tax

014.01 Reporting Changes from Other States. Any fiduciary who is required to file an income tax return in another state, and who receives changes made by such state in the fiduciary's state income tax return which are material to the tax liability owed to this state or to the amount of distributable income attributable to Nebraska must report the changes to the Nebraska Department of Revenue within ninety days of the final determination of the change. Reportable changes include changes made to the states return by any competent authority of the state. In reporting any change to the other states tax return, the fiduciary must furnish the department complete information regarding the amount of income reported and taxes paid to the other state. The report must also concede the accuracy of the final determination or give a statement outlining the specific errors of the final determination.

014.02 Amended Returns Used to Report Changes. Any adjustments made by the other states amended returns or by the other states revenue service must be reported to the department by filing an amended Nebraska Fiduciary Income Tax Return for the taxable year involved. The amended return for Nebraska must be filed within ninety days of the filing of the amended return for the other state, and must include copies of any reports issued by state authorities. A fiduciary who files an amended return with the other state as a protective claim is not required to file an amended return with Nebraska. The acceptance of the claim, or the payment of the refund, constitutes a state change that must be reported. A protective claim is a claim filed to protect the taxpayer from the expiration of the statute of limitations while a separate action challenging a position of the other state is pending.

014.03 Each Amended Return is Filed Separately. The amended return for Nebraska must be filed separately and should not be attached to or filed with a return for another taxable year. Payment of any additional tax must accompany the amended return.

014.04 Final Determination. For the purpose of determining when adjustments in state income tax constitute a final determination, the following acts will be considered to be a final determination even though the taxpayer and the other state may still be contesting the amount due:

014.04A A decision by a state tax court or a judgment, decree, or other order by a court of competent jurisdiction which has become final.

014.04B A closing agreement authorized by state law which relates either to the total tax liability of the fiduciary for a particular taxable year or years or to one or more separate items affecting tax liability. A closing agreement becomes final for purposes of this regulation on the date of its approval by the other state.

014.04C The final disposition by the other state of a fiduciary's claim for a refund.

014.04D Any informal agreement between the fiduciary and the other state made for the express purpose of serving as a determination in respect to the taxable income or tax liability of the taxpayer. Such an agreement must include a waiver by the fiduciary of restrictions on assessment and the collection of any deficiencies resulting from the agreement.

014.04E The acceptance of an examining officer's findings in regard to the income of a partnership or fiduciary.

014.04F The payment of any additional tax by the fiduciary. Any deposit made with the other state that can be returned at the request of the fiduciary is not considered the payment of the tax by the taxpayer. The additional tax will be considered paid when the other state applies the deposit.

014.04G Any other final judgment effecting changes in the reported taxable income or distributable income in the other state.

014.05 Notice of Deficiency Determination after State Change. If a fiduciary fails to file an amended return reporting any change or correction which increases its Nebraska taxable income, tax liability, or distributable income, the department may mail a notice of deficiency to the fiduciary at any time. If a fiduciary properly reports any change in the other states taxable income, tax liability, or distributable income, the department may make an assessment relating to the change at any time within two years after the amended return was filed.

014.06 Failure to Report Change to Other State. Any change in the other states adjusted taxable income, tax liability, or distributable income which has not been reported to the other state cannot be used as the basis for a change or reduction in the Nebraska liability.

014.07 Claim for Credit or Refund. The amended return reporting a change that results in an overpayment of tax for Nebraska is a claim for credit or refund.

014.07A The amount of the credit or refund shall not exceed the amount of the Nebraska tax attributable to such states change, correction, or the items amended on the other states return.

014.07B If the amended return is not filed within ninety days of the final determination of the change, interest shall not accrue after the ninetieth day.

014.07C If the amended return is not filed within two years and ninety days from the final determination of the change, or within ten (10) years of the original due date of the return, whichever is earlier, no credit or refund shall be granted.

(Section 77-2775(2), R.S.Supp., 1998, and section 77-2786(4) and (5), and 77-2793(5), R.R.S. 1996. November 11, 1998.)

History

• Effective 2009-02-22

Chapter 24 Corporation Income Tax

Neb. Admin. Code tit. 316, ch. 24 Corporation Income Tax {#sec-316-nac-24 omnilex-key=us-ne-regs-official--title-316--316 NAC 24}

REG-24-001 ENTITIES SUBJECT TO THE CORPORATION INCOME TAX

001.01 Any corporation or any other entity taxed as a corporation under the Internal Revenue Code whether foreign, domestic or domesticated shall be subject to the Nebraska income tax; provided such corporate entity is not exempt under the provisions of Public Law 86-272 (15 U.S.C.A. 381-384, 1959) or is not a financial institution, and has part of its federal taxable income derived from sources within Nebraska.

001.01A Any income derived from activities in Nebraska is subject to the Nebraska income tax unless otherwise exempted by federal statute.

001.01B A financial institution is: (1) any bank, building and loan association, cooperative credit association, credit union, industrial loan and investment company, savings and loan association, or savings bank chartered or qualified to do business in this state, or any subsidiary of such financial institution; or (2) any bank, bank holding company or subsidiary of a bank holding company as defined in 12 U.S.C. 1841, affiliate of a bank holding company as defined in 12 U.S.C. 221a, building and loan association, cooperative credit association, credit union, industrial loan and investment company, savings and loan association, or savings bank which is not chartered to do business in this state but maintains a permanent place of business in this state and actively solicits deposits from residents of this state for an affiliate, regardless of whether the affiliate maintains an office in this state, in which event the deposits of the affiliate shall be deemed deposits of such institution.

(Sections 77-2734.02, 77-2734.04, and 77-3801, R.R.S. 1996. November 11, 1998.)

REG-24-003 EXEMPT ORGANIZATIONS

003.01 Tax-exempt status; Determination letter; Internal Revenue Service determination letter issued. Any organization transacting business in Nebraska and exempt from federal income tax for which a ruling or determination letter has been issued by the Internal Revenue Service is exempt from Nebraska income tax.

003.02 Tax-exempt status; Internal Revenue Service determination letter not issued. Any organization which is exempt under the regulations of the Internal Revenue Service, for which a ruling or determination letter is not issued, is exempt from Nebraska income tax.

003.03 Filing requirements; income tax returns; revocation of tax-exempt status. No annual income tax information returns will be required from exempt organizations unless a federal return of unrelated business income is required to be filed. If such a federal return is required, the organization shall report those items of unrelated business income which are attributable to income derived from Nebraska sources. Such information shall be filed on Form 1120N. If the tax exempt status is revoked by the Internal Revenue Service, the Nebraska Department of Revenue must be notified within ninety days.

(Section 77-2714, R.R.S. 1943. December 4, 1984.)

REG-24-004 S CORPORATION

004.01 Filing requirements; Form 1120-SN. A small business corporation that has elected to file under Subchapter S of the Internal Revenue Code shall file Form 1120-SN for purposes of reporting net income of the S corporation and income subject to Nebraska income tax by the respective shareholders.

004.02 Character of income and deductions to shareholders. Each shareholder's proportionate part of the corporation's income and deductions will retain the same character and classification as allowed for federal income tax purposes.

004.03 Nonresident shareholder income tax returns and withholding. Nonresident shareholders shall file a Nebraska income tax return and include in Nebraska adjusted gross income that portion of the corporation's Nebraska income tax allocable to their interest in the corporation, together with any other Nebraska source income.

004.03A Each nonresident shareholder shall execute Form 12N which shall be attached to the corporation tax return, Form 1120-SN. Form 12N is an agreement which provides that the shareholder will file a Nebraska income tax return and pay income tax on all income received from Nebraska sources.

004.03B If a nonresident shareholder's executed Form 12N is not attached to the corporation tax return, the corporation shall complete Form 14N and withhold and remit an amount equal to the highest individual income tax rate on the nonresident shareholder's share of the corporation's taxable income which was derived from or attributable to sources within this state.

004.03C Nonresident shareholders do not have to file a return if their only connection with the state is the conduct of the business activities of the S corporation, and the corporation has withheld tax from all the Nebraska income attributable to the nonresident's share of the organization's income. The full amount of the withholding is, at the taxpayer's option, retained in lieu of the filing of an individual income tax return. Any nonresident who so desires can still file a return and claim a refund if there is one due. Any nonresident who files Form 12N to avoid withholding must still continue to file Form 1040N.

(Section 77-2734.01, R.R.S. 1996. November 11, 1998.)

REG-24-005 COOPERATIVE ORGANIZATIONS

005.01 In general. Any corporation or other entity organized as a cooperative under the Internal Revenue Code, which has federal taxable income derived from sources within Nebraska shall be subject to the Nebraska income tax if it is exercising its franchise within Nebraska. Additionally, if such cooperative is engaged exclusively in interstate or foreign commerce and has part of its federal taxable income derived from sources within Nebraska or has activities carried on within Nebraska, it shall be subject to the Nebraska income tax.

005.02 Computation of taxable income. For tax years beginning January 1, 1977, and thereafter, the cooperative taxable income base for Nebraska purposes shall be the federal taxable income derived from sources within this state. For tax years beginning after December 31, 1973, and before January 1, 1977, the cooperative taxable income base for Nebraska purposes shall be the entire net income derived from all sources within this state, including distributions of earnings and profits of the cooperative to members or patrons such as dividends paid on capital stock, nonpatronage income allocated to patrons, or patronage dividends attributable to this state as shall be excludable or deductible by such corporation for federal income tax purposes. The cooperative is allowed to deduct from the taxable income base such current distributions that are paid in money. However, this deduction does not include the redemption of prior year's distributions that were not paid in money such as qualified and nonqualified written notices of allocation.

005.03 Tax return filing requirements. Cooperative organizations shall report their income tax liability on Form 1120N.

005.03A The due date of the return is the same as the due date for the federal income tax return.

005.03B The cooperative organization shall pay the entire amount of tax on or before the prescribed due date, without regard to any extension granted for filing the return.

005.03C A cooperative organization is entitled to extensions of time to file the return the same as any other corporation. See Reg-24-007 covering extensions of time to file a corporate return.

(Section 77-2734.03, R.S.Supp., 1984. December 4, 1984.)

REG-24-006 CORPORATION INCOME TAX RETURNS: DUE DATE AND PAYMENT OF TAX

006.01 The due date for the Nebraska Corporation Income Tax Return, Form 1120N, is the same as the due date for the federal return, usually the 15th day of March following the close of the calendar year. If the corporate taxpayer is on a fiscal year basis, the due date is usually the 15th day of the third month following the close of the fiscal year.

006.02 The corporate taxpayer must pay the entire amount of tax on or before the prescribed due date, without regard to any extension granted for filing the return.

006.03 The Tax Commissioner may require some or all corporate taxpayers to file returns and remit payments electronically.

(Neb. Rev. Stat. §§ 77-1784 and 77-2768. July 3, 2013.)

REG-24-007 CORPORATION INCOME TAX RETURNS: EXTENSIONS OF TIME FOR FILING OR PAYMENT

007.01 Extensions of time for filing. The Nebraska Department of Revenue (Department) may grant an extension of time to file the Nebraska corporation income tax return, if an Application for Automatic Extension of Time to File Nebraska Corporation, Fiduciary, or Partnership Return, Form 7004N is filed and the amount of tentatively computed tax liability is paid on or before the original due date for filing the corporation income tax return. This extension will not be granted for a period exceeding seven months from the original due date of the return and may be terminated at any time by the Tax Commissioner by a mailing the taxpayer a notice of termination at least ten days prior to the termination date as fixed in the notice. This will allow the corporation taxpayer ten days from the date of the termination notice to file the Nebraska corporation return. If a federal extension of time has been granted, then a state extension will be granted if confirmation that the federal application for automatic extension of time to file is submitted with the Nebraska return when filed.

007.01A When the time for filing the annual return is extended by the Department, or because of a federal extension, interest will be imposed at the rate specified in Neb. Rev. Stat. § 45-104.02, from the original due date of the return to the date paid if the tax ultimately due exceeds the tentative remittance, any estimated payments made, and any applicable credits. Interest is due on the difference between the amount of tax ultimately due, and the sum of the tentative remittance, any estimated payments made, and any applicable credits.

007.01B Affiliated and unitary groups. A corporate taxpayer filing a combined return with Nebraska must list each corporation to be included in the combined return in the request for an extension of time to file. The automatic extension (Form 7004N) must include the name, address, and federal ID number of each corporation to be included in the combined return on the applicable schedule attached to Form 7004N. An automatic extension of time granted to the corporate taxpayer will not apply to any nonunitary member of an affiliated group filing a separate return with Nebraska.

007.01C If the application is denied, the Department will send a notice of denial to the corporate taxpayer at the address specified by the applicant on the extension form.

007.01D If the application is approved, no notice will be sent.

007.02 Extensions of time for payment. There can be no extension of time for payment of tax for a corporate taxpayer unless a request is filed with the Department, and granted by the Tax Commissioner. The Tax Commissioner may only grant an extension upon a proper showing by the taxpayer that payment by the due date will result in undue hardship upon the taxpayer.

007.02A Any request for an extension of time for payment must be made prior to the due date for payment of the tax. Any extension granted by the Tax Commissioner cannot exceed seven months.

007.02B If an extension of time for paying the tax is granted, the Tax Commissioner may require the taxpayer to furnish a bond in an amount not exceeding double the amount of tax due, or to furnish other security, approved in advance by the Tax Commissioner. If a bond is required, it must be filed with the Department within ten days after notice that a bond is required. The bond must comply with the terms of the extension and must be approved by the Tax Commissioner with regard to form and content before it will be accepted as security by the Department.

007.02C If an extension of time for payment is granted, the tax must be paid on or before the expiration of the extension, together with interest at the rate specified in Neb. Rev. Stat. § 45-104.02. Interest is due on the tax payment from the original date for payment until the date the payment is actually made, regardless of any extension of time.

007.02D All applications for extension of time for payment must be made to the Department and must contain a complete statement of the reasons for the request.

007.03 Any reference in this regulation to the term corporate taxpayer applies to any corporation or any entity taxed as a corporation under the Internal Revenue Code.

(Neb. Rev. Stat. § 77-2770. July 3, 2013.)

REG-24-008 CORPORATION INCOME TAX: RATE OF TAX

008.01 Entities which are subject to the corporation income tax are taxable upon the federal taxable income derived from or connected to sources within Nebraska.

008.01A The tax rate for the entire taxable year is the rate in effect on the first day of the corporate taxpayer’s taxable year. Corporate taxpayers on a fiscal year reporting basis must use the tax rate in effect on the first day of the taxable period. Corporate taxpayers may not use varying tax rates in effect for different portions of a taxable year.

008.01B For taxable years beginning after December 31, 1974, and before January 1, 1982, any entity subject to corporation income tax is subject to tax, at a rate equal to 25% of the rate imposed on individuals on the first $25,000 of taxable income, and 27.5% of the rate imposed on individuals on any amount in excess of $25,000.

008.01C For taxable years beginning on or after January 1, 1982 and before January 1, 1987, any entity subject to corporation income tax is subject to tax at a rate equal to 25% of the rate imposed on individuals on the first $50,000 of taxable income, and 35% of the rate imposed on individuals on any amount in excess of $50,000.

008.01D For taxable years beginning on or after January 1, 1987 and before January 1, 1990, any entity subject to corporation income tax is subject to tax at a rate equal to 4.75% on the first $50,000 of taxable income, and at the rate of 6.65% on all taxable income in excess of $50,000.

008.01E For taxable years beginning on or after January 1, 1990 and before January 1, 1991, any entity subject to corporation income tax is subject to tax at a rate equal to 5.17% on the first $50,000 of taxable income, and at the rate of 7.24% on all taxable income in excess of $50,000.

008.01F For taxable years beginning on or after January 1, 1991 and before January 1, 2008, any entity subject to corporation income tax is subject to tax at a rate equal to 5.58% on the first $50,000 of taxable income, and at the rate of 7.81% on all taxable income in excess of $50,000.

008.01G For taxable years beginning on or after January 1, 2008, any entity subject to corporation income tax is subject to tax at a rate equal to 5.58% on the first $100,000 of taxable income, and at the rate of 7.81% on all taxable income in excess of $100,000.

008.02 For taxable years beginning on or after January 1, 1995, an insurance company is subject to taxation at the lesser of the rate described in subsections 008.01A through 008.01G of this section, or the rate of tax imposed by the state or country in which the insurance company is domiciled if the insurance company can establish to the satisfaction of the Tax Commissioner that it is domiciled in a state or country other than Nebraska that imposes a retaliatory tax against the corporation income tax on Nebraska domiciled insurance companies.

(Neb. Rev. Stat. § 77-2734.02. July 3, 2013.)

REG-24-015 SEPARATE ACCOUNTING

015.01 If a taxpayer is engaged in a multistate business and the income derived from within Nebraska is separate and distinct from the income derived without Nebraska pursuant to the requirements stated below, the taxpayer may request permission to separately account taxable income to Nebraska.

015.01A The books and records are kept by recognized accounting standards to accurately reflect the amount of income of the multistate business which was realized in Nebraska during the taxable period,

015.01B The business operations are separate and distinct and there are no interstate, intercompany, or interdivisional purchases, sales, or transfers during the period.

(Section 77-2734.15, R.S.Supp., 1984. December 4, 1984.)

REG-24-023 APPORTIONMENT FORMULA

023.01 The federal taxable income, as adjusted, of a unitary business operating both within and without Nebraska shall be apportioned to this state by use of the apportionment formula set forth in section 77-2734.05 of the Nebraska Revised Statutes. The apportionment formula for tax years 1992 and thereafter consists of the sales factor (see Reg-24-035) of the trade or business of the taxpayer. A corporation, including an entity which has elected to file under Subchapter S of the Internal Revenue Code, engaged in business in Nebraska which is not subject to tax in another state does not apportion its income, but reports its entire taxable income to Nebraska.

(Sections 77-2734.05, and 77-2734.16, R.R.S. 2003, and section 77-2734.01, R.S.Supp., 2005. March 7, 2006.)

REG-24-043 CLAIMS FOR REFUND

043.01 Any person who has overpaid any corporation income tax may file a claim for a credit or refund of the amount of tax overpaid. A claim for credit or refund of corporation income tax (claim) must be filed with the Nebraska Department of Revenue (Department) in accordance with Reg-33-002.01A.

043.01A The Department will not accept a claim for credit or refund if the amount is less than $2.

043.01B If the claimant desires a hearing, a request for hearing must be made when the claim is filed or prior to the Tax Commissioner taking action on the claim. A claim for credit or refund is not presumed to be a request for a hearing.

043.01C Only the taxpayer or an authorized representative of the taxpayer may file a claim for refund.

043.01D A claim for overpayment of corporation income tax must be filed within the time specified in Reg-33-002.01B(3).

043.02 Unless the Tax Commissioner allows the claim and sends notice to the taxpayer within six months after the claim is filed, the claim is considered disallowed. Notice may be provided by first class mail.

043.03 The amount of overpayment may be credited against any sales, use, income, or any other tax, and any fees, interest, or penalties then due and payable to the state from the claimant. Any remaining balance may be refunded to the taxpayer. Corporation income tax refunds may be paid electronically.

043.04 Interest will be allowed on the refund at the rate specified in Neb. Rev. Stat. § 45-104.02 from the original due date of the return unless an exception applies.

(Neb. Rev. Stat. §§ 77-2704, 77-2791, 77-2793, 77-2794, 77-2795, 77-2797, and 77-2799. July 3, 2013.)

REG-24-044 METHODS OF ACCOUNTING

044.01 In computing the Nebraska corporate income tax, the method of accounting must be the same as the method used for federal income tax purposes.

(Sections 77-2760, and 77-2772, R.R.S. 1943. December 4, 1984.)

REG-24-045 PARTIAL-YEAR RETURNS

045.01 A return for a short period, that is, for a taxable year consisting of a period of less than 12 months, shall be made under any of the circumstances described in Section 443 of the Internal Revenue Code of 1986. The regulations under Section 443 should be followed in filing a short period return.

045.02 Any corporate taxpayer that can determine that the method of computing income under Section 443 does not closely reflect such short period income, and has records of income, deductions, or credits which are sufficient to establish the short period tax liability accurately, may request permission to use an alternative method of reporting income. However, any alternative method of reporting income must have prior written approval by the Tax Commissioner.

(Sections 77-2734.02, 77-2734.04 and 77-2734.15, R.R.S. 1996. November 11, 1998.)

REG-24-046 ADJUSTMENTS OF FEDERAL INCOME TAX

046.01 Any changes made by the Internal Revenue Service (IRS) to the federal taxable income of a corporate taxpayer, a member of a unitary group, or the unitary group must be reported to the Nebraska Department of Revenue (Department) within 60 days after the final determination of the change.

046.01A Reportable changes include changes made to the federal return by either the IRS Processing Center or any other IRS office.

046.01B When reporting any change to federal taxable income, the taxpayer must be furnish the Department complete information regarding the amount of income reported and taxes paid to the United States. The report must also concede the accuracy of the final determination or give a statement outlining the specific errors in the final determination.

046.02 Any adjustments made on federal amended returns which do not result in a federal credit or refund must be reported to the Department within 60 days after filing the federal amended return. Any adjustments made on federal amended returns which result in a federal credit or refund must be reported to the Department within 60 days after the taxpayer's receipt of proof that the federal credit or refund was accepted by the IRS, or within any other applicable period provided by law, whichever is later.

046.03 Adjustments made on a federal amended return or by the IRS must be reported to the Department by filing an Amended Nebraska Corporation Income Tax Return, Form 1120XN, for the taxable year involved.

046.03A The amended return for Nebraska must include copies of the federal amended return, IRS report, or any other document which substantiates the adjustments claimed.

046.03B Each amended return for Nebraska must be filed separately and cannot be attached to a return for another taxable year. Any additional tax that is due must be paid when the amended return is filed.

046.04 The following acts are considered a final determination:

046.04A A decision by the tax court or a judgment, decree, or other order by a court of competent jurisdiction which has become final;

046.04B A closing agreement authorized by IRC § 7121 which relates either to the total tax liability, or to one or more separate items affecting the Nebraska tax liability. A closing agreement becomes final for purposes of this regulation on the date it is approved by the IRS;

046.04C A final disposition by the IRS of a claim for refund;

046.04D Any informal agreement between the corporate taxpayer or a member of a unitary group and the IRS made for the express purpose of determining the tax liability of the taxpayer. To be considered a final determination, the agreement must include a waiver of restrictions on assessment and collection of any deficiencies resulting from the agreement;

046.04E Acceptance of an examining officer's findings with regard to the income of a partnership, a fiduciary, or a limited liability company;

046.04F Payment of any additional tax by the corporate taxpayer or unitary group; or

046.04G Any other final judgment causing changes in reported federal taxable income.

046.05 If a taxpayer fails to report any change or correction which increases its federal tax liability, fails to report any change or correction which is treated as a deficiency for federal income tax purposes, or fails to file an amended Nebraska return as required by this regulation, the Tax Commissioner may issue the taxpayer a notice of deficiency at any time. If a taxpayer properly reports any change in its federal tax liability, the Tax Commissioner must make an assessment relating to the change within two years after the report or amended return was filed.

046.06 An amended return reporting a change that results in an overpayment of tax for Nebraska is considered a claim for credit or refund.

046.06A The amount of the credit or refund cannot exceed the amount of the Nebraska tax attributable to the federal change, correction, or the items amended on the federal return.

046.06B If the amended return is not filed within 60 days after the final determination of the change, interest does not accrue after the 60th day.

046.06C If the amended return is not filed within two years and 60 days after the final determination of the change, no credit or refund will be granted.

(Neb. Rev. Stat. §§ 77-2774, 77-2775, 77-2786, and 77-2793. July 3, 2013.)

REG-24-047 RECORDS

047.01 In general. Any corporate taxpayer that conducts business within this state, makes deliveries or sales into this state, or has sales or service representatives operating in this state and any corporate taxpayer subject to tax under the Nebraska Revenue Act of 1967, as amended, shall keep such permanent books of account or records, including inventories and all supporting documents, as are sufficient to establish the amount of gross income, deductions, credits, or other matters which may be required to support the Nebraska corporation income tax return.

047.02 Availability of books and records. Such books or records shall be kept available at all times for inspection by the Tax Commissioner or any agent or representative designated by the Tax Commissioner for the purpose of ascertaining the correctness of any return or other document required to be filed under the Nebraska Revenue Act, or for the purpose of ascertaining whether a corporate taxpayer is subject to the corporation income tax.

047.03 Retention of records. Each corporate taxpayer or unitary group shall retain all of its records relating to a taxable year as long as the contents may become material in the administration of any Nebraska tax laws. If the Tax Commissioner serves a notice of deficiency determination for a taxable year, the corporate taxpayer or the unitary group shall retain all of its records relating to that taxable year until the deficiency has been satisfied, abated, settled, or disallowed.

(Section 77-27,119(3), R.S.Supp., 1998, and section 77-2772, R.R.S. 1996. November 11, 1998.)

REG-24-048 INCOME FROM UNITED STATES GOVERNMENT OBLIGATIONS

048.01 Interest or dividend income from obligations of the United States and its territories and possessions or of any authority, commission, or instrumentality of the United States shall be subtracted from federal taxable income to the extent such income is includable in federal gross income, but exempt from state income taxes pursuant to federal law.

048.02 The amount subtracted shall be reduced by any interest on indebtedness incurred to carry the obligations described above, and by any expenses incurred in the production of the interest or dividend income derived from such obligations to the extent that such expenses are deductible in determining federal taxable income.

048.03 A corporate taxpayer may not elect to forego the deduction set forth in paragraph 048.01 or the adjustments set forth in paragraphs 048.02 and 048.04.

048.04 Investment interest expense shall be determined by (a) dividing the taxpayer's average investment in exempt securities by the taxpayer's average total assets and multiplying such ratio by the taxpayer's total interest expense and (b) subtracting from the result of (a) any interest disallowed under 26 U.S.C.A.§§ 265 and 291.

048.05 As used in this regulation, unless the context requires otherwise:

048.05A Exempt securities shall mean the obligations that earn income exempt from taxation under section 048.01 of this regulation or under 26 U.S.C. §103;

048.05B Average investment in exempt securities shall mean the average of the aggregate tax bases in exempt securities at the beginning and at the end of the taxable year;

048.05C Average total assets shall mean the average of the aggregate tax bases in total assets at the beginning and at the end of the taxable year; and

048.05D Total interest expense shall mean the total interest expense allowed as a deduction in computing federal taxable income plus any interest disallowed under 26 U.S.C.A. §§ 265 and 291.

048.06 The State Tax Commissioner may permit or require the use of amounts from interim balance sheets to compute the ratio of investment in exempt securities to total assets whenever it is necessary to properly reflect such ratio.

048.07 When determining the computation in section 048.04 of this regulation, the taxpayer may use, in lieu of tax basis, the amounts from a balance sheet included with the federal return or as required to be reported to federal or state regulatory agencies if (a) such amounts are not materially different from tax basis, (b) the amounts are prepared consistently from year to year, and (c) absent a change in circumstances, the amounts are consistently used by the taxpayer from year to year. The State Tax Commissioner may require a taxpayer to use these alternative amounts when necessary to maintain consistency and may also require the taxpayer to show that the amounts used do not materially differ from the tax basis.

048.08 United States Government interest and dividend income that is exempt from state taxation includes the following:

048.08A Series E, F, G, and H savings bonds;

048.08B United States Treasury bills;

048.08C U.S. Government notes;

048.08D U.S. Government bonds;

048.08E U.S. Government certificates;

048.08F Interest on debentures issued to mortgages of mortgagees foreclosed under provisions of the National Housing Act if insured after February 3, 1938;

048.08G Retirement bond as provided by I.R.C. section 409;

048.08H Federal Farm Credit Bank Consolidated System wide bonds;

048.08I Federal Land Banks and Associations;

048.08J Federal Intermediate Credit Bank;

048.08K Commodity Credit Corporation;

048.08L Federal Farm Mortgage Corporation;

048.08M Federal Home Loan Banks;

048.08N Reconstruction Finance Corporation;

048.08O General Services Administration Participation Certificates;

048.08P Central Bank for Cooperatives (interest only);

048.08Q Federal Reserve Banks;

048.08R Federal Savings and Loan Insurance Corporation;

048.08S Production Credit Association (interest only);

048.08T Tennessee Valley Authority bonds;

048.08U Postal Service Bonds;

048.08V Federal Deposit Insurance Corporation (interest only);

048.08W Student Loan Marketing Association (interest only);

048.08X Resolution Trust Corporation;

048.09 Interest from repurchase agreements involving federal securities is not exempt and is subject to Nebraska income tax.

048.10 Gains and losses from the sale or other disposition of federal securities, as distinguished from interest income, are taxable for state income tax purposes.

048.11 Dividends and other income received from a regulated investment company are excluded to the extent they represent U.S. Government interest and dividend income included above.

(Section 77-2716, R.S.Supp., 1998. Nebraska Department of Revenue v. John Loewenstein, 513 U.S. 123 (1994). November 11, 1998.)

REG-24-050 INCOME FROM U.S. GOVERNMENT OBLIGATIONS--TAX YEARS BEGINNING PRIOR TO JANUARY 1, 1983.

050.01. Corporations may adjust federal taxable income for interest or dividend income from certain U.S. government obligations.

050.01A The adjustment is for income from those obligations of the United States government and its territories and possessions or any authority, commission, or instrumentality of the United States which a state is specifically prohibited from taxing under federal law.

050.01B If the owner of the United States government obligations is a member of an affiliated group of corporations, the adjustment will be made only from the taxable income of the owner of the U.S. government obligations.

050.02 Because of a federal prohibition of discrimination against Unites States government obligations, no offset against the adjustment in section 050.01 is required for interest or other expenses incurred in acquiring or carrying U.S. government obligations.

(Section 77-2716, R.R.S. 1943 (Reissue, 1981), Section 77-2734, R.R.S. 1943, Douglas v. Karnes, 216 Neb. 750, N.W.2d 1984. July 21, 1984.)

REG-24-051 DOMESTIC INTERNATIONAL SALES CORPORATIONS

051.01 If a group of corporations includes a domestic international sales corporation or other entity accorded similar treatment under the Internal Revenue Code, the income of the group shall include only that portion of the domestic international sales corporation that is considered to be a dividend to the parent.

051.02 The sales to the domestic international sales corporation shall be eliminated.

051.03 The domestic international sales corporation's property, payroll, and sales shall be included in the factors to the extent of the ownership of the rest of the group.

051.04 There shall be no adjustment to the factors when the deferred income is realized by the parent.

(Section 77-2734.08, R.S.Supp., 1984. July 7, 1985.)

REG-24-052 FOREIGN DIVIDEND DEDUCTION

052.01 Corporate taxpayers shall deduct from federal taxable income dividends received or deemed to be received from corporations which are not subject to the Internal Revenue Code.

052.02 Subject to the Internal Revenue Code means those corporations that meet the requirements of Internal Revenue Code section 243 in order for their distributions to qualify for the dividends received deduction.

(Section 77-2716(7), R.S.Supp., 1998, and section 77-2734.04(10), R.R.S. 1996. November 11, 1998.)

REG-24-053 COMBINED INCOME APPROACH

053.01 Any unitary business having income from business activity that is taxable both within and without Nebraska shall determine its taxable income by multiplying its federal taxable income, as adjusted, by a fraction which is the sales factor.

053.02 The combined income approach is the computation of combining the taxable income of a business conducted as a single economic unit. The Nebraska net income of a corporate taxpayer will be determined by applying the taxpayer's apportionment formula against the combined income of the unitary group.

053.02A Income attributable to Nebraska is determined by multiplying the income of the unitary group by the apportionment factor.

053.02B The apportionment factor is the sales factor of the corporate taxpayer.

053.03 When a unitary group includes two or more corporations engaged in a unitary business, a part of which is conducted in Nebraska by one or more members of the unitary group, the income of the corporate taxpayer apportioned to Nebraska is determined by calculating the ratio of the corporate taxpayer's sales in Nebraska compared to the total sales of the entire unitary group and by applying the computed ratio to the unitary group’s federal taxable income, as adjusted.

053.03A In the computation of the factors, only the part of the unitary group that is subject to the Internal Revenue Code shall be included.

053.03B. Only those corporations subject to federal income tax under §243 of the Internal Revenue Code are included in a corporate taxpayer’s filing.

053.03C Only the sales of those corporations with nexus in Nebraska are included in the numerator of the computed apportionment factor.

053.04 Each corporate taxpayer must file only one income tax return for the group for each taxable year, even if more than one member of the unitary business is taxable in Nebraska.

053.05 Any corporation that is required or has received permission to use an alternative apportionment formula cannot be included in the unitary group.

053.05A If more than one affiliated or related company of a unitary group is properly using the same special apportionment formula, such companies must use the combined income approach and must file a single Nebraska Corporation Income Tax Return, Form 1120N.

053.06 Inactive corporations may not be included in the unitary group.

053.07 A corporate taxpayer which is a part of a unitary group that includes a partner in a joint venture or partnership with which a member of a unitary group is unitary except for the ownership requirement will compute its Nebraska taxable income in accordance with Reg-24-056.

(Section 77-2734.05 and 77-2734.14, R.R.S. 1996. November 11, 1998.)

REG-24-054 SINGLE RETURN FILING REQUIREMENT

054.01 Each corporate taxpayer shall only file one state income tax return for each taxable year.

054.02 This requirement exists whether or not the taxpayer files a consolidated federal tax return or is considered a controlled group of corporations under the Internal Revenue Code.

(Section 77-2734.02(3), R.S.Supp., 1984. July 7, 1985.)

REG-24-056 CORPORATION AS PARTNER IN A PARTNERSHIP OR JOINT VENTURE

056.01 When a partnership has sufficient contacts with a corporate partner such that it would be considered unitary if it was a corporation that was at least 50 percent owned by that partner then the partnership will be considered unitary with the corporate partner regardless of the actual ownership share of the partner.

056.01A This determination will have to be made separately for each partner and will be based on the requirements of Reg-24-053.

056.02 When a corporation and a partnership are considered unitary, the apportionment factors of the corporation will be adjusted to include a portion of the sales factor of the partnership. The percentage of the sales factor included will be the percentage of profits or losses of that corporation. The percentage will be applied to each denominator and each state's numerator equally.

056.03 Intercompany transactions will be eliminated. The elimination of intercompany transactions will be based on the percentage of the ownership of the corporation, except all sales from the partnership to the corporation will be eliminated to the extent of the corporation's share of total sales of the partnership. If all of the sales from the partnership to the corporation are not eliminated, the remaining sales in each state will be the same percentage of the sales in the state before any eliminations. Any partnership agreements that identify particular activities to a specific partner will be given no effect in the determination of the income of each partner subject to tax in Nebraska.

056.04 Example. (Illustration only.) X multistate corporation is domiciled outside Nebraska and is a partner in AX, a multistate partnership. X has a 40 percent interest in the profits or losses of AX. X and AX are unitary, not considering the attribute of ownership. Corporation X has sales of $10,000,000, $1,000,000 of which were to Partnership AX. Partnership AX has sales of $2,000,000, $900,000, of which were to Corporation X. Corporation X has apportionable income of $3,000,000, exclusive of its interest in AX's income, and Partnership AX has apportionable income totaling $500,000.

056.05 The denominator to be used in a combined report of income with the corporate return is calculated as follows:

| | Sales | | --- | --- | | Corporation X | $10,000,000. | | Partnership AX | 800,000. * | | Less intercompany sales eliminations: Corporation X sales to AX ($1,000,000 x 40% ownership interest) | (400,000) | | Partnership AX sales to Corporation X, $900,000, limited to 40% ownership interest of $2,000,000 total sales, | (800,000) | | Totals | $9,600,000 |

*$2,000,000 x 40% = $800,000

056.06 The expanded apportionment factor will be applied to the apportionable income of Corporation X calculated as follows:

| Apportionable income: | $ 3,000,000 | | --- | --- | | Corporation X | 200,000 | | Partnership AX: $500,000 x 40% ownership interest | | | Combined apportionable taxable income (equals Corporation X's total federal taxable income) | $ 3,200,000 |

056.07 When a corporation engages in a partnership with which it is unitary as defined above, its apportionment formula shall be determined in accordance with this regulation.

(Sections 77-2734.14, 77-2734.15 and 77-2734.16, R.R.S. 1996. November 11, 1998.)

REG-24-057 TAXABLE IN ANOTHER STATE

057.01 A corporate taxpayer is taxable in another state if that state has jurisdiction to subject the taxpayer to a net income tax regardless of whether in fact the state does or does not do so.

057.02 The failure to provide upon request of the State Tax Commissioner a copy of the return filed together with proof of payment of a net income tax imposed by another state creates a rebuttable presumption that the taxpayer is not subject to tax in the other state.

(Section 77-2734.11, R.S.Supp., 1984. July 7, 1985.)

REG-24-058 DEFINITIONS

058.01 Commercial domicile shall mean the principal place from which the trade or business of the taxpayer is directed or managed.

058.02 Compensation shall mean wages, salaries, commissions, and any other form of remuneration paid to employees for personal services.

058.03 Corporate taxpayer shall mean any corporation that is not a part of the unitary business or the part of the unitary business, whether it is one or more corporations, that is doing business in the state. Corporate taxpayer shall not include any corporation that has made a valid election under subchapter S of the Internal Revenue Code.

058.04 Corporation shall mean all corporations and all other entities taxed as corporations under the Internal Revenue Code.

058.05 Doing business in this state shall mean the exercise of the corporation's franchise in this state or the conduct of operations in this state that exceed the limitations provided in 15 U.S.C. 381 on a state imposing an income tax.

058.06 Federal taxable income shall mean the corporate taxpayer's federal taxable income as reported to the Internal Revenue Service, or as subsequently changed or amended. Except for the deduction for foreign dividends or dividends deemed to be received from corporations which are not subject to the Internal Revenue Code, no adjustment shall be allowed for a change from any election made or the method used in computing federal taxable income.

058.07 Sales shall mean all gross receipts of the taxpayer.

058.08 Single economic unit shall mean a business where there is a sharing or exchange of value between the parts of the unit. A sharing or exchange of value occurs when the parts of the business are linked by common management, or common operational resources that produce material (a) economies of scale, (b) transfers of value, or (c) flow of goods, capital or services between the parts of the unit.

058.08A Common management includes, but is not limited to, a centralized executive force or review or approval authority over long-term operations with or without the exercise of control over the day-to-day operations.

058.08B Common operational resources include, but are not limited to, centralization of any of the following: accounting, advertising, engineering, financing, insurance, legal, personnel, pension or benefit plans, purchasing, research and development, selling, or union relations.

058.09 State shall mean any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.

058.10 Subject to the Internal Revenue Code shall mean a corporation that meets the requirements of Internal Revenue Code section 243 in order for its distributions to qualify for the dividends received deduction.

058.11 Taxable income shall mean federal taxable income as adjusted, and, if appropriate, as apportioned.

058.12 Taxable year shall mean the period the corporate taxpayer used on its federal income tax return.

058.13 Unitary business shall mean a business that is conducted as a single economic unit by one or more corporations with common ownership and shall include all activities in different lines of business that contribute to the single economic unit.

058.13A Common ownership shall mean one or more corporations owning fifty percent or more of another corporation.

058.14 Unitary group shall mean the group of corporations that are conducting a unitary business.

(Section 77-2734.04, R.S.Supp., 1984. July 7, 1985.)

REG-24-060 NET OPERATING LOSSES AND CAPITAL LOSSES

060.01 Any deduction for a federal net operating loss or capital loss shall be an adjustment increasing federal taxable income in order to compute Nebraska taxable income.

060.01A Where Nebraska taxable income is computed by apportionment, such adjustment shall be made prior to apportionment.

060.02 There shall be allowed as a deduction in computing Nebraska taxable income a carryforward of a Nebraska net operating loss computed on the basis of this regulation.

060.02A A Nebraska net operating loss for a corporate taxpayer that is not subject to apportionment shall be the amount of net operating loss after the adjustments have been made to the federal taxable income of the corporate taxpayer.

060.02B A corporate taxpayer who is required to apportion its income to Nebraska shall compute its Nebraska net operating loss in the following manner:

060.02B(1) Nebraska adjustments shall be made to the federal taxable income or net operating loss of the unitary group prior to apportionment.

060.02B(2) The federal net operating loss as adjusted is apportioned to Nebraska based on the apportionment factor of the corporate taxpayer for the year of the loss.

060.03 For tax years beginning on or after January 1, 1987, the Nebraska net operating loss may be allowed as a deduction in computing Nebraska taxable income for each of the five taxable years following the year of the loss. For Nebraska net operating losses incurred prior to tax years beginning prior to January 1, 1987, the periods in which the Nebraska net operating loss may be deducted shall be in accordance with the federal rules for such periods.

060.04 The carryforward of Nebraska net operating losses after reorganizations or mergers is limited to the same extent as the carryover of a net operating loss is limited under the provisions of sections 381 through 384 of the Internal Revenue Code and regulations thereunder or any other section of the Internal Revenue Code or regulations thereunder. Where the taxpayer files as a part of a consolidated income tax return for federal income tax purposes, but a separate return for Nebraska income tax purposes, the limitation on an Nebraska net operating loss carryforward must be determined as though a separate income tax return was filed for federal income tax purposes.

060.05 In addition to the limitations contained in paragraph 060.04 an additional limitation is imposed where a corporation which has a Nebraska operating loss carryforward becomes a member of a unitary group in a year in which such carryforward is still available. The net operating loss carryforward deduction shall not exceed the apportionable income of the unitary group times a fraction, the numerator of which is the Nebraska gross receipts of such corporation and the denominator is the gross receipts of the unitary group.

060.06 There shall be allowed a deduction in computing Nebraska taxable income a carryforward of a Nebraska capital loss computed on the basis of this regulation.

060.06A A Nebraska capital loss for a corporate taxpayer that is not subject to apportionment shall be the amount of capital loss after the adjustments have been made to the federal capital gain or loss of the corporate taxpayer.

060.06B A corporate taxpayer who is required to apportion its income to Nebraska shall compute its Nebraska capital loss in the following manner.

060.06B(1) Nebraska adjustments should be made to the federal capital gain or loss of the unitary group prior to apportionment.

060.06B(2) The federal capital loss as adjusted is apportioned to Nebraska based on the apportionment factor of the corporate taxpayer for the year of the capital loss.

060.07 For any Nebraska capital loss incurred in tax years beginning on or after January 1, 1987, the Nebraska capital loss may be allowed against any Nebraska capital gain for each of the five taxable years following the year of the capital loss. For Nebraska capital losses incurred in tax years beginning prior to January 1, 1987, the periods in which the Nebraska capital loss may be deducted shall be in accordance with federal rules for such loss year.

(Section 77-2734.07, R.R.S. 1996. November 11, 1998.)

REG-24-061 INSURANCE COMPANIES

061.01 Special Apportionment Formula. When an insurance company has income from sources both within and without this state the amount of business income from sources within this state shall be determined pursuant to the special apportionment formula provided in this regulation.

061.01A General Definitions. The following definitions are applicable to the terms used in the apportionment factor descriptions:

061.01A(1) Insurance company means a company engaged in the business of insurance as defined in Neb. Rev. Stat. Section 44-102.

061.01A(2) Schedule T is part of the annual statement prescribed by the National Association of Insurance Commissioners, which is required to be filed annually with the various state insurance departments.

061.01A(3) Quota-share reinsurance is reinsurance of a certain percentage of all or certain parts of the business of the reinsured.

061.01A(4) Premiums shall mean the consideration paid to insurance companies for insurance and shall include policy fees, assessments, dues or other similar payments (except premiums on all annuity contracts and pension, profit-sharing, individually sponsored retirement plans, and other pension plan contracts which are described in section 818(a) of the Internal Revenue Code).

061.01A(5) Direct premiums shall mean all premiums received for insurance other than reinsurance premiums.

061.01A(6) Reinsurance premiums shall mean premiums which are paid by an insurer to a third party to insure it against loss or liability by reason of such original insurance.

061.01B Sales Factor

061.01B(1) The numerator of the sales factor of an insurance company or a unitary group of insurance companies shall consist of direct premiums received on property or risks in Nebraska and the denominator of which is direct premiums received on property or risks everywhere. Premiums for reinsurance are not included except as provided in paragraph 061.01B(2).

061.01B(2) Reinsurance premiums are included in the sales factor when more than one-third of the premiums received by an insurance company or a unitary group of insurance companies consist of premiums received for reinsurance accepted. All transactions between corporate members of the same unitary group are eliminated prior to making the determinations outlined in this regulation.

061.01B(2)(a) Premiums received for reinsurance accepted will be sourced to Nebraska if it can be established or reasonably be assumed that the underlying risks are in Nebraska. In the case of reinsurance accepted for which the location of the underlying risk can neither be established nor reasonably assumed, premiums received will be sourced to the state of commercial domicile of the ceding company with the following exception. If more than half of the ceding company’s premiums written are direct premiums, reinsurance premiums received with respect to quota-share shall be sourced in proportion to the ceding company’s Annual Statement -- Schedule T allocation of its direct premiums written.

061.01C Unitary Group. An insurance company cannot be included in a unitary group when the other members of the unitary group are not insurance companies. A unitary group of insurance companies cannot include a corporation that is not an insurance company.

061.02 Credits for Taxes on Premiums and Assessments. An insurance company may receive a nonrefundable credit against its corporation income tax for taxes on premiums and assessments paid to the Nebraska Department of Insurance pursuant to the sections 77-908 and 81-523.

061.02A For taxable years beginning on or after January 1, 1997, an insurance company shall only receive a credit for taxes paid on premiums and assessments to the extent that the premiums were received on property or risks in Nebraska.

061.02B An insurance company may receive a nonrefundable credit for assessments paid to the Comprehensive Health Insurance Pool to the extent such assessment was allowed as an offset against premiums tax payments or prepayments imposed by section 77-908 or related retaliatory tax imposed by section 44-150.

(Section 77-2734.03, R.S.Supp. 1998, and Section 77-2734.15, R.R.S. 1996. November 11, 1998.)

REG-24-063 ADJUSTMENTS OF INCOME TAXABLE IN ANOTHER STATE

063.01 Whenever the income of a corporate taxpayer, a member of a unitary group, or the unitary group which is taxable in another state for any taxable year, is changed or corrected in a way material to the tax liability owed to this state, the change must be reported to the Nebraska Department of Revenue (Department) within 60 days after the final determination of the change.

063.01A Reportable changes include changes made by any competent taxing authority of the other state.

063.01B When reporting any change, the taxpayer must furnish the Department complete information regarding the amount of income reported and taxes paid to the other state. The report must also concede the accuracy of the final determination or give a statement outlining the specific errors of the final determination.

063.02 Any adjustments made by amended returns filed with another state or by another state’s taxing authority must be reported to the Department by filing an Amended Nebraska Corporation Income Tax Return, Form 1120XN, for the taxable year involved. The amended return for Nebraska must be filed within 60 days after filing the amended return for the other state, and must include copies of any report issued by the taxing authority of the other state.

063.03 Each amended return for Nebraska must be filed separately and cannot be attached to a return for another taxable year. Any additional tax that is due must be paid when the amended return is filed.

063.04 The following acts are considered a final determination:

063.04A A decision by a tax court or a judgment, decree, or other order by a court of competent jurisdiction which has become final;

063.04B A closing agreement or settlement agreement which relates either to the total tax liability, or to one or more separate items affecting Nebraska tax liability;

063.04C A final disposition of a claim for a refund by the other state’s taxing authority;

063.04D Any informal agreement between the corporate taxpayer, or a member of a unitary group, and the taxing authority of the other state made for the express purpose of determining the tax liability of the taxpayer. To be considered a final determination, the agreement must include a waiver of restrictions on assessment and the collection of any deficiencies resulting from the agreement; or

063.04E Any other final judgment causing changes in reported taxable income.

063.05 If a taxpayer fails to report any change or correction which would increase its Nebraska income tax liability, or fails to file an amended Nebraska return as required by this regulation, the Tax Commissioner may mail the taxpayer a notice of deficiency at any time. If a taxpayer properly reports any change to its taxable income by another state, the Tax Commissioner must make an assessment relating to the change within two years after the report or amended return was filed.

063.06 The amended return reporting a change that results in an overpayment of tax for Nebraska is a claim for credit or refund.

063.06A The amount of the credit or refund cannot exceed the amount of the Nebraska tax attributable to the change or correction in the taxable income for the other state, or the items amended on the other state’s return.

063.06B If the amended return is not filed within 60 days after the final determination of the change, interest will not accrue after the 60th day.

063.06C If the amended return is not filed within two years and 60 days after the final determination of the change, or within ten years after the due date of the original return, whichever is earlier, no credit or refund will be granted.

(Neb. Rev. Stat. §§ 77-2774, 77-2775, 77-2786, and 77-2793. July 3, 2013.)

History

• Effective 2020-07-05

Chapter 24 Article 3 - Apportionment

Neb. Admin. Code tit. 316, ch. 24 Article 3 - Apportionment {#sec-316-nac-24 omnilex-key=us-ne-regs-official--title-316--316 NAC 24}

REG-24-301 APPORTIONABLE AND NONAPPORTIONABLE INCOME

301.01 In General. A business entity or unitary group generating income from a business activity that is taxable within Nebraska and subject to tax in at least one other state must apportion its income. The income is apportioned using the sales factor only, as provided in Reg-24-301 through Reg-24-350.

301.02 Apportionable Income. The entire federal taxable income of a corporation, a unitary group, or a partnership is presumed to be apportionable income. The apportionable income includes income arising from transactions and activity of the business, and income arising from tangible and intangible property if the acquisition, management, employment, development, or disposition of the property was related to the operation of the business entity’s trade or business.

301.03 Nonapportionable Income. Nonapportionable income is any income the taxpayer has shown is not subject to apportionment. Income that is claimed to be nonapportionable must be supported by:

301.03A A detailed description of the source and nature of the income; and

301.03B An affidavit attached to the return and signed by a corporate officer attesting-

301.03B(1) That the income is not a part of the unitary business; and

301.03B(2) That the taxpayer has not claimed the same income as part of the unitary business and subject to apportionment in any other state with substantially the same law on apportionability of income.

301.04 Any nonapportionable income is subtracted from federal taxable income prior to apportioning the income to Nebraska. The amount subtracted must be reduced, but not below zero, by a portion of the interest expense and any expense incurred in the production of the nonapportionable income.

301.04A The interest expense for the reduction is determined by dividing the taxpayer’s average investment in the activities producing the nonapportionable income by the taxpayer’s average total assets and multiplying the result by the total interest deduction allowed in computing federal taxable income.

301.04A(1) For the purposes of this subsection, investment in activities producing the income means the tax basis of the assets, both tangible and intangible, that are used in the activities or that are the basis of receiving the income.

301.04A(2) Whenever it is necessary to properly reflect the ratio of the average investment in activities producing the nonapportionable income to the average total assets, the Tax Commissioner may permit or require computing the averages using amounts from interim balance sheets.

301.04A(3) In lieu of the tax basis, the taxpayer may use amounts from an income statement included with the federal return or required to be reported to federal or state regulatory agencies if:

301.04A(3)(a) The amounts are not materially different from the tax basis;

301.04A(3)(b) The amounts are prepared consistently from year to year; and

301.04A(3)(c) Absent a change in circumstances, the amounts are consistently used by the corporation from year to year.

301.04A(4) The Tax Commissioner may require a taxpayer to use the alternative amounts in order to maintain consistency.

301.04B The amount subtracted under this section cannot include any amounts deducted from federal taxable income under any other section of the Nebraska Revenue Act. For example: interest, rents, royalties, and license fees taxed by a foreign country in excess of the maximum federal corporate rates cannot be deducted as nonapportionable income if the same amounts are included in the calculation of the special foreign tax credit deduction.

301.05 A business entity or unitary group engaged in business in Nebraska which is not subject to tax in any other state cannot apportion its income, and must report its entire taxable income to Nebraska.

(Neb. Rev. Stat. §§ 77-2716, 77-2734.05, and 77-2734.06, Mobil Oil Corp. v. Commissioner of Taxes of Vermont, 445 U.S. 425, (1980), ASARCO, Inc. v. Idaho State Tax Commission, 458 U.S. 307 (1982), and Allied Signal, Inc. v. Director, Division of Taxation, 504 U.S. 768 (1992). December 27, 2015)

REG-24-305 APPORTIONMENT FORMULA

305.01 Corporations or Partnerships; Apportionment Formula. The federal taxable income, as adjusted under Reg-24-155, Nebraska Adjustments to Taxable Income, of a corporation or partnership operating both within and outside Nebraska is apportioned to Nebraska by using the sales factor of the corporation or partnership. The income of the taxpayer apportioned to Nebraska is determined by calculating the ratio of the taxpayer's sales in Nebraska compared to the total sales of the taxpayer and applying the computed ratio to the federal taxable income, as adjusted, of the taxpayer.

305.02 Unitary Group. The federal taxable income, as adjusted under Reg-24-155, Nebraska Adjustments to Taxable Income, of a unitary group operating both within and outside Nebraska is apportioned to Nebraska by using the sales factor of the unitary business.

305.03 Unitary Group; Apportionment Formula. When part of a unitary business is conducted in Nebraska by one or more members of the unitary group, the income of the taxpayer apportioned to Nebraska is determined by calculating the ratio of the unitary group’s sales in Nebraska compared to the total sales of the entire unitary group and applying the computed ratio to the federal taxable income, as adjusted, of the unitary group.

305.03A In computing the factor, only those business entities that are subject to the IRC are included in the calculation and in the taxpayer’s filing.

305.03B Sales of only those business entities with nexus in Nebraska are included in the numerator of the computed apportionment factor.

305.04 Unitary Group; Combined Return. Each unitary group must file only one income tax return for the group for each tax year, even if more than one member of the unitary group is taxable in Nebraska.

305.05 Unitary Group; S Corp Included in Apportionment. If a unitary group includes an S Corp, the apportionment formula in Reg-24-305.03 will be calculated for the entire unitary group and applied to the federal taxable income of the corporate taxpayer and separately to the federal taxable income of the S Corp which is taxable to its owners.

305.06 Unitary Group; Business Entities Excluded. Inactive business entities may not be included in the unitary group. Any business entity that is required or has received permission to use a special apportionment formula under Reg-24-381, Special Apportionment, cannot be included in the unitary group. If more than one affiliated or related company of a unitary group is properly using the same special apportionment formula, these business entities must use the combined income approach and must file a single return.

(Neb. Rev. Stat. §§ 77-2734.01, 77-2734.05, 77-2734.14, 77-2734.15, and 77-2734.16. December 27, 2015.)

REG-24-311 SALES FACTOR; IN GENERAL

311.01 Determining Sales. Sales means gross receipts, less returns and allowances, and includes all interest income, service charges, carrying charges, or time-price differential charges related to sales. Federal and state excise taxes (including sales taxes) must be included as part of gross receipts if the taxes are passed on to the buyer or included as part of the selling price of the product. The following are rules for determining sales for business entities.

311.01A Exclusions from sales. The sales factor does not include:

311.01A(1) Any sales made in producing income that is nonapportionable;

311.01A(2) Income from discharging indebtedness;

311.01A(3) Amounts received from hedging transactions involving intangible assets; or

311.01A(4) Net gains from marketable securities held for investment.

311.01B Sales applicable to particular businesses.

311.01B(1) For a taxpayer that manufactures or purchases goods or products for sale, sales means all gross receipts from the sales of goods or products (or other property of a kind which would properly be included in the inventory if on hand at the close of the tax period) held for sale to buyers.

311.01B(2) For a cost plus fixed fee contract (for example, operating a government-owned plant for a fee) sales means the entire reimbursed cost, plus the fee.

311.01B(3) For providing services for buyers, or performing equipment service contracts or research and development contracts, sales means the gross receipts from providing these services including fees, commissions, and similar charges.

311.01B(4) For renting real or tangible property, sales means the gross receipts from renting, leasing, or licensing the use of the property.

311.01B(5) Sales means receipts from the sales of equipment used in the business.

311.01B(6) For licensing or assigning intangible property (for example, copyrights or patents) sales means the gross receipts from the licensing or assignment.

311.01B(7) For sales of intangible property, sales means the net gain from the sales of all intangible property. Any net loss on sales of all intangible property is not included in the factor.

311.02 Changes in the Items in the Factor. If the taxpayer departs from or modifies the basis for excluding or including gross receipts in the sales factor used in returns for prior years, the return for the current year must disclose the nature and extent of the modification.

311.03 Inconsistent Reporting of Items in the Factor. If the returns or reports filed with all states with laws similar to Nebraska in which the taxpayer reports are not uniform in including or excluding items from the sales factor, the Nebraska return must disclose the nature and extent of the variance.

311.04 Denominator. The denominator of the sales factor includes the total sales of the taxpayer. If the sales factor is to be calculated for a unitary group, the denominator of the sales factor includes the total sales of all members of the unitary group.

311.05 Numerator. The numerator of the sales factor includes sales of the taxpayer that are attributable to Nebraska. All interest income, service charges, carrying charges, or time-price differential charges are included regardless of the place where the accounting records are maintained or the location of the contract or other evidence of indebtedness.

(Neb. Rev. Stat. §§ 77-2734.04 and 77-2734.14. December 27, 2015.)

REG-24-315 SALES FACTOR; BUSINESS ENTITIES AS OWNERS IN A PARTNERSHIP OR JOINT VENTURE

315.01 A business entity which is required to apportion income and has income from a partnership or joint venture (partnership), will calculate its Nebraska sales factor under this regulation. The entire federal taxable income of a corporate taxpayer is subject to apportionment in this state. Nebraska apportionable income includes any income or loss received due to a business entity’s interest in a partnership. If neither the corporation nor the partnership is subject to tax in another state, the entire federal taxable income of the business entity is subject to Nebraska tax and will not be apportioned.

315.02 When a business entity is an owner in a partnership, the business entity’s apportionment factor must be calculated based on whether or not the business entity and partnership are considered unitary. A unitary determination must be made for each business entity.

315.02A When a partnership has sufficient contacts with a business entity to be considered unitary if it were a corporation, the partnership will be considered unitary with the business entity regardless of the ownership share of the business entity.

315.02A(1) When a business entity and a partnership are considered unitary, the sales factor of the business entity must include the business entity’s share of the partnership’s sales determined by multiplying the partnership’s sales factor numerator and denominator by the business entity’s ownership percentage.

315.02A(2) Intercompany sales will be eliminated using calculations made in the following order:

315.02A(2)(a) Intercompany sales will be eliminated based on the percentage of the business entity’s ownership of the partnership; except that sales from the partnership to the business entity or members of the unitary group will be eliminated only to the extent of the business entity’s or unitary group's share of total sales of the partnership (See Reg-24-315.02A(4)); and

315.02A(2)(b) If all of the sales from the partnership to the business entity or unitary group are not eliminated based on Reg-24-315.02A(2)(a), the remaining sales in each state will be the same percentage of the sales in the state before any eliminations. (See Reg-24-315.02A(6)) 315.02A(2)(c) Any partnership agreements that identify particular activities to a specific owner will not be considered when determining the income of each owner subject to tax in Nebraska.

315.02A(3) Example 1- Facts. X is a multistate corporation domiciled outside Nebraska and is an owner of AX, a multistate partnership. X has a 40 percent ownership interest in AX. X and AX would be considered unitary if both were corporations. Corporation X has total sales of $10,000,000, $2,000,000 of which were made to Partnership AX, and Nebraska sales of $5,000,000, $400,000 of which were made to Partnership AX. Partnership AX has sales of $3,000,000, $700,000 of which were to Corporation X, and total Nebraska sales of $40,000.

315.02A(4) Example 1 - Denominator Calculation. The sales factor denominator to be used in the combined report of income with the corporate return is calculated as follows-

| Sales Factor Denominator | | | --- | --- | | Sales of Corporation X | $10,000,000 | | Sales of Partnership AX | $1,200,000 ($3,000,000 sales X 40% ownership) | | Total sales | $11,200,000 | | Minus intercompany sales eliminations | | | Corporation X sales to AX | ($800,000) ($2,000,000 sales X 40% ownership) | | Partnership AX sales to X | ($700,000) (Actual sales, not limited) | | Denominator | $9,700,000 |

315.02A(5) Example 1 - Numerator calculation. The sales factor numerator to be used in the combined report of income with the corporate return is calculated as follows-

| Sales Factor Numerator | | | --- | --- | | Nebraska sales of Corporation X | $5,000,000 | | Partnership AX | $6,500 (see computation in 315.02A(6) below) | | Minus intercompany sales eliminations | | | Corporation X sales to AX | ($160,000) ($400,000 Nebraska sales X 40% ownership) | | Partnership AX sales to X | 0 (after eliminations) | | Numerator | $4,846,500 |

315.02A(6) Example 1 - Numerator Calculation when Partnership’s Sales Are Not Totally Eliminated. Since Corporation X's share of Partnership AX's total sales were not totally eliminated in the denominator, the Nebraska sales by Partnership AX are determined by multiplying Partnership AX's remaining sales by its percentage of Nebraska sales (before any eliminations) as shown below-

| Numerator Calculation when Partnership’s Sales Are Not Totally Eliminated | | | --- | --- | | Corporation X's share of Partnership AX's total sales | $1,200,000 ($3,000,000 sales X 40% ownership) | | Partnership AX sales to Corporation X eliminated in the denominator | $700,000 | | Partnership AX sales not eliminated | $500,000 ($1,200,000 - $700,000) | | Partnership AX % of Nebraska sales | 1.30% ($40,000 Nebraska sales / $3,000,000 | | Partnership AX Nebraska sales eliminated | $6,500 ($500,000 X 1.30%) |

315.02B When a partnership does not have sufficient contacts with a business entity to be considered unitary, the business entity’s sales factor must include its share of income from the partnership. The net income distributed from the partnership to the business entity will be included in the denominator and the Nebraska source net income distributed from the partnership to the business entity will be included in the numerator.

315.02B(1) Example 2 – Non-Unitary Facts. Y is a multistate corporation domiciled outside Nebraska and is an owner in AY, a multistate partnership. Corporation Y has a 40 percent ownership interest in Partnership AY. Y and AY are not considered unitary. Corporation Y has sales of $10,000,000, $5,000,000 of which were made in Nebraska. Partnership AY has federal taxable income of $400,000 and Nebraska taxable income of $8,000-

| | Sales Factor Denominator | Sales Factor Numerator | | --- | --- | --- | | Corporation Y | $10,000,000 | $5,000,000 | | Partnership AY | $160,000 ($400,000 X 40% ownership interest) | $3,200 ($8,000 X 40% ownership interest) | | Totals | $10,160,000 | $5,003,200 |

315.02B(2) The business entity's sales factor does not include sales made by the partnership. Therefore, the business entity's sales factor is not adjusted to eliminate sales made between the business entity and the partnership.

(Neb. Rev. Stat. §§ 77-2729, 77-2734.14, 77-2734.15, and 77-2734.16. December 27, 2015.)

REG-24-323 SALES FACTOR; SALES OF TANGIBLE PERSONAL PROPERTY IN NEBRASKA

323.01 For tax years beginning or deemed to begin on or after January 1, 1997, gross receipts from sales of tangible personal property (TPP) (except as otherwise provided) are considered in Nebraska if the TPP is delivered or shipped to a purchaser in Nebraska regardless of the f.o.b. point, location where title transfers, or other conditions of sale. TPP is delivered or shipped to a purchaser in Nebraska when:

323.01A The recipient is located in Nebraska, even if the property is ordered from outside Nebraska;

323.01B The shipment terminates in Nebraska, even if the property is subsequently transported to another state;

323.01C The purchaser directs the taxpayer in Nebraska to deliver the TPP to the ultimate recipient in Nebraska;

323.01D The purchaser picks up the TPP at the seller’s location within Nebraska unless the taxpayer can show that the destination is a location outside Nebraska;

323.01E A purchaser located in Nebraska picks up the TPP at the seller’s location outside Nebraska, unless the taxpayer can show that the destination is a location outside Nebraska; or

323.01F The TPP being shipped by a seller from the state of origin to another state is diverted while enroute to a purchaser in Nebraska.

323.02 All mailing lists and prospect lists are considered TPP, even if the mailing or prospect list is delivered to the purchaser in an electronic format. Sales of mailing lists and prospect lists are considered in Nebraska under any of the circumstances in Reg-24-323.01.

323.03 Whether particular sales are attributable to Nebraska is determined on a transaction by transaction basis, not customer by customer, or contract by contract.

(Neb. Rev. Stat. § 77-2734.14; and ABI v. Egr, 264 Neb. 574 (2002). December 27, 2015.)

REG-24-326 SALES FACTOR; SALES OF TANGIBLE PERSONAL PROPERTY TO THE U.S. GOVERNMENT IN NEBRASKA

326.01 Gross receipts from sales of tangible personal property (TPP) to the U.S. Government are considered in Nebraska if the TPP is shipped from an office, store, warehouse, factory, or other place of storage in Nebraska, regardless of the final destination of the TPP. For the purposes of this regulation, only sales for which the U.S. Government makes direct payment to the seller pursuant to the terms of a contract constitute sales to the U.S. Government. Sales by a supplier or subcontractor to the prime contractor when the prime contractor is the party that contracted with the U.S. Government, are not sales to the U.S. Government.

(Neb. Rev. Stat. § 77-2734.14. December 27, 2015.)

REG-24-329 SALES FACTOR; SALES OTHER THAN SALES OF TANGIBLE PERSONAL PROPERTY IN NEBRASKA; TAX YEARS BEGINNING BEFORE JANUARY 1, 2014

329.01 In General. For tax years beginning before January 1, 2014, the numerator of the sales factor includes gross receipts from transactions other than the sales of tangible personal property (including transactions with the U.S. Government) if the income-producing activity which gave rise to the receipts is performed within Nebraska. Gross receipts are attributed to this state if, with respect to a particular income-producing activity, the income-producing activity is performed wholly within Nebraska or is performed both within and outside Nebraska but the greater proportion of the income-producing activity is performed in Nebraska, based on costs of performance.

329.02 Income-producing Activity. Income-producing activity means the transactions and activities directly performed for the ultimate purpose of obtaining gains or profit. This determination applies to each separate item of income. Income-producing activity does not include transactions and activities performed on behalf of a taxpayer (for example, those conducted on its behalf by an independent contractor). Income-producing activity includes but is not limited to the following:

329.02A Rendering personal services by employees or utilizing tangible and intangible property by the taxpayer in performing a service;

329.02B Selling, renting, leasing, licensing or other use of real property;

329.02C Renting, leasing, licensing or other use of tangible personal property; and

329.02D Selling, licensing, or other use of intangible personal property. Holding intangible personal property is not, by itself, an income-producing activity.

329.03 Costs of Performance. Costs of performance mean direct costs attributable to the income-producing activity. The costs of performance are determined in a manner consistent with generally accepted accounting principles and accepted conditions or practices in the trade or business of the taxpayer.

329.04 Special Rules. The following are special rules for determining when receipts from the income-producing activities described below are in Nebraska:

329.04A Gross receipts from selling, renting, leasing, or licensing real property are in Nebraska if the real property is located in this state.

329.04B Gross receipts from renting, leasing, or licensing tangible personal property are in Nebraska if the tangible personal property is located in Nebraska. If tangible personal property is used both within and outside Nebraska during the rental, lease, or licensing period, the gross receipts attributable to Nebraska are the total gross receipts multiplied by the ratio that the time the property was physically present or used in Nebraska bears to the total time or use of the property everywhere during the period.

329.04C Gross receipts for performing services are attributable to Nebraska to the extent the services are performed in Nebraska.

329.04C(1) Where services are performed both within and outside Nebraska, and the services performed in each state are separate income-producing activities, the gross receipts for performing these services that are attributable to Nebraska are the total gross receipts multiplied by the ratio which the time spent performing the services in Nebraska bears to the total time spent in performing the services everywhere. Time spent performing services includes the amount of time expended in performing a contract or other obligation which gives rise to the gross receipts.

329.04C(2) Where services relating to a single item of income are performed within and outside Nebraska, the gross receipts for performing these services are attributable to Nebraska if a greater portion of the services were performed in this state, based on costs of performance, than in any other state.

329.04C(3) Services not directly connected with performing the income-producing activity, for example, time expended negotiating the applicable contract, are excluded from the determination.

329.04D For the sale, assignment, or licensing of intangible personal property, for example, patents and copyrights, sales means the net gain from these sales, assignments, or licensing.

(Neb. Rev. Stat. §§ 77-2734.13 and 77-2734.14. December 27, 2015.)

REG-24-331 SALES FACTOR; SALES OTHER THAN SALES OF TANGIBLE PERSONAL PROPERTY IN NEBRASKA; TAX YEARS BEGINNING ON OR AFTER JANUARY 1, 2014

331.01 In General. For tax years beginning January 1, 2014, sales other than the sales of tangible personal property are included in the numerator of the sales factor as provided in Reg-24-333 to Reg-24-340. Whether particular sales are attributable to Nebraska is determined on a transaction-by-transaction basis, not customer-by-customer, or contract-by-contract. See, for example Reg-24-333.01D(4).

(Neb. Rev. Stat. § 77-2734.14. December 27, 2015.)

REG-24-333 SALES FACTOR; SALES OTHER THAN SALES OF TANGIBLE PERSONAL PROPERTY IN NEBRASKA; SERVICES

333.01 Services. Sales of services are attributable to Nebraska if the service, when rendered:

333.01A Relates to real property located in Nebraska;

333.01B Relates to tangible personal property located in Nebraska at the time the service is received, even if the buyer is located in another state;

333.01C Is provided to an individual physically present in Nebraska at the time the service is received; or

333.01D Is provided to a buyer engaged in a trade or business in Nebraska and the service relates to a part of the trade or business that is operated in Nebraska. It is presumed that a service provided to a buyer operating in Nebraska relates to a part of the trade or business that is operated in Nebraska.

333.01D(1) If the service relates to a part of the trade or business that is operated both within and outside Nebraska, the sales are sourced to Nebraska in proportion to the use of the service in Nebraska and the use of the service everywhere for the tax period calculated using any reasonable method.

333.01D(2) For purposes of Reg-24-333.01D(1), operating or engaged in a trade or business in Nebraska means having property, payroll, or customers in Nebraska.

333.01D(3) Services which relate to a product of the buyer are considered used by the buyer at a location without considering where the customers of the buyer are located. Services that relate to the buyer as a trade or business are considered used by the buyer at multiple locations where the buyer operates its trade or business.

333.01D(4) For example:

333.01D(4)(a) If the service is a payroll service and the buyer only has employees in Nebraska, the receipts from providing that service are entirely attributable to Nebraska. However, if the buyer has employees in multiple states, the receipts from providing the service to the buyer could be attributed to Nebraska in proportion to the number of employees in Nebraska.

333.01D(4)(b) If the service contributes to finishing a product that the buyer produces only in Nebraska, the receipts from providing the service are entirely attributable to Nebraska even if the product is sold outside Nebraska.

333.01D(4)(c) If the service is advertising services that will be broadcast in many states, the sales could be attributed to Nebraska in proportion to the market in Nebraska relative to the market in all states.

333.02 Application Services. Sales of application services are attributable to Nebraska if the buyer uses the application service in Nebraska. The application service is used in Nebraska if the buyer:

333.02A Is an individual, and his or her billing address is in Nebraska; or

333.02B Is a business entity, and uses the application service in a trade or business in Nebraska.

333.02B(1) If the buyer uses the application service within and outside Nebraska, these sales are attributed to Nebraska in proportion to the use of the application service in Nebraska and the use everywhere for the tax period, calculated using any reasonable method.

333.02B(2) If the location of use of the application cannot be determined, the sale of an application service is in the state from which the order was placed in the regular course of the buyer’s business.

333.02B(3) If that location cannot be determined, the sales are attributable to the buyer’s billing address.

333.03 Communications Company. The sales of a communications company other than sales of tangible personal property are attributable to Nebraska if:

333.03A The income-producing activity is performed in Nebraska; or

333.03B The income-producing activity is performed both within and outside Nebraska and a greater proportion of the activity is performed in Nebraska than in any other state, based on costs of performance.

333.04 Reasonable Method. To be a reasonable method of calculation, the method must be applied in a consistent manner to determine what amount of the service or application is received or used in Nebraska.

333.04A The method must be supported by the service or application provider’s business records at the time the service is received.

333.04B The method used must be described by the taxpayer.

(Neb. Rev. Stat. § 77-2734.14. December 27, 2015.)

REG-24-335 SALES FACTOR; SALES OTHER THAN SALES OF TANGIBLE PERSONAL PROPERTY IN NEBRASKA; INTANGIBLE PROPERTY

335.01 Sales of Intangible Property. Sales of intangible property are attributable to Nebraska if the buyer uses the intangible property at a location in Nebraska, even if the buyer’s customers are located in another state.

335.01A If the buyer uses the intangible property within and outside Nebraska, the sales are attributable to Nebraska in proportion to the use of the intangible property in Nebraska and the use everywhere during the tax period.

335.01A(1) Marketing Intangible. If the intangible is used by the buyer in marketing its products, the use of the intangible in Nebraska is the share of the receipts that reflects the sales of the buyer within and outside Nebraska. If this cannot be determined, the use of the intangible in Nebraska is the share of the receipts that reflects the population of Nebraska relative to the population everywhere the buyer markets the product using the intangible. Examples of a marketing intangible include licensing of a service mark, trademark, or trade name.

335.01A(2) Production Intangible. If the intangible is used by the buyer to produce its products, the use of the intangible in Nebraska is the share of the production which occurs in Nebraska using the intangible relative to the production of the product using the intangible everywhere. Examples of a production intangible include licensing of patents or copyrights.

335.01A(3) Service Intangible. If the intangible is used by the buyer like a good or service, or used by the business itself, the sales are attributable to Nebraska using the rules for sales of services in Reg-24-333. Examples of a service intangible include licensing use of a legal research service.

335.01A(4) Mixed Intangible. If the intangible is used by the buyer in more than one of the ways listed in Reg-24-335.01A(1), (2), or (3), and the fees charged for each type of use are separately stated in the license, the separate uses are attributable to Nebraska separately. If the intangible is used by the buyer in more than one of the ways listed in Reg-24-335.01A(1), (2), or (3), and the fees charged for each type of use are not separately stated in the license, the sales are attributable to Nebraska based on which use is most predominant.

335.01B If the location of use cannot be determined, the sale of intangible property is attributable to Nebraska if the buyer’s billing address is in Nebraska.

335.02 Income from Intangible Assets Used in a Treasury Function.

335.02A Income from intangible assets held in connection with a treasury function is attributable to Nebraska:

335.02A(1) To the extent that intangible asset income is included in taxable income; and

335.02A(2) To the extent the investment, management, and record-keeping activities associated with corporate investments occur in Nebraska.

335.02B This section does not include net gains from the sale or redemption of marketable securities or hedging transactions.

335.03 Income from Loans Secured by Real or Tangible Personal Property. Loans secured by real property or tangible personal property are attributable to Nebraska if the property securing the loan is located in Nebraska. This income includes gross interest, fees, points, charges, and penalties from loans, net gains from the sale of loans, and loan servicing fees derived from loans owned by the taxpayer or another person, including loans under a participation agreement.

335.03A If the real property or tangible personal property securing a loan is located within and outside Nebraska, the sale is attributable to Nebraska in proportion to the annual average amortized loan balance of the loan secured by the real property or tangible personal property located in Nebraska compared to the annual average amortized loan balance of the loan.

335.03A(1) If a loan is secured by property that is located both inside and outside Nebraska, the average amortized loan balance is attributable to Nebraska based on the ratio of the value of the property securing the loan that is in Nebraska compared to the total value of all property securing the loan.

335.03A(2) If a loan is secured by mobile property that is in Nebraska only part of the time, the average amortized loan balance is attributable to Nebraska in proportion to the time the property was physically present or was used in Nebraska compared to the total time or use of the property everywhere during the tax period.

335.04 Loans Not Secured by Real or Tangible Personal Property. A loan not secured by real property or tangible personal property is attributable to Nebraska if the borrower is in Nebraska based upon the borrower’s billing address. This income includes gross interest, fees, points, charges, and penalties from loans, net gains from the sale of loans, and loan servicing fees from loans owned by the taxpayer or another person, including loans under a participation agreement.

335.05 Credit Cards. For credit cards; the gross interest, fees, points, charges, and penalties from credit card receivables and gross receipts from annual fees and other fees charged to credit card holders are attributable to Nebraska if the billing address of the credit card holder is in Nebraska.

335.06 Credit Card Receivables. Net gains from the sale of credit card receivables are attributed to Nebraska if the billing address of the credit card holder is in Nebraska. The net gains cannot be less than zero.

(Neb. Rev. Stat. § 77-2734.14. December 27, 2015.)

REG-24-337 SALES FACTOR; SALES OTHER THAN SALES OF TANGIBLE PERSONAL PROPERTY IN NEBRASKA; LEASING TANGIBLE PERSONAL PROPERTY IN NEBRASKA; SELLING OR LEASING REAL PROPERTY IN NEBRASKA

337.01 Lease, Rental, or Licensing of Tangible Personal Property. Gross receipts from the lease, rental, or licensing of tangible personal property are attributed to Nebraska to the extent the tangible personal property is located in Nebraska.

337.01A Tangible personal property is located in Nebraska to the extent the tangible personal property is physically present or used in Nebraska.

337.01B If the property is located within and outside Nebraska, the gross receipts are attributed to Nebraska in proportion to the percentage of time the property was located in Nebraska.

337.02 Sale, Lease, Rental, or Licensing of Real Property. Gross receipts from the sale, lease, rental, or licensing of real property are attributed to Nebraska if the real property is located in Nebraska.

(Neb. Rev. Stat. § 77-2734.14. December 27, 2015.)

REG-24-338 SALES FACTOR; SALES OTHER THAN SALES OF TANGIBLE PERSONAL PROPERTY IN NEBRASKA; SALE NOT SPECIFICALLY ADDRESSED

338.01 Sale Not Specifically Addressed. For sales other than sales of tangible personal property which are not specifically addressed in these regulations, the sales must be attributed to Nebraska so that they fairly represent the extent of the taxpayer’s business activity in Nebraska.

338.01A If the buyer is an individual, the sale is deemed to have occurred at the buyer’s billing address.

338.01B If the buyer is not an individual and the order is placed in the regular course of the buyer’s business, the sale is deemed to have occurred in the state from which the order was placed. If the state from which the order was placed cannot be determined, the sale is deemed to have occurred at the buyer’s billing address.

(Neb. Rev. Stat. § 77-2734.14. December 27, 2015.)

REG-24-341 SPECIAL APPORTIONMENT RULES; ALL TAX YEARS; AIRLINES

341.01 Scope. This regulation governs the apportionment of taxable income of an airline that has income from sources both within and outside Nebraska.

341.02 Definitions. The following definitions are applicable to the terms used in the apportionment factor descriptions.

341.02A Aircraft ready for flight are aircraft owned or acquired through rental or lease (but not interchange) which are in the possession of the taxpayer and are available for service on the taxpayer routes.

341.02B Cost of aircraft by type is the average original cost or value of aircraft by type which are ready for flight.

341.02C Departures are all takeoffs, whether they are regularly-scheduled or charter flights, that occur during revenue service.

341.02D Original cost is the initial federal tax basis of the property plus the value of capital improvements to the property, except that, for this purpose, it is assumed that safe harbor leases are not true leases and do not affect the original initial federal tax basis of the property.

341.02E Net annual rental rate is the annual rental rate paid by the taxpayer.

341.02F Revenue service is using aircraft ready for flight for producing revenue.

341.02G Transportation revenue is flight revenue earned by transporting passengers, freight, and mail as well as revenue earned in connection with providing transportation, including, but not limited to, food, beverage, and media sales made on the plane; pet crate rentals, baggage fees, etc.

341.02H Value of rented real and tangible personal property is the product of eight times the net annual rental rate.

341.03 Sales Factor: Numerator. The numerator is the revenue other than transportation revenue as calculated in Reg-24-341.03A plus the result of the calculation of the transportation revenue in Reg-24-341.03B.

341.03A Revenue Other than Transportation Revenue. The gross receipts of the taxpayer, other than transportation revenue, are included in the sales factor numerator in accordance with Reg-24-301 through Reg-24-340.

341.03B Transportation Revenue. The gross receipts of the transportation revenue that is included in the numerator is the total revenue of the taxpayer in Nebraska during the income year. To compute the total transportation revenue of the taxpayer in Nebraska during the income year:

341.03B(1) Calculate the ratio of departures of aircraft in this state weighted as to the cost and value of aircraft by type, compared to total departures also weighted as to the cost and value of the aircraft by type; and

341.03B(2) Multiply this ratio by the total transportation revenue.

341.04 Sales Factor; Denominator. The denominator is revenue derived from all transactions and activities in the regular course of the trade or business of the taxpayer, including both the revenue that is other than transportation revenue and the transportation revenue.

341.05 Income Excluded from the Factors. Investment income items such as interest, rental income, dividends, or proceeds or net gains or losses from the sale of aircraft will not be included in either the numerator or the denominator.

341.06 Unitary Group. An airline must be included in a unitary group with business entities which are not airlines.

341.07 Records. The taxpayer must maintain the records necessary to determine departures by type of aircraft as described in these regulations. These records are subject to review by the Department.

(Neb. Rev. Stat. §§ 77-2734.14, 77-2734.15, and 77-2734.16. December 27, 2015.)

REG-24-342 SPECIAL APPORTIONMENT RULES; ALL TAX YEARS; PIPELINE COMPANIES

342.01 In General. The regulation governs the apportionment of the income of a pipeline company that has income from sources both within and outside Nebraska.

342.02 Definitions. The following definitions are applicable to the terms used in the apportionment factor descriptions.

342.02A Pipeline company is any business entity engaged in the business of moving, conveying, or transporting any oil, gas, refined petroleum products, or any other substance through a pipeline for a consideration.

342.02B Revenue mile is transporting one barrel of oil, refined petroleum product, or other liquid; one thousand cubic feet of gas, or any other standard measure of a product, the distance of one mile for a consideration.

342.02C Transportation revenue is the gross receipts or sales derived from moving, conveying, or transporting oil, gas, refined petroleum products, or any other substance through a pipeline for a consideration.

342.03 Sales Factor.

342.03A Numerator. The gross receipts of the taxpayer, other than transportation revenue, are included in the sales factor numerator in accordance with Reg-24-301 through Reg-24-340. Transportation revenue must be included in the sales factor numerator on the basis of the ratio of the revenue miles in this state to the total revenue miles.

342.03B Denominator. The denominator is all sales everywhere, calculated in accordance with Reg-24-301 through Reg-24-340.

342.04 Unitary Group. A pipeline company must be included in a unitary group with business entities which are not pipeline companies.

342.05 Records. The taxpayer must maintain the records necessary to identify total revenue miles and revenue miles by state. These records are subject to review by the Department.

(Neb. Rev. Stat. § 77-2734.15. December 27, 2015.)

REG-24-343 SPECIAL APPORTIONMENT RULES; ALL TAX YEARS; TRUCKING COMPANIES

343.01 In general. This regulation governs the apportionment of income of a trucking company that has income from sources both within and outside Nebraska.

343.02 Definitions. The following definitions are applicable to the terms used in the apportionment factor descriptions.

343.02A Mobile property means all motor vehicles, including trailers, engaged directly in the movement of tangible personal property.

343.02B Mobile property mile means moving a unit of mobile property a distance of one mile, whether loaded or unloaded.

343.02C Transportation revenue means revenue derived from hauling freight, mail, and express delivery.

343.02D Trucking company means a motor common carrier, a motor contract carrier, or an express carrier which primarily transports tangible personal property of others by motor vehicle for compensation.

343.03 Sales Factor.

343.03A Numerator:

343.03A(1) The gross receipts of the taxpayer, other than transportation revenue, are included in the sales factor numerator in accordance with Reg-24-301 through Reg-24-340;

343.03A(2)The transportation revenue from any movements or shipments which are entirely within Nebraska are included in the sales factor numerator; and

343.03A(3) The transportation revenue from movements or shipments passing through, into, or out of this state must be included in the sales factor numerator on the basis of the ratio that the mobile property miles traveled in Nebraska bears to the total mobile property miles traveled everywhere.

343.03B Denominator. The denominator of the sales factor is all sales everywhere, calculated in accordance with Reg-24-301 through Reg-24-340.

343.04 Unitary Group. A trucking company must be included in a unitary group with companies which are not trucking companies.

343.05 Records. The taxpayer must maintain the records necessary to identify mobile property and the mobile property miles traveled by such mobile property in each state. These records are subject to review by the Department.

(Neb. Rev. Stat. § 77-2734.15. December 27, 2015.)

REG-24-347 SPECIAL APPORTIONMENT RULES; ALL TAX YEARS; INSURANCE COMPANIES

347.01 Unitary Group. An insurance company, including a captive insurance company, cannot be included in a unitary group when the other members of the unitary group are not insurance companies. A unitary group of insurance companies cannot include a corporation that is not an insurance company.

347.02 In General. Reg-24-347.04 governs the apportionment of income of an insurance company that has income from insuring property or risks both within and outside Nebraska.

347.03 Definitions. The following definitions apply to the terms used in the apportionment factor descriptions in this regulation.

347.03A Direct premiums are all premiums received for insurance other than reinsurance premiums.

347.03B Insurance company is a company engaged in the business of insurance as defined in Neb. Rev. Stat. § 44-102.

347.03C Premiums are the consideration paid to insurance companies for insurance and includes policy fees, assessments, dues, or other similar payments, except premiums on all annuity contracts and pension, profit-sharing, individually sponsored retirement plans, and other pension plan contracts which are described in IRC § 818(a).

347.03D Quota-share reinsurance is reinsurance of a certain percentage of all or certain parts of the business being reinsured.

347.03E Reinsurance premiums means premiums which are paid by an insurer to a third party to insure it against loss or liability by reason of the original insurance.

347.03F Schedule T is part of the annual statement prescribed by the National Association of Insurance Commissioners, which is required to be filed annually with the various state insurance departments.

347.04 Sales Factor. The numerator of the sales factor of an insurance company or a unitary group of insurance companies is direct premiums received on property or risks in Nebraska. The denominator is direct premiums received on property or risks everywhere.

347.04A Reinsurance premiums are included in the numerator and denominator only when more than one-third of the premiums received by an insurance company or a unitary group of insurance companies consist of premiums received for reinsurance accepted. If more than one-third of the premiums received by an insurance company or a unitary group of insurance companies consist of premiums received for reinsurance accepted, all premiums for reinsurance are included in the denominator.

347.04A(1) Premiums received for reinsurance accepted will be included in the numerator if it can be established or reasonably assumed that the underlying risks are in Nebraska.

347.04A(2) In the case of reinsurance accepted for which the location of the underlying risk can neither be established nor reasonably assumed, premiums received will be included in the numerator if Nebraska is the state of commercial domicile of the ceding company, except:

347.04A(2)(a) If more than half of the ceding company’s premiums written are direct premiums, reinsurance premiums received with respect to quota-share will be sourced in proportion to the ceding company's Annual Statement -- Schedule T allocation of its direct premiums written.

347.04B All transactions between corporate members of the same unitary group are eliminated prior to making the determinations outlined in this regulation.

(Neb. Rev. Stat. § 77-2734.15. December 27, 2015.)

REG-24-361 PROPERTY FACTOR; SCOPE

361.01 The property factor is described in Reg-24-361 through Reg-24-367. The property factor must be used to apportion the income of a multistate business for tax years beginning before January 1, 1992. The property factor may be used in a special apportionment formula, to calculate the Financial Institutions Deposit Tax, or to calculate the Nebraska Advantage Research and Development Tax Credit.

(Neb. Rev. Stat. §§ 77-2734.12, 77-3805, and 77-5803. December 27, 2015.)

REG-24-362 PROPERTY FACTOR; IN GENERAL

362.01 Property That Is Used; Included. The property factor of the apportionment formula includes all real and tangible personal property owned or rented and used during the tax period. Real and tangible personal property includes land, buildings, machinery, stocks of goods, equipment, and other real and tangible personal property, but does not include coins or currency.

362.01A Property is included in the property factor if it is actually used, is available for use, or capable of being used during the tax period.

362.01B Property held as reserves, standby facilities, or property held as a reserve source of materials must be included in the factor. For example, a temporarily idle plant or raw material reserves not currently being processed are included in the factor.

362.01C Property used remains in the property factor until its permanent withdrawal is established by an identifiable event or the lapse of an extended period of time (normally, five years) during which the property is held for sale.

362.01D Leasehold improvements are property owned by the taxpayer regardless of whether the taxpayer is entitled to remove the improvements or the improvements revert to the lessor upon expiration of the lease. The original cost of leasehold improvements must be included in the factor.

362.02 Property That Is Not Used; Excluded. Property used in connection with producing income that is not subject to apportionment is excluded from the property factor.

362.03 Property Under Construction. Property or equipment under construction during the tax period, except goods in process that will become inventory, are excluded from the factor until the property is actually used. If the property is used while under construction, the value of the property must be included in the property factor to the extent used.

(Neb. Rev. Stat. §§ 77-2734.12, 77-2734.15, 77-2734.16, and 77-5803. December 27, 2015.)

REG-24-363 PROPERTY FACTOR; NUMERATOR AND DENOMINATOR

363.01 Numerator. The numerator of the property factor includes the average value of the real and tangible personal property owned or rented by the taxpayer and used in this state during the tax period.

363.01A Property in transit between locations of the taxpayer is considered to be at its destination for purposes of the property factor.

363.01B Property in transit between a buyer and seller which is included by a taxpayer in the denominator of its property factor in accordance with its regular accounting practices must be included in the numerator if the destination is Nebraska.

363.01C The value of mobile property which is located within and outside Nebraska during the tax period must be included in the numerator of the factor in proportion to the total time within the state compared to its total time in all states during the tax period.

363.01D Mobile property assigned to a traveling employee must be included in the numerator if the employee’s compensation is assigned to Nebraska under the payroll factor or if the mobile property is a motor vehicle that is licensed in Nebraska.

363.02 Denominator. The denominator of the property factor is the average value of all real and tangible personal property owned or rented by the taxpayer.

363.03 Average Value. The property factor is the average value of the property for the tax year.

363.03A The average value of property owned by the taxpayer is calculated by averaging the values at the beginning and ending of the tax period. However, the Tax Commissioner may require or allow averaging the monthly values if necessary to properly reflect the average value of the property for the tax period.

363.03B Averaging by monthly values may be applied if substantial fluctuations in the values of the property exist during the tax period, or if property is acquired after the beginning of the tax period or disposed of before the end of the tax period.

(Neb. Rev. Stat. § 77- 2734.12. December 27, 2015.)

REG-24-364 PROPERTY FACTOR; VALUATION OF OWNED PROPERTY

364.01 Property that is owned must be valued at its original cost. Original cost is the basis of the property for federal income tax purposes (prior to any federal adjustments) at the time of acquisition and as adjusted by subsequent capital additions or improvements and partial dispositions, by reason of sale, exchange, abandonment, etc.

364.02 If the original cost of property cannot be determined, the property is included in the factor at its fair market value at the date of acquisition by the taxpayer.

364.03 Inventory must be included in the factor consistent with the valuation method used for federal income tax purposes.

364.04 Property acquired by gift or inheritance must be included in the factor at its basis for determining depreciation for federal income tax purposes.

(Neb. Rev. Stat. § 77-2734.12. December 27, 2015.)

REG-24-365 PROPERTY FACTOR; VALUATION OF LEASED OR RENTED PROPERTY

365.01 Leased or Rented Property. Property that is leased or rented by the taxpayer during the tax year is valued at eight times its annual lease or rental payment. The annual lease or rental payment for any items of rented property is the total amount paid to lease or rent the property for the year. Subleases or subrents are not deducted when the amounts received are apportionable income.

365.01A If a taxpayer has leased or rented property for a term of 12 or more months and the current tax period is less than 12 months (due, for example, to a reorganization or change of accounting period), the amount payable for the short tax period must be annualized. The payment is not annualized if the lease or rental term expires during the tax period.

365.01B If property is leased or rented for less than a 12-month period, or the term remaining during the tax year is less than 12 months, the amount paid for the period is substituted for the annual lease or rental payment for the tax period. The payment is not annualized if the lease or rental term expires during the tax period.

365.02 Day to Day Rentals; Excluded. Leased or rented property does not include incidental day-to-day rentals, for example, hotel or motel accommodations, or daily rental of automobiles.

365.03 Annual Lease or Rental Payment. The annual lease or rental payment is the total amount of money or other consideration payable, directly or indirectly, for the use of the property and includes:

365.03A Any amount payable for using some or all of any real or tangible personal property, whether designated as a fixed sum of money or as a percentage of sales, profits, or another measure; and

365.03B Any amount payable as additional rent or in lieu of rent (for example, interest, taxes, insurance, repairs, or any other items which are required to be paid by the terms of the lease or other arrangement). These additional amounts do not include amounts payable as service charges (for example, utilities or janitor services). If a payment includes rent and service charges but the service charges are not separately stated, the annual lease or rental payment is the fair market value of the lease or rent excluding the other charges.

(Neb. Rev. Stat. § 77-2734.12. December 27, 2015.)

REG-24-367 PROPERTY FACTOR; CONSISTENCY IN REPORTING

367.01 In filing returns with Nebraska, if the taxpayer departs from or modifies the manner of valuing property, or of including or excluding property in the property factor, as compared to returns for prior years, the taxpayer must disclose the nature and extent of the modification in the return for the current year.

367.02 If the returns or reports filed by the taxpayer with all states to which the taxpayer reports are not uniform in the valuation of property and in the inclusion or exclusion of property in the property factor, the taxpayer must disclose the nature and extent of the variance in the Nebraska return.

(Neb. Rev. Stat. §§ 77-2734.06 and 77-2774. December 27, 2015.)

REG-24-371 PAYROLL FACTOR; SCOPE

371.01 The payroll factor is described in Reg-24-371 through Reg-24-374. The payroll factor must be used to apportion the income of a multistate business for tax years beginning before January 1, 1992. The payroll factor may be used in a special apportionment formula, to calculate the Financial Institutions Deposit Tax, and to calculate the Nebraska Advantage Research and Development Tax Credit.

(Neb. Rev. Stat. §§ 77-2734.13, 77-3805, and 77-5803. December 27, 2015.)

REG-24-372 PAYROLL FACTOR; IN GENERAL

372.01 Total Compensation Paid to Employees. The payroll factor of the apportionment formula includes the total compensation paid to employees in the regular course of the trade or business during the tax period.

372.01A The total compensation paid to employees is determined by the accounting method used. If the taxpayer uses the accrual method of accounting, all compensation properly accrued is deemed to have been paid during the tax period. If the taxpayer is required to report compensation under the cash method for unemployment compensation purposes, the taxpayer may use this method to calculate the payroll factor regardless of the taxpayer’s method of accounting.

372.01B Compensation paid to employees includes wages, salaries, commissions, and any other form of payment given to employees for services, as well as the value of the board, rent, housing, lodging, or other benefits or services furnished to employees by the taxpayer in return for personal services if the value received constitutes income to the recipient under the IRC.

372.01C In the case of employees not subject to the IRC (for example, those employed in foreign countries) the determination of whether benefits or services would constitute income to the employees will be made as though the employees were subject to the IRC.

372.02 Employees.

372.02A Employees include any officer of a corporation, or any individual who, under the common-law rules applicable when determining the employer-employee relationship, has the status of an employee.

272.02B Generally, a person will be considered an employee if he or she is included by the taxpayer as an employee for purposes of the payroll taxes imposed by the Federal Insurance Contributions Act. Individuals included within the term "employees" in the Federal Insurance Contributions Act who would not be employees under the usual common-law rules, are not employees for purposes of this regulation.

372.03 Excluded from the Payroll Factor. The payroll factor does not include:

372.03A Compensation paid in producing income that is not subject to apportionment; or

372.03B Payments made to an independent contractor or any other person not properly considered an employee.

(Neb. Rev. Stat. § 77-2734.13. December 27, 2015.)

REG-24-373 PAYROLL FACTOR; NUMERATOR AND DENOMINATOR

373.01 Numerator. The numerator of the payroll factor is the total compensation paid to employees in Nebraska during the tax period.

373.01A If compensation paid to employees is included in the payroll factor using the cash method of accounting, or if the taxpayer is required to report compensation under the cash method of accounting for unemployment compensation purposes, it is presumed that the total wages reported to Nebraska for unemployment compensation purposes is also compensation paid in Nebraska, except as provided in Reg-24-373.01B below.

373.01B The presumption may be overcome by satisfactory evidence that an employee’s compensation is not properly reportable to Nebraska for unemployment compensation purposes.

373.02 Compensation Paid in Nebraska. Compensation is paid to employees in Nebraska when, applied consecutively, any of the following tests are met:

373.02A The employee’s service is performed entirely within Nebraska;

373.02B The employee’s service is performed both within and outside Nebraska, but the service performed outside Nebraska is incidental to the employee’s service within Nebraska. Any service which is temporary or transitory in nature, or which is rendered in connection with an isolated transaction, is incidental;

373.02C If the employee’s services are performed both within and outside Nebraska, the employee’s compensation will be considered compensation paid to employees in Nebraska if-

373.02C(1) The employee’s base of operations is in Nebraska;

373.02C(2) There is no base of operations in any state in which some part of the service is performed, but the place where the service is directed or controlled is in Nebraska; or

373.02C(3) The base of operations or the place from which the service is directed or controlled is not in any state where some part of the service is performed but the employee’s residence is in Nebraska.

373.02D The base of operations is the location from which the employee customarily starts working and to which the employee customarily returns in order to receive instructions from the employer, receive communications from his or her customers or other persons, replenish stock or other materials, repair equipment, or perform any other functions necessary to the exercise of his or her trade or profession.

373.02E The place from which the service is directed or controlled is the location from which the power to direct or control the service is exercised by the employer.

373.03 Denominator. The denominator of the payroll factor is the total compensation paid to employees everywhere during the tax period. Compensation paid to employees whose services are performed entirely in a state where the taxpayer is immune, for example, under 15 U.S.C. §§ 381-385, are included in the denominator of the payroll factor.

(Neb. Rev. Stat. § 77-3734.13. December 27, 2015.)

REG-24-375 PAYROLL FACTOR; CONSISTENCY IN REPORTING

375.01 When filing a Nebraska return, if the taxpayer departs from or modifies the treatment of compensation from that used in returns for prior years, the taxpayer must disclose in the return for the current year the nature and extent of the departure or modification in the return for the current year.

375.02 If the returns or reports filed with all states to which the taxpayer reports are not uniform in the treatment of compensation paid to employees, the Nebraska return must disclose the nature and extent of the variance in the Nebraska return.

(Neb. Rev. Stat. §§ 77-2734.06 and 77-2774. December 27, 2015.)

REG-24-381 SPECIAL APPORTIONMENT

381.01 If the apportionment provisions contained in Reg-24-301 through 24-380 do not fairly represent the taxable income that is reasonably attributable to Nebraska, the taxpayer may petition the Tax Commissioner for a special apportionment formula.

381.01A The petition must be filed before filing any returns that propose to use the special apportionment formula.

381.01B Content. The petition must:

381.01B(1) Identify the taxpayer;

381.01B(2) State the pertinent facts;

381.01B(3) Show that the standard apportionment formula does not fairly represent the taxable income attributable to Nebraska;

381.01B(4) State the reasons why a special apportionment formula does fairly represent the taxable income attributable to Nebraska;

381.01B(5) Describe clearly the proposed special apportionment formula;

381.01B(6) Include a request for hearing, if one is desired; and

381.01B(7) Include any other information that the taxpayer believes supports the petition.

381.01C A special apportionment formula may be:

381.01C(1) The inclusion of one or more additional factors which will fairly represent the taxpayer's taxable income in this state;

381.01C(2) The exclusion of any one or more factors;

381.01C(3) Separate accounting; or

381.01C(4) The employment of any other method to effectuate an equitable apportionment of the taxpayer's income.

381.01D The Tax Commissioner may approve the petition if he or she finds that the taxpayer’s factual situation is unique and nonrecurring, and the apportionment formula in Reg-24-301 through Reg-24-380 otherwise produces incongruous results.

381.01E The Tax Commissioner may place conditions on approving a petition for a special apportionment formula, including, but not limited to:

381.01E(1) A change in the proposed special apportionment formula;

381.01E(2) A delay or retroactive application of the special apportionment formula; or

381.01E(3) An expiration of the special apportionment formula.

381.01F The Tax Commissioner must mail notice of the decision to the taxpayer by first class mail. If the Tax Commissioner does not mail the notice of final action on the petition within 30 days of filing the petition, the taxpayer may consider the petition denied.

381.02 The Tax Commissioner may determine that a taxpayer’s factual situation is unique and nonrecurring, and the apportionment formula in Reg-24-301 through Reg-24-380 otherwise produces incongruous results.

381.02A If the Tax Commissioner makes this determination, he or she may require a taxpayer to use a special apportionment formula as described in Reg-24-381.01C, for any tax year.

381.02B The Tax Commissioner must mail notice of this determination and requirement to the taxpayer by first class mail.

381.03 If a business entity is engaged in a multistate business and the income derived from within Nebraska is separate and distinct from the income derived in other states, the taxpayer may petition the Tax Commissioner for permission to separately account taxable income to Nebraska rather than apportioning the taxable income to Nebraska. The petition must meet the requirements of Reg-24-381.01B.

381.03A Books and records must be kept by recognized accounting standards to accurately reflect the amount of income of the multistate business which was derived in Nebraska during the tax period.

381.03B Business operations must be separate and distinct and there cannot be interstate, intercompany, or interdivisional purchases, sales, or transfers during the period.

381.03C The Tax Commissioner must mail notice of the decision on the petition to the taxpayer by first class mail. If the Tax Commissioner does not mail the notice of final action on the petition within 30 days of filing the petition, the taxpayer may consider the petition denied.

381.04 Request for Hearing. A petition for special apportionment or a request for separate accounting is not presumed to be a request for a hearing. The Tax Commissioner will grant a request for a hearing on the issue if requested in writing prior to the Tax Commissioner taking action on the petition or request.

381.05 The denial of a petition for special apportionment or a request for separate accounting and a determination by the Tax Commissioner to require a special apportionment formula are considered final actions of the Tax Commissioner and may be appealed to the Lancaster County District Court as provided in the Administrative Procedure Act. Petitions for review must be filed within 30 days after the notice of determination is mailed by the Tax Commissioner.

(Neb. Rev. Stat. §§ 77-2734.15, 77-27,127, and 84-919. December 27, 2015.)

History

• Effective 2020-07-05

Chapter 25 Partnership Income Tax Regulations

Neb. Admin. Code tit. 316, ch. 25 Partnership Income Tax Regulations {#sec-316-nac-25 omnilex-key=us-ne-regs-official--title-316--316 NAC 25}

REG-25-001 DEFINITION OF PARTNERSHIP TERMS FOR NEBRASKA TAX PURPOSES

001.01 In general. For the purpose of applying the Nebraska income tax to partnerships, the definition of partnership, partner, partnership agreement, and liquidation of a partner's interest as contained in the Internal Revenue Code of 1986 shall apply.

001.02 Federal classification as a partnership. A federal classification of an entity as a partnership shall be the conclusive determination for Nebraska tax purposes. This includes a limited liability company classified for federal income tax purposes as a partnership.

(Section 77-2773, R.R.S. 1996. November 11, 1998.)

REG-25-002 PARTNERS, NOT THE PARTNERSHIP, SUBJECT TO TAX

002.01 Taxation of partnerships. A partnership is not subject to income tax in Nebraska unless it is taxed as a corporation for federal income tax purposes. Persons who carry on business as partners must include in their incomes their proportionate share of the partnership income taxable in Nebraska.

002.02 Partnerships required to file Form 1065N. Every partnership having either a resident partner or income derived from sources within Nebraska, regardless of whether the partners are residents or nonresidents, shall file a Form 1065N, Nebraska Partnership Return of Income, for the taxable year. This return should set forth all items of income, gain, loss, deduction, and credit, and the names, addresses, and social security numbers of nonresident partners who are entitled to share in the income and deductions of the partnership. For Nebraska individual income tax purposes the credits include the partner's share of the nonhighway use motor fuel credit for tax years ending before January 1, 2005, the Community Development Assistance Act credit, the Nebraska Employment and Investment Expansion Act credit, the Nebraska Employment and Investment Growth Act credit, the Beginning Farmer Tax credit, the Nebraska Advantage Rural Development Act credit, the Nebraska Advantage Microenterprise Tax credit, the Nebraska Advantage Research and Development Act credit, and the Nebraska Advantage Act credit.

002.02A A limited partnership conducting business entirely outside this state which has Nebraska resident partners, none of whom are general partners charged with the management responsibility of the partnership, is not required to file Form 1065N.

002.03 Taxation of partners; in general. A partnership having income from Nebraska sources or having a resident partner must provide both resident and nonresident partners with a schedule listing the amounts and character of the income, deductions, and credits that are to be included in each partner's Nebraska income tax return. A resident partner must include his or her entire share of the partnership income, computed under the provisions of the Internal Revenue Code, in his or her adjusted gross income. A nonresident partner is subject to the Nebraska income tax on his or her share of the partnership income derived from or connected with Nebraska sources.

002.04 Character of income, gain, loss, or deduction. Each item of partnership income, gain, loss, or deduction shall have the same character for the partner individually, for the purposes of the Nebraska income tax, as it has for the federal income tax. Unless characterized otherwise by federal law, all items shall have the same character for the partner individually as if he or she realized it directly from the source from which it was realized by the partnership.

002.05 Time and manner of filing.

002.05A The Nebraska partnership return must be filed on or before the fifteenth day of the fourth month following the close of the taxable year of the partnership. Only one return is required to be filed for each partnership. A copy of the federal partnership return must accompany the filing of the Nebraska partnership return.

002.05B The Tax Commissioner may grant the partnership a reasonable extension of time, not to exceed seven (7) months, for the filing of the partnership return. Such an extension must be requested by the partnership prior to the prescribed due date for the filing of the return to avoid levy of penalty. Application should be made on Form 2688N and must give the reasons for the extension request.

002.05C Form 2688N should not be filed if the Internal Revenue Service has already granted the partnership an extension of time for filing the return. In this instance the due date for filing the comparable Nebraska return is automatically extended for the same period as the federal extension. However, a copy of the federal extension of time must be attached to the Nebraska return when it is filed.

(Sections 77-2728, 77-2729, 77-2773, and 77-4106, R.R.S. 2003 and sections 77-2715.07, 77-2717, 77-2727, and 77-27,188, R.S.Supp., 2005. March 7, 2006.)

REG-25-003 TAXATION OF NONRESIDENT PARTNERS

003.01 Partners' liability for Nebraska income tax. If a Nebraska partnership has either a resident partner or income derived from sources within Nebraska, then the partners of such partnership shall be liable for income tax on their proportionate shares of the partnership income.

003.02 Nonresident partner agreement to file return and pay tax. If any partner of such a partnership is a nonresident, he or she must file a Nebraska income tax return which includes that portion of the partnership's Nebraska source income which is allocable to his or her interest in the partnership. The nonresident partner should execute and forward to the partnership, on or before the original due date of the Nebraska partnership return, an agreement, Form 12N, which states that he or she will file a Nebraska income tax return and pay income tax on all income derived from sources in the State of Nebraska. Form 12N should be attached to the partnership's Nebraska return, Form 1065, for the reporting year.

003.03 Nonresident partner withholding. If such an agreement, Form 12N, is not attached to the partnership's return, then Form 14N should be completed and attached to the partnership's Nebraska return, Form 1065N, and the partnership should remit with its Nebraska return a portion of the nonresident partner's income which was derived from Nebraska sources. The amount of this remittance shall be a percentage equal to the highest individual income tax rate of the nonresident partner's share in the partnership income which was attributable to Nebraska sources. The nonresident partner can also be provided with a copy of Form 14N in order that he or she may properly take credit for the tax withheld on his or her Nebraska Individual Income Tax Return, Form 1040N, but no form need be provided unless requested by the partner.

003.03A Publicly traded partnerships (as defined by section 7704 (b) of the Internal Revenue Code and which do not file as corporations) are not required to withhold and remit tax on nonresident individuals provided such partnerships file an annual information return with the Department of Revenue. The information return must report the name, address, taxpayer identification number, and other information requested by the Department of Revenue for each individual nonresident partner with Nebraska income in excess of five hundred dollars.

003.04 Nonresident individual partners do not have to file an individual income tax return if their only connection with the state is conduct of the business activities of the partnership, and the partnership has remitted tax from all the Nebraska income attributable to the nonresident's share of the partnership's income pursuant to Reg-25-003.03. The full amount of the withholding is, at the taxpayer's option, retained in lieu of the filing of an individual income tax return. Any nonresident who so desires can still file a return and claim a refund if there is one due. Any nonresident who files Form 12N to avoid withholding or who has income from a publicly traded partnership which did not withhold and remit tax for such nonresident, must file a Nebraska income tax return.

003.05 Nonresident partner; Nebraska source income. In determining the taxable income of a nonresident partner of a Nebraska partnership, there must be included only that portion of the partnership income which was derived from sources within Nebraska. This would include a nonresident partner's distributive share of all items of partnership income, gain, loss, and deduction entering into his or her federal taxable income as determined under the general rules in section 77-2733 of the Nebraska Revised Statutes, and Reg-22-003.

003.05A This amount will be modified by a deduction for interest and dividend income received on any United States savings bonds or other federal obligations. Any modification for United States bond interest shall be determined in accordance with the nonresident partner's distributive share, for federal purposes, of the partnership income. The partnership income shall be adjusted by applying the amount of U.S. bond interest in the same manner as though the partnership were an individual. It should be noted that any modification for U.S. bond interest shall be limited to the proportion of such interest as is derived from Nebraska sources pursuant to section 77-2733 of the Nebraska Revised Statutes.

003.05B In determining the sources of a nonresident partner's income, no effect shall be given to any provision of a partnership agreement which characterizes payments to the partner as being compensation for services or as being a return on capital. Similarly, no effect shall be given to any provision in a partnership agreement which allocates to the nonresident partner a greater share of the income or gain from sources outside Nebraska than would be the nonresident partner's share in respect to income from all sources. In addition, any partnership agreement provision which allocates to a nonresident partner a greater proportion of any loss or deduction connected with Nebraska sources than his or her proportionate share for federal purposes shall be disregarded in determining the Nebraska tax liability.

003.05C If the Nebraska partnership has income from business activities that is taxable both within and without Nebraska, it will determine its Nebraska income by use of the formula apportionment method set forth in Reg-24-023 and Reg-24-056. A partnership engaged in business in Nebraska which is not subject to tax in another state does not apportion its income, but reports its entire taxable income to Nebraska.

003.05C(1) If the apportionment provisions do not fairly represent the taxable income reasonably attributed to Nebraska business operations, the partnership may, in unique and nonrecurring factual circumstances, request, or the Tax Commissioner may require, alternative methods of income attribution to produce an equitable apportionment of the partnership's income.

003.05D The Tax Commissioner may authorize the use of other methods of determining a nonresident partner's share of partnership income derived from Nebraska sources if such a method is requested by a taxpayer and if it more clearly and fairly reflects the amount of income of the nonresident partner which is derived from the State of Nebraska.

(Sections 77-2728, 77-2729, and 77-2733, R.R.S. 2003 and sections 77-2727 and 77-2734.01, R.S.Supp., 2005. March 7, 2006.)

REG-25-004 METHODS OF ACCOUNTING

004.01 In computing income tax imposed under the Nebraska Revenue Act of 1967, as amended, the partnership's method of accounting must be the same as its method of accounting used for federal income tax purposes.

(Sections 77-2760, and 77-2772, R.R.S. 1943. September 15, 1975.)

REG-25-005 RECORDS

005.01 In general. Any person subject to tax under the Nebraska Revenue Act of 1967, as amended, or any person required to file an information return for the taxable year, shall keep such permanent books of account or records, including inventories and all supporting documents, as are sufficient to establish the amount of gross income, deductions, credits, or other matters which may be required to support any income tax or information return.

005.02 Availability of books and records. Such books or records shall be kept available at all times for inspection by the Tax Commissioner or any agent or representative designated by him or her for the purpose of ascertaining the correctness of any return or other document required to be filed under the Nebraska Revenue Act.

005.03 Retention of records. Each taxpayer shall retain all of his or her records relating to a taxable year as long as their contents may become material in the administration of any Nebraska tax laws. If the Tax Commissioner serves a notice of deficiency for a taxable year, the taxpayer shall retain all of his or her records relating to that taxable year until the deficiency has been satisfied, abated, settled, or disallowed.

(Section 77-2772, and 77-27,119(3), R.R.S. 1943. September 15, 1986.)

REG-25-006 CORPORATION AS PARTNER IN A PARTNERSHIP OR JOINT VENTURE

006.01 When a partnership has sufficient contacts with a corporate partner such that it would be considered unitary if it was a corporation, then the corporate partner shall use Reg-24-056 to determine the income from the partnership attributable to Nebraska.

006.02 If the partnership is not unitary with the corporation and is operating entirely within Nebraska, then the partnership income of the corporation will be allocated entirely to Nebraska and will be added to any other income of the corporation attributable to Nebraska.

006.03 If the partnership is not unitary with the corporation and is operating within and without Nebraska, then the partnership will use the apportionment formula as referenced in Reg-24-023 and Reg-24-056 to determine the income of the partnership attributable to Nebraska. The corporation's share of the partnership's Nebraska income will then be added to any other income of the corporation attributable to Nebraska in order to determine the corporation's Nebraska taxable income.

006.04 If the partnership is not unitary with the corporation and is operating totally outside Nebraska, then the partnership income will be neither allocated nor apportioned to Nebraska.

(Sections 77-2727(2), R.R.S. 1996. November 11, 1998.)

REG-25-007 ADJUSTMENTS OF FEDERAL OR ANOTHER STATE'S INCOME TAX

007.01 Any changes or corrections made by the Internal Revenue Service or through renegotiation of a contract with the United States in a partnership's reported income or deductions must be reported to the Nebraska Department of Revenue within ninety (90) days of the final determination of the change.

007.01A In reporting any change, the partnership must furnish complete information regarding the amount of income and deductions reported to the Internal Revenue Service after the change or correction. The report must also concede the accuracy of the final determination or give a statement outlining the specific errors of the final determination.

007.02 Any adjustments made on a federal amended return shall be reported to the Department of Revenue within ninety (90) days of the filing of the amended federal return.

007.02A Adjustments made on a federal amended return or by the Internal Revenue Service shall be reported to the Department of Revenue by filing a Nebraska Partnership Return of Income, Form 1065N, and marking the box “Amended Return”. The amended return for Nebraska must include copies of the federal amended return, Internal Revenue Service report, or other documentation which substantiates the adjustments claimed.

007.03 Any changes or corrections in a partnership's reported income, deductions, or allowed tax credits in another state in a way material to the Nebraska tax liability made by filing an amended return, by the other state, or by any other competent authority, shall be reported to the Department of Revenue by filing a Nebraska Partnership Return of Income, Form 1065N, and marking the box "Amended Return". The amended return must be filed within ninety (90) days of the filing of the amended or corrected state return or the date of the changes, and must include copies of any reports issued by the other state or other competent authority.

007.04 A partnership filing an amended return reporting an increase in its income reported to Nebraska will make a revised calculation of Nebraska income tax to withhold from any nonresident partners. Revised statements of income tax withheld from such partners will be issued by the partnership to nonresident partners for use by the partners in filing their amended Nebraska individual income tax returns. A publicly traded partnership which did not withhold under Reg-25-003 will not calculate revised withholding statements for its nonresident individual partners.

007.05 If a nonresident partner fails to report any change or correction which increases his or her tax liability, fails to report any change or correction which is treated as a deficiency for federal income tax purposes, or fails to file an amended Nebraska return, the Tax Commissioner may mail the partner a notice of deficiency at any time. If a partner properly reports any change in his or her federal tax liability, the Tax Commissioner may make an assessment relating to the change at any time within two (2) years after the report or amended return was filed.

(Sections 77-2727, 77-2775, and 77-2786(4), and (5), R.S.Supp., 2005. March 7, 2006.)

History

• Effective 2015-12-27

Chapter 28 Litter Fee

Neb. Admin. Code tit. 316, ch. 28 Litter Fee {#sec-316-nac-28 omnilex-key=us-ne-regs-official--title-316--316 NAC 28}

REG-28-001 NATURE OF THE LITTER FEE

001.01 The Nebraska Litter Reduction and Recycling Act authorizes the collection of a litter fee to be administered by the Nebraska Department of Revenue. The litter fee is imposed at a rate of one hundred seventy-five dollars per one million dollars of gross proceeds from the manufacture and sale or sale at either wholesale or retail in this state of the products, including by-products, listed below.

001.02 In the case of manufacturers and wholesalers, the litter fee is imposed on the gross proceeds from the manufacture and sale or sale at wholesale in this state of the products, including by-products, falling into any of the following categories.

001.02A Food for human or pet consumption;

001.02B Cigarettes and other tobacco products;

001.02C Soft drinks and carbonated waters;

001.02D Liquor, wine, beer, and other malt beverages;

001.02E Household paper and household paper products;

001.02F Glass containers;

001.02G Metal containers;

001.02H Plastic or fiber containers made of synthetic material;

001.02I Cleaning agents and toiletries; and

001.02J Kitchen supplies.

001.03 In the case of retailers, the litter fee is imposed upon the gross proceeds from the sale at retail in this state of products which fall into the following categories.

001.03A Food for human consumption, beverages, soft drinks, carbonated waters, liquor, wine, beer, and other malt beverages, except those sold by retailers which are solely for consumption indoors on the retailer's premises;

001.03A(1) Food or beverages sold through a vending machine are presumed not to be solely for consumption on the retailer's premises, and are therefore subject to the fee.

001.03B Food for pet consumption;

001.03C Cigarettes and other tobacco products;

001.03D Household paper and household paper products;

001.03E Cleaning agents; and

001.03F Kitchen supplies.

001.04 The litter fee shall apply each time such products or by-products are manufactured and sold, or sold at either wholesale or at retail in this state. The fee shall not apply to any person whose annual gross proceeds from the sale of products subject to the fee are less than one hundred thousand dollars. Any person engaged in business as both a retailer and either a manufacturer or a wholesaler shall pay the fee either on the gross proceeds derived from retailing operations or on the gross proceeds derived from the manufacturing and wholesaling operations, whichever are greater. The litter fee is calculated by multiplying the annual gross proceeds from the sale of the above listed products, including by-products, for the period either from retailing operations or from manufacturing and wholesaling operations by .000175.

001.05 The litter fee does not apply to the gross proceeds of:

001.05A Products of farmers, ranchers, and fishermen;

001.05B Products stored in grain elevators which do not undergo milling or other processing;

001.05C Food and food products for human or pet consumption sold in bulk form and of a size not suitable for sale to consumers purchasing in the ordinary course of retail marketing. Bulk form does not include large quantities of any food or food products that are packaged or subpackaged in containers or that are suitable for sale to consumers in the ordinary course of retail marketing. For example, a pallet containing 4,800 six ounce cans of peas, individual tomatoes, apples, potatoes, or other similar items is not bulk form;

001.05D Fertilizer, seeds, annual plants, and any form of animal life, and animal feed sold for resale or use in the agricultural food industry;

001.05E Any animal, bird, or insect, or the milk, eggs, wool, fur, meat, honey, or other substance obtained therefrom, if the person performs only the growing or raising function of such animal, bird, or insect; or,

001.05F Any product not listed in Reg-28-001.02 and Reg-28-001.03 above.

001.06 Questions as to whether or not the litter fee applies to a specific product or person are to be directed to the Nebraska Department of Revenue in the format set out in Practice and Procedure Regulation 33-007.

(Sections 81-1534, 81-1536, 81-1541, 81-1542, 81-1543, 81-1545, 81-1548.01, 81-1548.02, 81-1548.03, 81-1548.04, 81-1559, 81-1560, 81-1560.01, 81-1560.02, and 81-1560.03, R.R.S. 1999, and section 81-1566, R.S.Supp., 2005. March 7, 2006.)

REG-28-002 DEFINITIONS

002.01 "Cigarettes and other tobacco products" means any roll of tobacco wrapped in paper, leaf tobacco, or in any substance containing tobacco and shall include any pipe tobacco, chewing tobacco, or other sundry tobacco products.

002.02 "Cleaning agents" includes, but is not limited to, all soaps, detergents, solvents, or other cleaning substances used for cleaning buildings, places, animals, or other things.

002.03 "Delivery" is held to have taken place in this state when physical possession of the products, including by-products, is actually transferred to the purchaser within this state, or when the products, including by-products, are placed in the mails or delivered to a common or contract carrier at a point outside this state and directed to the purchaser in this state.

EXAMPLE: A product sold by an Iowa wholesaler to a Nebraska wholesaler is shipped from Iowa to the Nebraska purchaser by common carrier. Delivery is held to have taken place in this state. However, the litter fee would not apply unless the Iowa wholesaler was engaged in business in this state.

002.04 "Engaging in business in this state" means and includes any of the following:

002.04A Maintaining, occupying, or using permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse, or storage place or other place of business;

002.04B Having any representatives, agents, salesmen, canvassers, or solicitors operating in this state under the authority of the manufacturer, wholesaler, or retailer or a subsidiary of the manufacturer, wholesaler, or retailer for the purpose of producing, selling, delivering, or taking of orders, for any tangible personal property;

002.04C Deriving receipts from the rental or lease of tangible personal property in this state;

002.04D Soliciting retail sales of tangible personal property from residents of this state on a continuous, regular, or systematic basis by means of advertising which is broadcast from or relayed from a transmitter within this state or distributed from a location within this state;

002.04E Soliciting orders from residents of this state for tangible personal property by mail, if the solicitations are continuous, regular, seasonal, or systematic and if the retailer benefits from any banking, financing, debt collection, or marketing activities occurring in this state or benefits from the location in this state of authorized installation, servicing, or repair facilities;

002.04F Being owned or controlled by the same interests which own or control any retailer engaged in business in the same or similar line of business in this state; or

002.04G Maintaining or having a franchisee or licensee operating under the retailers trade name in this state if the franchisee or licensee is required to collect the tax under the Nebraska Revenue Act of 1967.

002.05 "Food" or "food for human or pet consumption" includes, but is not limited to, any substance, except drugs, which is used for human or pet nourishment, including candy, chewing gum, and condiments. Drugs means substances or products which are used as medicine for treating disease, healing, or relieving pain.

002.06 "Glass containers" includes, but is not limited to, articles made wholly or in substantial part of processed silicates which can be, or are, used to hold other things within themselves and are susceptible to being dropped, deposited, discarded, or otherwise disposed of upon any property in this state. The phrase shall not include containers having capacities in excess of ten gallons.

002.07 "Groceries" means all food for human or pet consumption, cigarettes, other tobacco products, soft drinks, carbonated waters, liquor, wine, beer, other malt beverages, household paper, household paper products, cleaning agents, and kitchen supplies.

002.08 "Gross proceeds" means the total amount of consideration valued in money, whether received in money or otherwise, arising or accruing from the manufacture and sale or sale at either wholesale or retail in this state of products, including by-products, falling into any of the categories listed in Reg-28-001, Nature of the Litter Fee, without any deduction for costs or expenses except those incurred for the purchase of any item in this state for the purpose of recycling such item. In addition, gross proceeds shall include all consideration derived from the sale of products, including by-products, by an out-of-state manufacturer, wholesaler, or retailer for delivery in this state.

002.09 "Household paper and household paper products" includes, but is not limited to, materials or substances made into sheets or leaves from organic or synthetic material for home or other use. It also includes products or articles made from such sheets or leaves for home or other use, such as napkins, paper plates, and paper towels.

002.09A Household paper and household paper products do not include magazines, periodicals, newspapers, literary works, or commercial paper, such as catalogs or other advertising.

002.10 "Liquor, wine, beer, and other malt beverages" means all beverages defined as alcoholic liquor, wine, or beer by Section 53-103, of the Nebraska Revised Statutes.

002.11 "Magazines, periodicals, newspapers, and literary works"includes, but is not limited to, all daily or periodical publications and the written products of an author or any copies thereof.

002.12 "Manufacturer" includes any person engaged in business in this state who has annual gross proceeds of at least one hundred thousand dollars from the sale in this state of any of the products, including by-products, falling into the categories listed in Reg-28-001.02, which the person makes, produces, manufactures, processes or fabricates.

002.13 "Metal containers" includes, but is not limited to, articles made wholly or in substantial part of materials such as iron, steel, tin, aluminum, copper, lead, zinc, silver, and any alloys thereof which can be, or are, used to hold other things within themselves and are susceptible to being dropped, deposited, discarded, or otherwise disposed of upon any property in this state. The phrase shall not include containers having capacities in excess of ten gallons.

002.14 "Person" shall mean any natural person, political subdivision, government agency, public or private corporation, partnership, joint venture, association, firm, or individual proprietorship.

002.15 "Plastic or fiber containers made of synthetic material" includes, but is not limited to, articles made wholly or in substantial part of ethylene derivatives, resins, waxes, adhesives, or polymers and which can be, or are, used to hold other things within themselves and are susceptible to being dropped, deposited, discarded, or otherwise disposed of upon any property in this state. The phrase includes all paper containers except those which are made exclusively of organic pulp fiber and without synthesis with adhesives, polymers, waxes, resins, or other materials. Synthetic material means that produced by synthesis which is the process of making or building up by a composition or union of simpler parts or elements as distinguished from the process of extraction or refinement. The phrase shall not include containers with rigid sides having capacities in excess of ten gallons.

002.16 "Retailer" includes any person engaged in business in this state having annual gross proceeds of at least one hundred thousand dollars resulting from sales made at the retail level of any of the products falling into the categories listed in Reg-28-001.03.

002.16A A retailer includes any person operating vending machines selling items subject to the litter fee.

002.17 "Soft drinks and carbonated waters" includes, but is not limited to, pop, soda, cola, tonic, etc., but does not include water, ice, liquor, wine, beer, and other malt beverages.

002.18 "Wholesaler" includes any person engaged in business in this state having annual gross proceeds of at least one hundred thousand dollars resulting from sales made at the wholesale level to retailers, other merchants, or industrial, institutional, and commercial users of any of the products, including by-products, falling into the categories listed in Reg-28-001.02. For purposes of the litter fee, the term wholesaler includes out-of-state manufacturers making sales in Nebraska.

002.19 "Toiletries" includes, but is not limited to, all substances such as soap, powder, deodorant, hairspray, cologne, perfume, cosmetics, toothpaste, etc., used in connection with the dressing or grooming of persons.

002.20 "Kitchen supplies" includes, but is not limited to, any nondurable supply used in conjunction with the preparation, consumption, or cleaning up after meals, including plastic wrap, aluminum foil, or plastic utensils.

(Sections 81-1545, 81-1548.03, 81-1548.04, 81-1560, R.R.S. 1943, and sections 81-1542, 81-1543, 81-1548.01, 81-1548.02, 81-1559, 81-1560.01, 81-1560.02, and 81-1560.03 R.S.Supp, 1993. May 14, 1994.)

REG-28-003 THE LITTER FEE RETURN

003.01 A return is required for each annual period or fraction thereof in which a litter fee license is required. The annual period is from July 1 through June 30.

003.02 Each person shall file only one return. See Reg-28-007 for the procedures to be followed by persons having more than one location.

003.03 Returns shall be signed by the person required to file the return or by his or her duly authorized agent.

003.04 Returns properly signed and accompanied by remittance will be considered timely filed if mailed, postage prepaid, on or before the due date stated on the face of the return. When the due date falls on a Saturday, Sunday, or any approved holiday, the return shall be considered timely filed if mailed postage prepaid on the next succeeding day which is not a Saturday, Sunday, or an approved holiday. A United States Postal Service postmark will be conclusive evidence of the date of mailing for the purpose of timely filing a return. Failure to file the return or to remit the fee due by the due date will subject the person required to file a return to a penalty in the amount of the larger of twenty-five dollars ($25.00) or ten percent of the fee due. In addition, interest will be assessed on the unpaid fee at the rate specified in Section 45-104.02 from the due date until the date payment is received.

003.05 Remittance must accompany the return and be in the form of a check, draft, or money order made payable to the Nebraska Department of Revenue. Cash or postage stamps should not be sent as payment.

(Sections 81-1559, and 81-1560.01, R.S.Supp., 1993. May 14, 1994.)

REG-28-004 LICENSES

004.01 Every person engaging in business in the State of Nebraska who manufactures and sells or sells at either wholesale or at retail in this state the products, including by-products, listed in Reg-28-001, Nature of the Litter Fee, must obtain a Nebraska litter fee license. A license may be obtained by filing a Nebraska Tax Application, Form 20. A license is not required if the person's annual gross proceeds from sales in this state of products subject to the litter fee at all locations are less than one hundred thousand dollars ($100,000.00).

004.02 A separate application for a litter fee license must be obtained for each place of business in this state required to hold a license. Each out-of-state manufacturer, wholesaler, or retailer required to obtain a litter fee license must file an application.

004.03 Upon examination and approval of the application, the Nebraska Department of Revenue shall issue to the manufacturer, wholesaler, or retailer a license for the specific place of business for which the application was filed. The license is not assignable, and will be valid only for the manufacturer, wholesaler, or retailer in whose name it is issued and for the transaction of business at the place designated thereon.

004.04 Upon violation of any of the litter fee statutes or regulations, the Nebraska Department of Revenue may revoke or suspend the license or licenses of the violator. The procedures as to revocation hearings are contained in Practice and Procedure Regulation 33-008.

004.05 A person whose license has been previously suspended or revoked shall pay the Nebraska Department of Revenue a fee of twenty-five dollars ($25.00) for the renewal or issuance of a license in the event of a first revocation, and fifty dollars ($50.00) for each successive revocation. A new license will not be issued to the same person until the Nebraska Department of Revenue is satisfied that such person will comply with the litter fee statutes and regulations issued thereunder.

004.06 A person who engages in business as a manufacturer, wholesaler, or retailer in this state without a license or licenses or after a license has been suspended or revoked, and each officer of any corporation which so engages in business, shall be guilty of a misdemeanor. Upon conviction thereof, such person and each such officer shall be fined an amount not to exceed five hundred dollars ($500.00) per each day of operation.

(Sections 81-1559 and 81-1560.01, R.R.S. 1999. March 7, 2006.)

REG-28-005 RECORDS

005.01 Every manufacturer, wholesaler, and retailer subject to the litter fee is required to keep records in order to determine the amount of fee due. These records must include the normal books of account ordinarily maintained by the average prudent business manager engaged in a similar activity together with all documents supporting entries in the books of accounts. Schedules and working papers used in the preparation of litter fee returns must be retained.

005.02 The records created at the time of sale may take the form of sales slips, sales invoices, tally sheets, itemized lists, or other memoranda. A cash register tape may be acceptable if it preserves sufficient information. Items may be described by a symbol if the symbol is representative of a class of products which are subject to the fee. If a manufacturer, wholesaler, or retailer sells products which are not subject to the fee in a "Department P" a description of such products as "Department P" is sufficient; provided, the manufacturer, wholesaler, or retailer uses such symbol consistently to describe the same products.

However, if a manufacturer, wholesaler, or retailer sells several types of products, including those not subject to the litter fee, in a single department, his records must individually identify the types of products which are subject to the litter fee. A manufacturer, wholesaler, or retailer may report and pay the litter fee on the basis of a percentage of gross proceeds where the gross proceeds from sales of products subject to the litter fee do not exceed 20 percent of his or her total gross proceeds. The percentage reported must reasonably reflect the sale of the products subject to the litter fee.

005.03 The State Tax Commissioner or any person authorized in writing by him may examine the books, papers, records, and equipment of any person to ascertain or verify the accuracy of any return filed, or, if no return is filed by the person, to ascertain and determine the amount required to be paid. Records must be retained for a period not less than three years after the return is filed, unless the Nebraska Department of Revenue, in writing, authorizes their destruction at an earlier date. However, the Department may issue a deficiency determination within five years after any amount of fee is determined due and payable when a return has not been filed.

(Sections 81-1559 and 81-1560.01, R.S.Supp., 1981. May 11,1982.)

REG-28-006 CONFIDENTIAL INFORMATION

006.01 It shall be a misdemeanor for the State Tax Commissioner, his or her employees, legal representatives, or agents, any employee of the State Treasurer or the Department of Administrative Services, or any person receiving information from them to divulge or to make known in any manner whatever, the business affairs, operations, or information obtained by an investigation of records and equipment of any person visited or examined in the discharge of official duty, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any return, or to permit any return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person. The preceding shall not be construed:

006.01A To prohibit the delivery to a person required to pay the fee, his duly authorized representative, or his successors, receivers, trustees, executors, administrators, assignees, or grantors, of a certified copy of any return or report.

006.01B To prohibit the publication of statistics.

006.01C To prohibit the inspection by the Attorney General or other legal representative of the State of Nebraska of reports or returns of any person when information on the reports or returns is considered, by the Attorney General, to be relevant to any action or proceeding instituted by the person or against whom an action or proceeding is being considered or has been commenced by any state agency.

006.01D To prohibit the furnishing of information to the Treasury Department of the United States, or to states allowing similar privileges to the State Tax Commissioner and the Nebraska Department of Revenue.

006.02 Information as to whether or not a person has a litter fee license may be released upon request.

(Sections 81-1559 and 81-1560.01, R.R.S. 1999. March 7, 2006.)

REG-28-007 PERSONS WITH MORE THAN ONE LOCATION

007.01 Where any manufacturer, wholesaler, or retailer conducts business operations at more than one location and at the various locations manufactures and sells, or sells at wholesale or at retail any products, including by-products, subject to litter fee, such manufacturer, wholesaler, or retailer must calculate the litter fee on the total gross proceeds from all of the locations. Business operations are conducted at two or more locations by the same manufacturer, wholesaler, or retailer if the same person or persons own eighty percent or more of the businesses at each location.

007.02 The manufacturer, wholesaler, or retailer must submit an application to the Department of Revenue to file a combined litter fee return covering the business operations of two or more locations. Such application shall be made on forms provided by the Department of Revenue and in addition to other information shall set forth the business locations to be included in each combined litter fee return. Business locations may not be added to or deleted from the combined litter fee return without written application for such change and without the prior approval of the Department of Revenue.

007.03 Such combined litter fee returns shall be made for all reporting periods on forms provided by the Department of Revenue setting forth for each location reported on the combined return such information as may be required. All information requested must be completed as to each business location. Failure to comply will subject the taxpayer to the appropriate penalties provided by law.

(Section 81-1559, R.S.Supp., 1993. May 14, 1994.)

REG-28-008 PERCENTAGE OF SALES METHOD FOR RETAILERS TO DETERMINE SALES SUBJECT TO THE FEE

008.01 The State Tax Commissioner may by regulation authorize particular types of retail businesses to report and pay the Nebraska Litter Fee based on a percentage of sales in lieu of separately accounting for sales subject to the fee.

008.02 Each type of retail business may submit to the State Tax Commissioner information that clearly defines the type of retail business and that shows the use of the percentage method will reasonably approximate the activity subject to the litter fee of that type of retail business.

008.03 The State Tax Commissioner, upon receipt of the information, may prepare a regulation to authorize the use of the percentage method. He or she shall designate a time and place for a hearing in order to give those concerned an opportunity to explain or answer questions concerning the information.

008.04 The State Tax Commissioner may then adopt a regulation for the particular type of retailer as defined in the regulation.

(Section 81-1560.04, R.S.Supp., 1993. May 14, 1994.)

History

• Effective 2006-03-07

Chapter 29 Quality Jobs Act

Neb. Admin. Code tit. 316, ch. 29 Quality Jobs Act {#sec-316-nac-29 omnilex-key=us-ne-regs-official--title-316--316 NAC 29}

REG-29-001 QUALITY JOBS ACT -- CONDUCT OF MEETINGS

001.01. The Board is the Quality Jobs Board. The members of the Board are the Governor, the State Treasurer, and the Chairperson of the Nebraska Investment Council.

001.01A Any two members of the Board shall constitute a quorum for the transaction of the business of the Board.

001.02 The Governor shall be the Chairperson of the Board.

001.03 The address of the Board is the Nebraska Department of Revenue.

001.04 The Tax Commissioner is designated as the Secretary of the Board with the following responsibilities:

001.04A The scheduling of a meeting when an application needs to be considered;

001.04B The publishing of the notices of the meeting according to the policies of the Board;

001.04C The keeping of the minutes of the meetings and other records of the Board;

001.04D The notification of the applicant of the decision of the Board;

001.04E Receiving and entering into the record any written testimony concerning an application; and

001.04F Consenting on behalf of the Board to an extension of time within which the Board is to make a decision.

001.05 The meeting of the Board shall be recorded by a court reporter.

001.05A The closed portion of the meeting shall be also recorded, and the record of that portion shall be sealed.

001.06 The Board shall decide within thirty days after receipt of the application whether it approves or disapproves the application, unless such time is extended by mutual written consent of the Board and the applicant.

(Section 77-4928, R.S.Supp., 1998, and section 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-002 QUALITY JOBS ACT -- APPLICATION

002.01 The application must request that the company be considered for approval under the Quality Jobs Act. The application shall also contain:

002.01A The exact name of the company and any related companies which will be included in the project;

002.01B A statement describing, in detail, the nature of the company's business, including the products sold and respective markets;

002.01C A detailed narrative that describes the proposed project, including how the company intends to attain and maintain the job and investment requirements:

002.01C(1) The number of base-year employees;

002.01C(2) The expected number of new employees;

002.01C(3) The expected timing of the hiring of the new employees;

002.01C(4) The average salaries expected by category for the new employees; and

002.01C(5) The anticipated timing and amounts of new investment in buildings and equipment.

002.01D If more than one location within this state is to be involved in the project, sufficient documentation to show that the employment and investment at the different locations are interdependent parts of the project plan;

002.01E A copy of the applicants authorization for the project;

002.01F A copy of the company's most recent financial report, federal income tax return, Nebraska income tax return, Nebraska reconciliation of income tax withheld, and Nebraska sales and use tax identification number; and

002.01G A five-thousand-dollar nonrefundable application fee payable to the Department of Revenue.

002.02 Any representations made by the applicant, or the applicants representatives, during the meeting before the Board shall become a part of the application.

002.03 The applicant shall specifically state whether they are requesting the wage benefit credit or the alternative wage benefit credit.

(Section 77-4928, R.S.Supp., 1998, and sections 77-4927.01, and 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-003 QUALITY JOBS ACT -- MEETING NOTICE

003.01 The Board shall give ten days notice of meetings by publication in at least six newspapers across the state.

003.02 The Board shall also give notice of meetings by publication in a newspaper that is local to the project area.

003.03 A copy of the notice shall be posted in the State Capitol and the State Office Building in Lincoln.

003.04 A copy of the notice shall be sent to the applicant.

003.05 A news release will be distributed.

(Section 84-1411, R.S.Supp., 1998, and section 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-004 QUALITY JOBS ACT -- CONFIDENTIALITY

004.01 The only information from the application, any supporting documents, or information received during a closed session of the Board that can be made public regarding an application, without the written approval of the applicant, is:

04.01A The name of the applicant;

04.01B The location or locations of the project;

04.01C The amount of increased employment; and

04.01D The amount of increased investment.

004.02 The decision of the Board shall be made in open meeting and is not confidential.

004.03 The confidential information contained in an application shall be discussed only in a closed session of the Board, unless the applicant waives its right to confidentiality in writing.

004.04 The only persons who may attend the closed session of the Board are the members of the Board, the representatives of the applicant, other persons invited at the request of the applicant, the Tax Commissioner, other employees of the Nebraska Department of Revenue, and the court reporter.

004.04A Other persons, as necessary, may be invited by the Board for the purpose of providing specific, confidential information. However, they may only attend the portion of the meeting necessary to provide the information requested by the Board.

004.05 The members of the Board will respect the confidentiality of the information received and will not disclose any confidential information regarding the applicant to any person other than the representatives of the applicant, the State Tax Commissioner or other employees of the Nebraska Department of Revenue, except as specifically provided in this regulation.

004.06 Any applications, or parts of applications, provided to the members of the Board shall be numbered copies and shall be delivered to the offices of the board members in a double envelope.

004.06A All applications, or parts of applications, shall be returned to the Nebraska Department of Revenue at the conclusion of the meeting.

(Sections 77-4928, and 84-1410, R.S.Supp., 1998, section 77-4932, R.R.S. 1996, and section 84-1413, R.R.S. 1994. November 11, 1998.)

REG-29-005 QUALITY JOBS ACT -- DECISION CRITERIA

005.01 A project may be approved by the Board only if the application defines a project consistent with the legislative purposes contained in section 77-4902 in one or more qualified business activities within this state.

005.02 The project must result in:

005.02A The investment in qualified property of at least fifty million dollars and the hiring of at least five hundred new employees; or

005.02B The investment in qualified property of at least one hundred million dollars and the hiring of at least two hundred fifty new employees.

005.03 The new investment and employment must occur within seven years, meaning by the end of the sixth year after the end of the year the application was filed.

005.04 The Board shall be governed by and shall take into consideration all of the following factors in making its determination:

005.04A The timing, number, wage levels, employee benefit package, and types of new jobs to be created by the project;

005.04B The type of industry in which the company and the project would be engaged;

005.04C The timing, amount, and types of investment in qualified property to be made at the project; and

005.04D Whether the Board believes the project would occur in this state regardless of whether the application was approved.

005.05 The weight given to each factor shall be determined by each Board member individually for each application.

005.06 The Board shall determine whether to approve the company's application by majority vote based on its determination as to whether the project will sufficiently help enable the state to accomplish the purposes of the Quality Jobs Act.

(Section 77-4928, R.S.Supp., 1998, and section 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-006 QUALITY JOBS ACT -- AGREEMENT

006.01 If the project application is approved by the Board, the company and the state shall enter into a written agreement, which shall be executed on behalf of the state by the Tax Commissioner.

006.02 In the agreement, the company shall agree to complete the project and the state shall designate the approved plans of the company as a project and, in consideration of the company's agreement, agree to allow the wage benefit credit as provided for in the act.

006.03 The application, and all supporting documentation, to the extent approved, shall be considered a part of the agreement.

006.04 The agreement shall contain provisions to allow the Department of Revenue to verify that the required levels of employment have been attained and maintained.

006.05 The agreement shall contain such other conditions or requirements for the applicant as established by the Board to carry out the purposes of the Act.

(Section 77-4928, R.S.Supp., 1998, and section 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-007 QUALITY JOBS ACT -- WAGE BENEFIT CREDIT

007.01 The wage benefit credit shall be withheld by the company from the employee's compensation in the normal manner for state income tax withholding.

007.01A The wage benefit credit may be withheld only when the company exceeds the required levels of investment and employment for the year.

007.01B The amount withheld shall not be required to be paid over to the state and shall not constitute part of the trust fund or be owned by the state.

007.01C The amount withheld shall be paid or applied by the company in the manner designated in writing by the employee or as jointly agreed to in writing by the employee and the company.

007.01C(1) The company shall design a form for the making of the designation or agreement. The company must obtain the approval of the Department before using the form.

007.02 For purposes of the withholding reporting provisions of sections 77-2754 and 77-2756, the company shall report the wage benefit credit to the state and to the employee as a wage benefit credit separate from other income tax withholding.

007.03 If the wage benefit credit for any year exceeds five percent (5%) of the total compensation paid to all employees at the project, other than base-year employees, the amount retained in excess of five percent shall be paid to the Department of Revenue in the same manner as withholding under section 77-2756.

007.04 If any amount designated by the employee as a wage benefit credit has been through error or otherwise improperly paid to the state, it shall be refunded to the company who paid it upon application for refund filed within three years after payment.

007.05 If the wage benefit credit withheld by the company exceeds the nonrefundable credit allowed the employee as calculated in this subsection, the company shall refund the difference to the employee.

007.05A The company may request verification or substantiation of the amount claimed. Such verification or substantiation shall be confidential and used only for the determination of the claim filed by the employee.

007.06 A company shall notify employees individually in writing at the time the company reports the wage benefit credit to the employee of the right to claim a refund under this subsection by April 1 of each year.

007.06A The claim for the refund from the company shall be made by September 1 of the year when the employee files his or her individual income tax return or fifteen days after the employee files such tax return, whichever is later.

007.06B The company shall pay the refund to an employee within thirty days after the date a claim is filed.

(Section 77-2756, R.S.Supp., 1998, and sections 77-4921, 77-4927, and 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-008 QUALITY JOBS ACT -- EMPLOYEES CREDIT

008.01 Each employee shall be allowed on his or her Nebraska individual income tax return a nonrefundable credit against the income tax imposed by the Nebraska Revenue Act.

008.02 The wage benefit credit shall not exceed the lesser of the amount withheld or the amount of Nebraska liability on the income received from the company.

008.02A The Nebraska liability on the income received from the company is (a) the income tax liability as shown on the return actually filed, after all other nonrefundable credits but before any refundable credits, minus (b) the amount that the income tax liability, after all other nonrefundable credits but before any refundable credits, would be if the total compensation paid by the company in the taxable year were excluded from the adjusted gross income on the return.

008.03 The calculation of this nonrefundable credit shall be included with the employee's tax return and reported as determined by the Department of Revenue.

(Section 77-4927, and 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-009 QUALITY JOBS ACT -- ALTERNATIVE WAGE BENEFIT CREDIT

009.01 If the company has entered into an agreement with the state that provides for the alternative wage benefit credit, then the company shall receive the wage benefit credit in the manner provided in this regulation.

009.02 The wage benefit credit shall be paid or applied by the company for company training programs, employee benefit programs, educational institution training programs, or company workplace safety programs, or any combination thereof, as determined by the company.

009.02A Nothing in this section shall be construed to limit the right of an employee or employees subject to a collective bargaining agreement to negotiate relative to such programs.

009.03 The wage benefit credit shall be an amount equal to the percentage specified in paragraph 009.04 multiplied by the amount by which the total compensation paid during each project year to employees of the company while employed at the project exceeds the average compensation paid at the project multiplied by the number of equivalent base-year employees.

009.03A Average compensation means the total compensation paid during each project year divided by the total number of equivalent employees at the project.

009.04 The percentage used to determine the wage benefit credit shall be:

| If the average compensation is over | But not over | Then the credit percentage shall be | | --- | --- | --- | | $0 | $20,000 | 0% | | $20,000 | $30,000 | 3% | | $30,000 | $40,000 | 4% | | $40,000 | | 5% |

009.05 The wage benefit credit shall be allowed for each project year the company is above the required levels of investment and employment.

009.06 The wage benefit credit shall be established by filing the forms required by the Tax Commissioner with the income tax return for the year.

009.06A The credit may be used to reduce the taxpayer's Nebraska income tax liability.

009.06B The credits shall be applied in the order in which they were first allowed.

009.06C The credit may be carried over until fully utilized, except that the credit may not be carried over more than eight years after the end of the entitlement period.

009.07 The wage benefit credit shall not be transferable.

(Sections 77-4921, 77-4927.01, and 77-4932, R.R.S. 1996. November 11, 1998.)

REG-29-010 QUALITY JOBS ACT -- RECAPTURE

010.01 If the company fails either to meet the required levels of employment or investment for the project by the end of the sixth year after the end of the year the application was filed or to utilize such project in a qualified business at or above the required levels of employment and investment required in the Quality Jobs Act for the entire entitlement period, all or a portion of the wage benefit credit shall be recaptured directly by the state from the company or shall be disallowed.

010.02 In no event shall any wage benefit credit be required to be paid back directly or indirectly by the employees, but instead shall be paid to the state by the company.

010.03 In the case of a company which has failed to meet the required levels within the required time period, all wage benefit credits shall be disallowed, and if any have been inadvertently received, they shall be paid by the company to the state.

010.04 In the case of a company which has failed to maintain the project at the required levels of employment and investment for the entire entitlement period:

010.04A No wage benefit credits shall be allowed, and if already retained by the company, shall be paid to the Department of Revenue, for the actual year or years in which the required levels of employment or investment were not maintained;

010.04B For wage benefit credits allowed in prior years, one-tenth of the credits shall be recaptured from the company for each year the required levels of employment or investment were not maintained; and

010.04C For wage benefit credits for future years, one-tenth of the credits otherwise allowable shall not be allowed for each year the required levels of employment or investment were not maintained in previous years.

010.04D When the required levels are not maintained for more than one year any recapture shall be calculated on the allowable credits before any other recapture.

010.04E Any amount paid to the state under Reg-29-007.03, or subdivision 010.04A of this regulation shall not counted as either part of the recapture for any other subdivision, and as an allowable amount subject to recapture.

010.05 Any amounts required to be recaptured shall be deemed to be an underpayment of tax, shall be immediately due and payable, and shall constitute a lien on the assets of the company.

010.05A When wage benefit credits were received in more than one year, the credits received in the most recent year shall be recovered first and then the credits received in earlier years up to the extent of the required recapture.

010.06 Interest and penalties accrue as follows:

010.06A In the case of a company which has failed to meet the required levels within the required time period, interest accrues from the time the withholding should have been paid to the state;

010.06B In the case of a company which has failed to maintain the project at the required levels of employment and investment for the entire entitlement period, interest first accrues from the time of the original due date for the income return for the year in which the company failed to maintain the required levels; and

010.06C Penalties do not accrue until ninety days after the requirement for recapture or disallowance becomes known or should have become known to the company.

010.07 The recapture or disallowance required by this section may be waived by the Board if the Board finds the failure to attain or maintain the required levels of employment or investment was caused by unavoidable circumstances such as an act of God or national emergency.

(Section 77-4929, R.S.Supp., 1998, and section 77-4932, R.R.S. 1996. November 11, 1998.)

History

• Effective 1998-11-11

Chapter 33 Practice and Procedure

Neb. Admin. Code tit. 316, ch. 33 Practice and Procedure {#sec-316-nac-33 omnilex-key=us-ne-regs-official--title-316--316 NAC 33}

REG-33-001 SCOPE AND DEFINITIONS

001.01 These regulations govern practice and procedure for the Nebraska Department of Revenue arising from and as required under any law administered, enforced, or supervised by the Nebraska Department of Revenue or the Tax Commissioner, except where a specific regulation of the Department applies.

001.02 Definitions. The following definitions apply as used throughout Chapter 33 of these rules and regulations.

001.02A Charitable Gaming Law means the statutory provisions of the Nebraska Bingo Act, the Nebraska County and City Lottery Act, the Nebraska Lottery and Raffle Act, the Nebraska Small Lottery and Raffle Act, and the Nebraska Pickle Card Lottery Act.

001.02B Claim means a request for a refund or credit of any overpayment of tax.

001.02C Claimant means any person that files a claim for an overpayment of tax with the Department.

001.02D Contested Case means a proceeding before the Department in which the legal rights, duties, or privileges of specific parties are required by law or constitutional right to be determined after a hearing before the Department.

001.02E Corporation means any corporation and any other entity that is taxed as a corporation under the Internal Revenue Code.

001.02F Department means the Nebraska Department of Revenue.

001.02G Ex Parte Communication means a communication as defined in subsection 33-009.01 of these regulations.

001.02H Hearing Officer means the Tax Commissioner or individual or individuals designated by the Tax Commissioner to conduct a hearing, contested case or other proceeding pursuant to the Administrative Procedure Act, whether designated as the presiding officer, administrative law judge, or some other title designation.

001.02I Nonlawyer means any person not duly licensed or otherwise authorized to practice law in the State of Nebraska. The term also includes any entity or organization not authorized to practice law by specific rule of the Nebraska Supreme Court, whether or not it employs persons who are licensed to practice law.

001.02J Notice of Hearing means the notice issued by the Hearing Officer informing the parties of the date on which the hearing on the merits of a contested case will be held.

001.02K Party means the person by or against whom a contested case is brought or a person allowed to intervene in a contested case.

001.02L Person shall be defined in accordance with the statutes governing the tax under consideration. If the term is not specifically defined in the statutes governing the tax, person means bodies politic and corporate, county officials, societies, communities, nonprofit organizations, nonprofit corporations, the public generally, individuals, partnerships, limited liability companies, joint stock companies, associations and other entities and organizations.

001.02M Petition means the initial document filed with the Department that sets forth a request for action, including:

001.02M(1) A written request for redetermination of a notice of proposed deficiency determination issued by the Department that includes a request for hearing;

001.02M(2) A written request for a redetermination of a disapproved application that includes a request for hearing;

001.02M(3) A written request for a hearing regarding any action initiated by the Department under section 33-004 of these regulations;

001.02M(4) A written request to intervene in a contested case.

001.02N Petitioner means the taxpayer, permitholder, licensee, or applicant, or his or her representative, or authorized successor in interest who timely files a petition for a proceeding before the Department that contains all the necessary information.

001.02O Practice of law means the application of legal principles and judgment with regard to the circumstances or objectives of another entity or person which require the knowledge, judgment, and skill of a person trained as a lawyer. This includes, but is not limited to, the following:

001.02O(1) Giving advice or counsel to another entity or person as to the legal rights of that entity or person or the legal rights of others for compensation, direct or indirect, where a relationship of trust or reliance exists between the party giving such advice or counsel and the party to whom it is given;

001.02O(2) Selection, drafting, or completion, for another entity or person, of legal documents which affect the legal rights of the entity or person;

001.02O(3) Representation of another entity or person in a court, in a formal Practice and Procedure Regulations administrative adjudicative proceeding or other formal dispute resolution process, or in an administrative adjudicative proceeding in which legal pleadings are filed or a record is established as the basis for judicial review;

001.02O(4) Negotiation of legal rights or responsibilities on behalf of another entity or person; or

001.02O(5) Holding oneself out to another as being entitled to practice law as defined herein.

001.02P Security includes but is not limited to any of the following when supplied in the amount and form required by the Department:

001.02P(1) Surety bonds executed by a surety company duly licensed and authorized to do business within this state;

001.02P(2) Bonds or other obligations of the United States, the State of Nebraska, or any city or county of the state based upon their actual market value;

001.02P(3) Certificates of deposit issued by a bank doing business in this state and insured by the Federal Deposit Insurance Corporation in amounts not exceeding the federally insured amount; or

001.02P(4) Cash.

001.02Q Tax Commissioner means the chief executive officer of the Department.

(Sections, 9-201, 9-301, 9-401, 9-501, and 9-601, R.R.S. 2007, section 49-801(16), R.S.Supp., 2008, sections 66-485, 77-369, 77-375, 77-1783.01, 77-2711(1)(a), 77-27,119, and 77-27,154, R.R.S., 2009, and sections 81-1262, 84-909, and 84-909.01, R.R.S. 2008. January 30, 2010)

REG-33-002 CLAIMS FOR REFUND

002.01 These rules shall be followed when filing a claim for refund.

002.01A Content. The following information shall be supplied by a claimant filing a claim with the Tax Commissioner. The claim shall:

002.01A(1) Identify the claimant;

002.01A(2) State all material factual allegations;

002.01A(3) Demand the amount of tax or fee requested by the claimant;

002.01A(4) Be in writing and signed by or on behalf of the claimant;

002.01A(5) Include a request for hearing if one is desired; and

002.01A(6) In the case of a claim for a refund of Nebraska sales and consumer’s use taxes paid for a pollution control facility under the Air and Water Pollution Control Tax Refund Act, the claim must be accompanied by the items outlined in Reg 1-084.

002.01A(7) All claims shall be made on white, letter sized (8½ x 11) paper and shall be legibly typewritten, photostatically reproduced, printed or handwritten. If handwritten, a claim must be written in ink.

002.01A(8) All claims shall be filed with the Department at its office. Filing may be accomplished by personal delivery or mail and will be received during regular office hours of the Department.

002.01B Filing date. A claim is considered filed with the Tax Commissioner on the date that it is received by the Tax Commissioner, or if delivered by United States mail, the claim is considered filed with the Tax Commissioner on the date of the postmark of the United States post office stamped on the envelope. Postmarks made by other than the United States post office will not be accepted as evidence of the filing date of any claim received after the due date. When the last day for filing falls on Saturday, Sunday, or an approved holiday, the claim will be considered timely if received or postmarked on the next succeeding day which is not a Saturday, Sunday, or an approved holiday. The period fixed by statute within which to file a claim cannot be extended.

002.01B(1) Sales and use tax, lodging tax, and litter fee. A claim for refund of sales and use tax, lodging tax, or litter fee must be filed with the Tax Commissioner by the person who made the overpayment or his or her attorney, executor, or administrator within three years from the last day of the month following the close of the period for which the overpayment was made, within six months after any determination became final under the provisions of the Nebraska Revenue Act of 1967, or within six months from the date of overpayment with respect to such determinations, whichever of these three periods expires latest unless the claim relates to a period for which a waiver has been given.

002.01B(2) Sales or use tax under the Air and Water Pollution Control Tax Refund Act. A claim for refund of sales or use tax under the Air and Water Pollution Control Tax Refund Act must be filed with the Tax Commissioner within three years from the date of payment of the applicable sales or use tax. See Reg 1-084.

002.01B(3) Income tax.

002.01B(3)(a) A claim for refund of income tax must be submitted on the appropriate original or amended income tax return for the taxable year(s) involved and shall be filed with the Tax Commissioner within three years from the time the original return was filed, or within two years from the date of payment of the tax, whichever is later, unless one of the following applies.

002.01B(3)(a)(i) If the amount of the claimant’s federal adjusted gross income, taxable income or tax liability reported on his or her federal income return, for any taxable year was changed or corrected by the Internal Revenue Service, or if the claimant was required to report a change or correction which is treated as if it were an overpayment for federal income tax purposes, or if the claimant was required to file an amended return with the Tax Commissioner, a claim for any overpayment of tax resulting from such change shall be filed within two years from the time the notice of such change or correction or such amended return was required to be filed with the Tax Commissioner. See Reg 22-015.07, Reg 23-010.05 and Reg 24-046.06; or

002.01B(3)(a)(ii) If the claimant was required to report a change or correction in the amount of income taxable or tax credit allowable in one or more states and such changes or corrections result in an overpayment of tax when reflected in the return filed under the Nebraska Revenue Act of 1967, a claim resulting from such change shall be filed by the claimant within two years from the time the notice of such change or correction or such amended return was required to be filed with the Tax Commissioner or ten years from the due date of the return, whichever is earliest. See Reg 22-018.07, Reg 23-014.07 and Reg 24-063.06.

002.01B(3)(b) Any return filed before the last day prescribed by statute for filing the return determined without regard to any extension, shall be considered as filed on such last day.

002.01B(3)(c) If an agreement for an extension of an assessment period was signed by the parties within the time otherwise allowed for claims, the written claims must be filed within six months after the expiration of the agreement or within the time otherwise provided above, whichever is later. An agreement between the taxpayer and the Internal Revenue Service providing for the extension of the period for the mailing of a notice of deficiency of federal income taxes shall constitute an agreement with the Tax Commissioner to extend the period for filing claims through six months after the ending date shown on the federal agreement. A copy of all such agreements and extensions shall be filed with the Tax Commissioner within 30 days after their execution.

002.01B(4) Financial institution franchise tax. A claim for refund of the franchise tax on financial institutions must be filed within 90 days after the date on which:

002.01B(4)(a) The tax was due or was paid, whichever is later; or

002.01B(4)(b) A change was made to the amount of deposits or the net financial income of the financial institution by a state or federal regulatory agency.

002.01B(5) Petroleum release remedial action fee. A claim for credit or refund of the petroleum release remedial action fee must be filed with the Tax Commissioner within three years after the date of payment of the fee. See Reg 73-008.

002.01B(6) Aircraft fuels tax. A claim for refund of aircraft fuels tax where the aircraft fuels were purchased and consumed in connection with flying instruction conducted by an air school approved by the Federal Aviation Administration (FAA) must be filed with the Tax Commissioner within seven months after the date of purchase or invoice. See Reg 73-008.

002.01B(7) Estate and generation-skipping transfer tax. A claim for refund of estate or generation-skipping transfer tax must be filed with the Tax Commissioner within four years after the date of such overpayment or within one year of a change in the amount of federal tax due, whichever is later.

002.01B(8) Motor fuels tax. A claim for credit or refund of motor fuels tax must be filed with the Tax Commissioner within three years after the date of payment of the tax. See Reg 73-008.

002.01B(9) Documentary stamp tax and other taxes where Nebraska statutes do not provide for claims. A claim for credit or refund of documentary stamp tax or any other tax where Nebraska statutes do not provide for a claim must be filed with the Tax Commissioner within two years after the date of payment of the tax.

002.01B(10) Bingo tax, lottery by the sale of pickle cards tax, lottery/raffle tax, and county/city lottery tax. A claim for refund of bingo tax, lottery by the sale of pickle cards tax, lottery/raffle tax, or county/city lottery tax must be filed with the Tax Commissioner by the person who made the overpayment or his or her attorney, executor, or administrator within three years after the last day of the month following the close of the period for which the overpayment was made, within six months after any determination of tax became final under the provisions of the Nebraska Revenue Act of 1967, or within six months after the date of overpayment with respect to such determinations, whichever of these three periods expires latest unless the credit relates to a period for which a waiver has been given.

002.02 Limitation. The Department will not accept a claim for refund of a taxpayer’s overpayment of tax under any program administered by the Department when the amount is less than $2.00.

002.03 Request for hearing. A claim shall not be presumed to be a request for a hearing. Unless the claim is approved in full by the Tax Commissioner, the Tax Commissioner shall grant a petitioner an opportunity for a hearing if requested in writing by the claimant.

002.03A Income tax. In the case of a claim for refund of income tax, the request for hearing must be made when the claim is filed.

002.03B For all other claims, the request for a hearing must be made when the claim is filed or prior to the Department taking any action on the claim.

002.03C Sales and use tax, lodging tax, and litter fee. After the claim is filed, the Tax Commissioner shall allow or disallow a claim within 180 days. A written request for a hearing shall be deemed a waiver of the 180 day period. The claimant and the Tax Commissioner may also agree to extend the 180 day period.

002.04 Commencement of a contested case. Unless the claim is approved in full by the Tax Commissioner, a claim becomes a contested case if the taxpayer makes a request in writing for a hearing.

002.05 The payment of a claim for refund, the allowance of a credit, or the application of a refund to an existing balance, in whole or in part, shall be considered a final decision of the Tax Commissioner for purposes of the Administrative Procedure Act.

002.06 The denial of a claim, in whole or in part, shall be considered a final action of the Tax Commissioner and may be appealed in accordance with the Administrative Procedure Act for all tax programs except for the estate and generation-skipping transfer tax.

(Sections 3-151, 9-239, 9-240, 9-344, 9-429, and 9-648, R.R.S. 2007, sections 66-498, 77-369, 76-908, 77-1777, 77-1778, 77-1779, 77-1780, 77-2106.01, 77-2610, 77-2708(2), 77-2711(1)(a), 77-2775, 77-2793, 77-2794, 77-2795, 77-27,119, 77-27,150, 77-27,154, and 77-3806, R.R.S. 2009, and sections 81-1260, 81-1559, 84-909(1), and 84-909.01, R.R.S. 2008. January 30, 2010)

REG-33-003 PETITIONS FOR REDETERMINATION

003.01 These rules shall be followed when filing a petition for redetermination in response to a notice and demand for payment issued pursuant to Neb. Rev. Stat. § 77-1783.01 or a notice of proposed deficiency determination.

003.01A Content. This information shall be supplied by the petitioner when filing a petition for redetermination with the Tax Commissioner. The petition shall:

003.01A(1) Identify the petitioner;

003.01A(2) Identify the notice of proposed deficiency determination or the notice and demand for payment the petitioner is requesting be redetermined;

003.01A(3) State all material factual allegations;

003.01A(4) State concisely the action the Department is being requested to take;

003.01A(5) Be in writing and signed by or on behalf of the petitioner; and

003.01A(6) Include a request for hearing if one is desired.

003.01B All petitions shall be made on white, letter sized (8½ x 11) paper and shall be legibly typewritten, photostatically reproduced, printed or handwritten. If handwritten, a petition must be written in ink.

003.01B(1) All petitions shall be filed with the Department at its office. Filing may be accomplished by personal delivery or mail and will be received during regular office hours of the Department.

003.01B(2) When the Tax Commissioner approves and implements an electronic form or method for filing a petition, any petition for redetermination may be filed electronically with the Department if it contains all the information required by subsection 003.01A of these regulations. The petition may be filed using the website of the Department (www.revenue.ne.gov).

003.01C Filing Date. Except as provided in subdivisions 003.01C(1) or 003.01C(2) of this subsection, a petition for redetermination of a notice of proposed deficiency determination must be filed with the Tax Commissioner on or before the 60th day following the date the notice was mailed by the Tax Commissioner.

003.01C(1) A petition for the redetermination of a notice of proposed deficiency determination for drug tax or for a notice of jeopardy determination must be filed with the Tax Commissioner on or before the 10th day following the date the notice was mailed.

003.01C(2) A petition for the redetermination of a notice of proposed deficiency determination for income tax, if the petitioner was outside the United States as of the date the notice was mailed, must be filed with the Tax Commissioner on or before the 150th day following the date the notice was mailed.

003.01C(3) A petition for the redetermination of a notice and demand for payment issued to any officer or employee of a corporation or any member, manager, or employee of a limited liability company with the duty to collect, account for, or pay over any taxes imposed upon a corporation, or with the authority to decide whether the corporation will pay taxes imposed upon a corporation, must be filed with the Tax Commissioner on or before the 60th day following the date the notice was mailed by the Tax Commissioner.

003.01D When specifically provided by law, the Tax Commissioner may require the posting of security during the pendency of a contested case. This security must be maintained during the course of the proceeding before the Tax Commissioner. If the security is withdrawn during the course of any proceeding before the Tax Commissioner, the petition will not be considered to be in proper form and will be subject to dismissal by the Tax Commissioner.

003.02 These rules shall be followed when filing a petition for a redetermination of a disapproved tax application.

003.02A Content. This information shall be supplied by petitioner when filing a petition for redetermination of a disapproved tax application. The request shall:

003.02A(1) Identify the petitioner;

003.02A(2) Identify the disapproved application;

003.02A(3) State all material factual allegations;

003.02A(4) State concisely the action the Department is being requested to take;

003.02A(5) Be in writing and signed by or on behalf of the person making the request; and

003.02A(6) Include a request for hearing if one is desired.

003.02B All petitions shall be made on white, letter sized (8½ x 11) paper and shall be legibly typewritten, photostatically reproduced, printed or handwritten. If handwritten, a petition must be written in ink.

003.02B(1) All petitions shall be filed with the Department at its office. Filing may be accomplished by personal delivery or mail and will be received during regular office hours of the Department.

003.02B(2) When the Tax Commissioner approves and implements an electronic form or method for filing a petition, any petition for redetermination of a disapproved tax application may be filed electronically with the Department if it contains all the information required by subsection 003.02A of these regulations. The petition may be filed using the website of the Department (www.revenue.ne.gov).

003.02C Filing Date. Petitioner must file a written request for redetermination of a disapproved tax application with the Tax Commissioner on or before the 30th day following the date of disapproval unless a shorter time period has been provided for by statute.

003.03 The Department may deny a license or permit application under the Charitable Gaming Law. These rules shall be followed when any license or permit application is subject to denial.

003.03A Cause for Denial. Upon receipt of a license or permit application, the Department shall review the application to determine whether or not a license or permit should be issued. A license or permit application or renewal application may be denied for cause.

003.03B Notice of Intended License or Permit Denial. If the Department determines that a license or permit application should be denied, it shall give notice to the applicant of its intention. Notice shall be given in writing by mail, to the license or permit applicant or his or her authorized representative. The notice of intended denial shall:

003.03B(1) Identify the applicant and the license or permit to be denied;

003.03B(2) State all legal or factual reasons why the application is to be denied, sufficient to allow the applicant to know the exact basis for the denial; and

003.03B(3) Inform the applicant that a written petition requesting a redetermination of the intended license or permit application denial through a hearing may be filed with the Department on or before the 30th day following the date the notice was mailed to the applicant of the Department’s intent to deny the license or permit application.

003.03C If the applicant does not file a written petition with the Department on or before the 30th day following the mailing date of the Department’s notice to the applicant of its intent to deny the license or permit application, the Department’s action denying the application shall be considered final.

003.04 These rules shall be followed when filing a petition for a redetermination of an intended license or permit application denial.

003.04A Content. This information shall be supplied by petitioner when filing a petition for redetermination of an intended license or permit application denial. The request shall:

003.04A(1) Identify the petitioner;

003.04A(2) Identify the license or permit application;

003.04A(3) State all material factual allegations;

003.04A(4) State concisely the action the Department is being requested to take; and

003.04A(5) Be in writing and signed by or on behalf of the petitioner.

003.04B All petitions shall be made on white, letter sized (8½ x 11) paper and shall be legibly typewritten, photostatically reproduced, printed or handwritten. If handwritten, a petition must be written in ink.

003.04B(1) All petitions shall be filed with the Department at its office. Filing may be accomplished by personal delivery or mail and will be received during regular office hours of the Department.

003.04B(2) When the Tax Commissioner approves and implements an electronic form or method for filing a petition, any petition for redetermination of an intended denial of a license or permit application may be filed electronically with the Department if it contains all the information required by subsection 003.04A of these regulations. The petition may be filed using the website of the Department (www.revenue.ne.gov).

003.04C Filing Date. Petitioner must file a written request for redetermination of an intended denial of a license or permit application with the Department on or before the 30th day following the date the notice was mailed to the applicant of the Department’s intent to deny the license or permit application.

003.05 Request for Hearing. A petition for redetermination of a notice of proposed deficiency determination, request for redetermination of a disapproved tax application, or a request for a redetermination of an intended Charitable Gaming license or permit application denial shall not be presumed to be a request for a hearing. The Tax Commissioner shall grant a petitioner an opportunity for a hearing if the petitioner so requests in his or her petition or if the petitioner amends his or her petition and requests a hearing. A petition for redetermination of a notice and demand for payment issued pursuant to Neb. Rev. Stat. § 77-1783.01is presumed to be a request for hearing.

003.06 Joinder of Parties. If multiple notices of proposed deficiency determination are mailed to a number of persons based on similar or identical grounds, they may not join in filing one protest petition, except where a joint notice of proposed deficiency determination is sent to parties who filed a joint return; however, a motion for consolidation may be considered after the individual protest petitions have been filed. Parties may be joined with the approval of the Tax Commissioner under any of the other types of proceedings.

003.07 Filing Date. A petition is considered filed with the Tax Commissioner on the date that it is received by the Tax Commissioner, or if delivered by the United States mail, the petition is considered filed with the Tax Commissioner on the date of the postmark of the United States post office stamped on the envelope. Postmarks made by other than the United States post office will not be accepted as evidence of the filing date of any petition received after the due date. When the last day for filing falls on Saturday, Sunday, or an approved holiday, the filing will be considered timely if received or postmarked on the next succeeding day which is not a Saturday, Sunday, or an approved holiday. The period fixed by statute within which to file a petition cannot be extended. If a petition is not filed within the statutory period, it will not be considered by the Tax Commissioner but will be returned to the petitioner by mail.

(Neb. Rev. Stat. §§ 3-149, 9-226, 9-226.01, 9-226.02, 9-240, 9-322, 9-322.02, 9-344, 9-418, 9-418.01, 9-429, 9-620, 9-622, 9-648, 57-717 and 57-718, 66-4,117, 77-369, 77-375, 77-612, 77-1783.01, 77-2105, 77-2612, 77-2709, 77-2710, 77-2711(1)(a), 77-2776, 77-2777, 77-2778, 77-2785, 77-2786, 77-27,119, 77-27,125, 77-3006, 84-909 and 84-909.01. November 17, 2013.)

REG-33-004 PROCEEDINGS INITIATED BY THE NEBRASKA DEPARTMENT OF REVENUE

004.01 The Department may initiate a proceeding against a person who has failed to comply with the tax laws that are administered by the Department.

004.02 Revocation of a Sales and Use Tax Permit, Lodging Tax Permit, Litter Fee License, or Mechanical Amusement Device License. Whenever the holder of a sales and use tax permit, lodging tax permit, litter fee license, or mechanical amusement device license fails to comply with any provision of the sales and use tax portion of the Revenue Act, the Nebraska Visitor’s Development Act, the Nebraska Litter Reduction and Recycling Act, or the Mechanical Amusement Device Tax Act, or with any rule or regulation of the Department with regard to these acts, the Department may initiate a hearing to require the permitholder or licensee to show cause why his or her permit or license should not be revoked.

004.02A The Department must give the permitholder or licensee at least 20 days’ notice prior to the show cause hearing. The notice shall be in writing, specifying the time and place of the hearing, and shall be sent by mail.

004.02B The Tax Commissioner or any Hearing Officer designated by the Tax Commissioner, may examine any books, papers, or memoranda bearing upon the matter at issue and require the attendance of any permitholder, licensee, or employee of the permitholder or licensee having knowledge pertinent to the issue.

004.02C The Tax Commissioner shall make a final decision or determination within a reasonable time after the hearing and notify the permitholder or licensee of the decision or determination by mail.

004.03 Suspension or Revocation of a License to Transport Unstamped Cigarettes, License to Sell Tobacco, Tobacco Products Tax Act License, Wholesale Cigarette Dealer’s Permit or Discount Privileges. The Tax Commissioner may revoke or suspend the license, permit or discount privileges granted under Neb. Rev. Stat. §§ 28-1420 to 28-1429, or Neb. Rev. Stat. §§ 77-2601 to 77-2622, of any person who violates any of the provisions of Neb. Rev. Stat. §§ 77-2601 through 77-2622, any stamping agent who violates any provisions of Neb. Rev. Stat. § 69-2706(3), or any rules and regulations adopted by the Department, including failure to timely file the required reports by giving notice by mail, to the licensee. The Tax Commissioner may revoke, cancel, or suspend any license for a violation of the Tobacco Products Tax Act or any rule or regulation adopted and promulgated by the Tax Commissioner in administering the act by giving notice by mail, to the licensee.

004.04 Notice of Proposed Deficiency of Tobacco Products Tax. If, after examination of any tobacco products tax return, the Tax Commissioner finds that the return is incorrect, and any amount of tax due from the tobacco products tax licensee is unpaid, the Tax Commissioner shall notify the licensee, by mail, of the proposed deficiency.

004.05 Procedures. The following procedures apply to suspension or revocation of any of the licenses mentioned in Reg 004.03 or a notice of proposed deficiency of tobacco products tax as mentioned in Reg 004.04.

004.05A The permitholder or licensee may file a written petition with the Department within 20 days after receipt of the notice of intent to cancel, revoke or suspend or within 20 days after the receipt of the notice of proposed deficiency requesting an oral hearing. The form, content, and service of the petition shall be similar to that found in subsection 33-003.01A and 33-003.01B of these regulations.

004.05B At the hearing, the Tax Commissioner, or any Hearing Officer designated by the Tax Commissioner, may examine any books, papers, or memoranda bearing upon the matter at issue and require the attendance of any permitholder or licensee or any officer or employee of the permitholder or licensee having knowledge pertinent to the issue.

004.05C During the hearing, the Tax Commissioner or his or her designee, shall not be bound by the rules of evidence, and no informality in any proceeding or in the manner of taking testimony shall invalidate any order or decision made or approved by the Tax Commissioner.

004.05D The Tax Commissioner shall make a final decision or final determination within a reasonable time after the hearing and notify the permitholder or licensee by mail of the decision or determination.

004.06 Collection of Delinquent Taxes from a Responsible Corporate Officer or Employee, or any Member, Manager, or Employee of a Limited Liability Company. Any corporate officer or employee, or any member, manager, or employee of a limited liability company, with the duty to collect, account for, or pay over any taxes imposed upon a corporation or limited liability company or with the authority to decide whether the corporation or limited liability company will pay taxes imposed upon a corporation or limited liability company, shall be personally liable for the payment of taxes in the event of willful failure on his or her part to have a corporation or limited liability company perform this act.

004.06A Before collection from a responsible corporate officer or employee or a member, manager, or employee of a limited liability company, a written notice and demand for payment must be mailed to the responsible corporate officer or employee, or the member, manager, or employee of the limited liability company by mail.

004.06B Any corporate officer or employee, or a member, manager or employee may challenge the Tax Commissioner’s determination by filing a petition for the redetermination of the corporate officer’s or employees, or a member’s, manager’s, or employee’s personal liability, the amount of the corporation’s or limited liability company’s unpaid taxes or both within 60 days following the date the notice and demand for payment was mailed. If a petition for redetermination is not filed within the 60-day period, the determination becomes final.

004.06C If the Department determines that further delay in collection of the delinquent taxes from the corporate officer or employee, or the member, manager, or employee of a limited liability company will jeopardize collection proceedings, nothing in this regulation will prevent the immediate collection of the taxes.

004.07 The Department may initiate a proceeding against a person who has failed to comply with the provisions of the Charitable Gaming Law or any regulations adopted pursuant to these acts.

004.07A Whenever the holder of a license or permit under the Charitable Gaming Law fails to comply with any provision of the Charitable Gaming Law or any regulation adopted pursuant to these acts, the Department may suspend, cancel, or revoke for cause all rights and privileges granted to a licensee or permitholder.

004.07B Order of Suspension.

004.07B(1) The Tax Commissioner may enter an order of suspension to a permitholder or licensee if the Department determines that the permitholder or licensee is in noncompliance with the provisions of the Charitable Gaming Law, or regulations adopted pursuant to these acts.

004.07B(2) Before any license or permit is suspended prior to a hearing, notice of an order to suspend a license or permit must be mailed to or personally served upon the permitholder or licensee at least 15 days before the order of suspension takes effect. The order of suspension must be in writing and be personally served or sent by mail.

004.07B(3) No suspension shall be issued prior to a hearing to any nonprofit organization or any volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad licensed to conduct a lottery by sale of pickle cards pursuant to Neb. Rev. Stat § 9-326 of the Nebraska Pickle Card Lottery Act or any person licensed pursuant to the Nebraska County and City Lottery Act.

004.07B(4) An order of suspension pursuant to subdivisions 004.07B (1) and (2) may be issued when an action for suspension, cancellation, or revocation is pending.

004.07B(5) The permitholder or licensee may file a written petition with the Department within 15 days after the date the order of suspension was mailed, requesting reconsideration of the suspension.

004.07B(6) The form, content, and service of the petition shall be similar to that found in subsection 33-003.01A and 33-001B of these regulations, except that the petitioner may request that the hearing for suspension be held after 20 days from when the suspension takes effect.

004.07B(7) A hearing for suspension shall be held within 20 days of the date the suspension takes effect whether or not a permitholder or licensee files a petition for reconsideration of the suspension except that a request by the licensee or permitholder to hold the hearing after the end of the 20-day period shall extend the suspension up to the time of hearing. Any request must be contained in the petition.

004.07B(8) The Department shall serve notice upon the permitholder or licensee by mail, of the time, date, and place of a hearing at least ten days before the hearing is to be held.

004.07B(9) At the redetermination hearing, the permitholder or licensee may present evidence that the violations for which the suspension has been imposed have been corrected and that the licensee is currently in compliance with the law. Upon this showing, the Tax Commissioner may lift the suspension.

004.07B(10) The decision of the Department shall be made within 20 days after the conclusion of the hearing. The suspension shall continue in effect until the decision is issued. If the decision is that an order of suspension, revocation, or cancellation is not appropriate, the suspension shall terminate immediately by order of the Tax Commissioner. If the decision is an order for the suspension, revocation, or cancellation of the license or permit, the suspension shall continue pending an appeal of the decision of the Department.

004.07C Suspension, Cancellation, or Revocation of a License or Permit.

004.07C(1) Cause for suspension, cancellation, or revocation. Cause shall generally mean any noncompliance with the provisions of the Charitable Gaming Law, or any regulation adopted pursuant to these acts.

004.07C(2) Notice of suspension, cancellation, or revocation proceeding shall be served upon the licensee or permitholder by personal service or mail, at least ten days prior to the hearing. This notice shall inform the licensee of the time, date, and place of hearing.

004.07C(3) The procedures for suspension, cancellation, or revocation of a license or permit shall be considered separate from an order of suspension under subsection 004.07B.

004.08 Cease and Desist Orders. The Department may issue a cease and desist order to any person, permitholder or licensee under the Charitable Gaming Law if the Department determines that a practice engaged in by the person, permitholder or licensee is not in compliance with the acts or regulations adopted pursuant to these acts. This order shall take effect upon issuance by the Department.

004.08A Cease and desist orders shall contain:

004.08A(1) A statement of the violation of the Charitable Gaming Law constituting the reasons for the entry of an order;

004.08A(2) A statement of the practice or practices engaged in by the person, permitholder or licensee which are to be discontinued; and

004.08A(3) A statement of the rights of the person, permitholder or licensee to request a hearing for review of the cease and desist order entered by the Tax Commissioner.

004.08B The notice of order shall be in writing and personally served or mailed to the person, permitholder or licensee. If the notice of order is mailed, the date the notice was mailed is the date of service of notice to the person, permitholder, or licensee.

004.08C The person, permitholder, or licensee receiving a cease and desist order may file a petition requesting reconsideration of such order.

004.08D The form, content, and service of the petition shall be similar to that found in subsection 33-003.01A and 33-003.01B of these regulations.

004.08E A petition for reconsideration by the person, permitholder or licensee shall be made in writing and filed with the Department within 30 days after service of the cease and desist order. If the notice of order is mailed, the date the notice is mailed shall be deemed to be the date of service. If a request for hearing is not filed within the 30-day period, the cease and desist order becomes permanent at the expiration of this period.

004.08F If a hearing is requested, the hearing shall be held within 30 days after the request for hearing is received by the Department.

004.08G Within 20 days of the date of the hearing, the Tax Commissioner shall issue an order vacating the order or making it permanent as the facts require.

004.08H The person, permitholder, or licensee receiving a cease and desist order shall be deemed to be in default if he or she fails to appear at the hearing and the allegations contained in the order shall be deemed to be true.

004.08I A cease and desist order issued to a person, permitholder, or licensee shall not affect the validity of the license or permit held by the person, permitholder, or licensee and shall only affect the practice or practices alleged to be in violation of the Charitable Gaming Law.

004.09 Administrative Fines. The Department may institute a proceeding to levy an administrative fine against any person, permitholder, or licensee for violations of the Charitable Gaming Law and any regulations adopted pursuant to these acts.

004.09A The notice of a proceeding to levy an administrative fine shall be served upon the person, licensee, or permitholder, by personal service or mail, at least ten days prior to the proceeding. The notice shall inform the alleged violator of the time, date, and place of hearing.

004.09B For every violation of the Charitable Gaming Law or any regulation adopted pursuant to these acts, the Tax Commissioner may impose the maximum fine authorized by law. Each violation may be the subject of a fine.

004.09C Any administrative fines levied pursuant to the Charitable Gaming Law and regulations adopted pursuant to these acts shall be subject to all collection measures available to the Department on behalf of the State.

004.10 The administrative remedies provided in sections 004.07 through 004.09 of these regulations, are not exclusive and may be imposed in combination as the result of a single proceeding. For example, a cease and desist order may also be accompanied by a proceeding to levy an administrative fine.

(Neb. Rev. Stat. §§ 9-226, 9-226.01, 9-226.02, 9-228, 9-229, 9-322, 9-322.01, 9-322.02, 9-418.01, 9-418.02, 9-419, 9-420, 9-421, 9-620, 9-621, 9-622, 9-623, 77-1783.01, 21-2612, 77-2615.01, 77-2622, 77-2705, 77-27,111, 77-27,118, 77-27,135, 77-3003, 77-4001 through 77-4025, 81-1560.01, and 81-3722, and Jones v. State, 248 Neb. 158, 532 N.W.2d 636 (1995) November 17, 2013.)

REG-33-005 CONTESTED CASES: GENERAL

005.01 A contested case begins with the filing of a petition or claim and request for hearing, if applicable, with the Department. The petition or claim is the initial document filed by or with the Department that sets forth a request for Department action.

005.02 The pleadings in a contested case may include a petition, claim, notice, motion, stipulation, objection or order or other formal written document filed in a proceeding before the Department. Any pleading filed in a contested case shall meet the following requirements.

005.02A The pleading shall contain a heading specifying the Department and the title or nature of the pleading, shall state material factual allegations and state concisely the action the Department is being requested to take, shall contain the name and address of the petitioner or claimant, and shall be signed by the party filing the pleading or the party’s authorized representative. If applicable, the pleading shall include the address, telephone number of the party’s authorized representative, and, if the representative is an attorney, the representative’s bar number.

005.02B All pleadings shall be made on white, letter sized (8½ x 11) paper and shall be legibly typewritten, photostatically reproduced, printed, or handwritten. If handwritten, a pleading must be written in ink.

005.03 All pleadings shall be filed with the Department at its office. Filing may be accomplished by personal delivery, United States mail, or by the method established by the parties at the preliminary conference as provided in section 011.03B of these regulations, and will be received during the Department’s regular office hours.

005.04 All pleadings subsequent to the initial petition or claim shall be served by the party filing the pleading upon all attorneys of record or other representatives of record and upon all unrepresented parties. Service shall only be made personally, by mail, or by the method established by the parties at the preliminary conference as provided in section 011.03B of these regulations. Written proof of service shall be filed with the Department.

005.05 Unless state law provides that a hearing is not required, a hearing date shall be set by the Hearing Officer in accordance with statutory requirements. A written notice of the time and place of hearing and the name of the Hearing Officer, if known, shall be served by the Department upon all attorneys of record or other representatives of record and upon all unrepresented parties. The notice must include proof of such service and will be filed with the Department.

005.06 In computing time prescribed or allowed by Chapter 33 or by any applicable statute in which the method of computing time is not specifically provided, days will be computed by excluding the day of the act or event and including the last day of the period. If the last day falls on a Saturday, Sunday, or state approved holiday, the period shall include the next business day.

(Neb. Rev. Stat. §§ 3-149, 57-717, 57-718, 66-4,117, 77-369, 77-375, 77-612, 77-1777, 77-1778, 77-1779, 77-1780, 77-1783.01, sections 77-2709, 77-2711(1)(a), 77-2793, 77-2794, and 77-27,119, 84-909(1) and 84-909.01. November 17, 2013.)

REG-33-007 HEARING OFFICER

007.01 The Tax Commissioner has the authority to delegate to a Hearing Officer or hearing officers the functions of conducting a prehearing conference and/or a hearing and submitting a recommended decision to the Tax Commissioner.

007.02 A person who has served as an investigator, prosecutor, or advocate in a contested case or in its prehearing stage may not serve as a Hearing Officer or assist or advise a Hearing Officer in the same proceeding except as provided in subsection 007.04.

007.03 A person who is subject to the authority, direction, or discretion of one who has served as an investigator, prosecutor, or advocate in a contested case or in its prehearing stage may not serve as a Hearing Officer or advise a Hearing Officer in the same proceeding except as provided in subsection 007.04.

007.04 If all parties consent, a person who has served as, or who is subject to the authority, direction, or discretion of one who has served as investigator, prosecutor, or advocate in a contested case or in its prehearing stage may assist a Hearing Officer in the preparation of orders.

007.05 A person who has participated in a determination of probable cause or other equivalent preliminary determination in a contested case may serve as a Hearing Officer or assist or advise a Hearing Officer in the same proceeding.

007.06 A person may continue to serve as a Hearing Officer at successive stages of the same contested case.

007.07 Powers and duties. The Hearing Officer has the duty to conduct full, fair and impartial hearings, to take appropriate action to avoid unnecessary delay in the disposition of the proceeding, and to maintain order. He or she shall have the following powers:

007.07A To administer oaths and affirmations;

007.07B To issue subpoenas as authorized;

007.07C To compel discovery and to impose appropriate sanctions for failure to make discovery;

007.07D To rule upon offers of proof and receive relevant, competent, and probative evidence;

007.07E To regulate the course of the proceedings in the conduct of the parties and their representatives;

007.07F To hold prehearing conferences for simplification of the issues, order of hearing, settlement of the contested case, or any other proper purposes;

007.07G To consider and rule orally or in writing, upon all procedural and other motions appropriate in adjudicative proceedings;

007.07H To fix the time for holding the record open for additional evidence or for submission of briefs;

007.07I To exclude people from the hearing;

007.07J To issue recommended decisions, rulings, and orders, as appropriate; and

007.07K To order any other action consistent with the purpose of the law.

007.08 If the parties agree and the circumstances of the case permit it, the Hearing Officer may order that the hearing be recorded electronically and without a transcriber.

(Sections 77-366 and 77-375, R.R.S. 2009, and sections 84-909, 84-909.01, and 84-913 through 84-913.04, R.R.S. 2008. January 30, 2010)

REG 33-008 REPRESENTATION

008.01 In general. Representation before the Tax Commissioner is governed by the applicable statutes and the decisions of the Nebraska Supreme Court.

008.02 Power of attorney. Any person appearing on behalf of a taxpayer as his or her duly authorized representative with regard to any of the laws or programs administered, enforced, or supervised by the Department or the Tax Commissioner must have on file with the Department a Power of Attorney, Form 33, or its legal equivalent. Once a Power of Attorney, Form 33, or its legal equivalent, has been filed with the Department, the Tax Commissioner will presume that it is valid until written notice of its revocation is served.

008.03 Appearances. When the practice of law arises in the resolution of a contested case, only the following individuals shall be allowed to appear on behalf of the petitioner.

008.03A A petitioner, claimant, or respondent who is an individual may appear on his or her own behalf.

008.03B An individual may appear on behalf of the petitioner, claimant, or respondent if the individual is admitted to practice law before the Nebraska Supreme Court.

008.03C An individual admitted to practice law in another United States jurisdiction may appear on behalf of the petitioner, claimant, or respondent provided the individual:

008.03C(1) Has not been disbarred or suspended from practice in any jurisdiction;

008.03C(2) Has undertaken an association with an attorney who is admitted to practice law before the Nebraska Supreme Court, who actively participates in the contested case, and who shares responsibility for the representation of the petitioner; and

008.03C(3) Files a motion with the Hearing Officer requesting he or she be allowed to appear on behalf of the petitioner Pro hac vice.

008.04 Nonlawyers. A nonlawyer may be allowed to appear in a limited representative capacity subject to the following.

008.04A A nonlawyer who is an officer of the party or an employee, provided a Power of Attorney, Form 33, or its legal equivalent is on file for the employee, may represent the party, if all of the following conditions are met.

008.04A(1) The nonlawyer officer or employee is specifically authorized by the party to appear before the Department on its behalf;

008.04A(2) This representation is not the nonlawyer officer’s or employee’s primary duty to the employer, but is secondary to other duties relating to the management or operation of the petitioner, claimant, or respondent;

008.04A(3) The nonlawyer officer or employee does not receive separate or additional compensation (other than reimbursement for costs) for this representation;

008.04A(4) The representation does not involve a claim that the Department’s action is illegal as a matter of law or unconstitutional;

008.04A(5) The representation does not require the knowledge, judgment, or skill of a lawyer, or the preparation of legal briefs, or does not require the practice of law; and

008.04A(6) The Nebraska Evidence Rules applicable in the district courts do not apply to the contested case.

008.04B A certified public accountant who is not an employee or officer of the petitioner, claimant, or respondent may represent the petitioner if all of the following conditions are met.

008.04B(1) The representation does not involve a claim that the Department’s action is illegal as a matter of law or unconstitutional;

008.04B(2) The representation does not require the knowledge, judgment, or skill of a lawyer, or the preparation of legal briefs, or does not require the practice of law; and

008.04B(3) The Nebraska Evidence Rules as applicable in the district courts do not apply to the contested case.

(Sections 77-369, 77-2711, and 77-27,119, R.R.S. 2009, and sections 84-909 and 84-909.01, R.R.S. 2008. January 30, 2010)

REG-33-009 PROHIBITIONS AGAINST EX PARTE COMMUNICATIONS

009.01 Ex parte communication means an oral or written communication which is not on the record in a contested case with respect to which reasonable notice to all parties was not given. Ex parte communication shall not include:

009.01A Communications which do not pertain to the merits of a contested case;

009.01B Communications required for the disposition of ex parte matters as authorized by law;

009.01C Communications in a ratemaking or rulemaking proceeding; and

009.01D Communications to which all parties have given consent.

009.02 Prohibitions; when applicable. The prohibitions found in this section shall apply when the Notice of Hearing has been issued.

009.03 Prohibitions; to whom applicable.

009.03A Parties and public. No party in a contested case or other person outside the Department having an interest in the contested case shall make or knowingly cause to be made an ex parte communication to the Hearing Officer or the Tax Commissioner or employee who is or may reasonably be expected to be involved in the decisionmaking process of the contested case.

009.03B Persons in decision-making roles. Neither the Hearing Officer, the Tax Commissioner nor any employee of the Department who is or may reasonably be expected to be involved in the decision-making process of the contested case shall make or knowingly cause to be made an ex parte communication to any party in a contested case or other person outside the Department having an interest in the contested case.

009.03C Neither the Tax Commissioner nor any employee of the Department engaged in the investigation or enforcement of a contested case shall make or knowingly cause to be made an ex parte communication to the Hearing Officer, Tax Commissioner or any employee of the Department who is or may reasonably be expected to be involved in the decision-making process of the contested case.

009.04 Disclosure of contacts. The Hearing Officer, Tax Commissioner, or any employee of the Department who is or may reasonably be expected to be involved in the decision-making process of the contested case who receives or who makes or knowingly causes to be made an ex parte communication set forth in subsections 009.03A through 009.03C is required to disclose any such contact.

009.04A If an ex parte communication is made, the Hearing Officer, Tax Commissioner, or employee of the Department shall file in the record of the contested case:

009.04A(1) All such written communications;

009.04A(2) Memoranda stating the substance of all such oral communications; and

009.04A(3) All written responses and memoranda stating the substance of all oral responses to all ex parte communications.

009.04B The filing shall be made within two business days of the receipt or making of the ex parte communication. Notice of the filing, with the opportunity to respond, shall be given to all parties of record.

009.04C Filing and notice of filing provided under subsection 009.03B shall not be considered on the record nor reasonable notice for purposes of the definition of ex parte communication.

(Sections 84-909, 84-909.01, and 84-914(6), R.R.S. 2008. January 30, 2010)

REG-33-010 INTERVENTION IN A CONTESTED CASE

010.01 Intervention in a contested case shall be allowed when the following requirements are met.

010.01A A petition for intervention must be submitted in writing to the Hearing Officer at least five days before the hearing. Copies must be mailed by the petitioner for intervention to all parties named in the Hearing Officer’s Notice of Hearing;

010.01B A petition must state facts demonstrating that the petitioner’s legal rights, duties, privileges, immunities, or other legal interests may be substantially affected by the proceeding or that the petitioner qualifies as an intervenor under any provision of law; and

010.01C The Hearing Officer must determine that the interests of justice and the orderly and prompt conduct of the proceedings will not be impaired by allowing the intervention and that the intervention will not violate the rules of confidentiality governing the Department unless waived by the person protected by the rules.

010.02 The Hearing Officer may grant a petition for intervention at any time upon determining that the intervention sought is in the interests of justice and will not impair the orderly and prompt conduct of the proceedings.

010.03 If a petitioner qualifies for intervention, the Hearing Officer may impose conditions upon the intervenor’s participation in the proceedings, either at the time that intervention is granted or at any subsequent time. Those conditions may include:

010.03A Limiting the intervenor’s participation to designated issues in which the intervenor has a particular interest demonstrated by the petition;

010.03B Limiting the intervenor’s use of discovery, cross-examination, and other procedures to continue to promote the orderly and prompt conduct of the proceedings; and

010.03C Requiring two or more intervenors to combine their presentation of evidence and argument, cross-examination, discovery, and other participation in the proceedings.

010.04 The Hearing Officer, at least 24 hours before the hearing, shall issue an order granting or denying each pending petition for intervention, specifying any conditions and briefly stating the reasons for the order.

010.04A The Hearing Officer may modify the order at any time, stating the reasons for the modification.

010.04B The Hearing Officer shall promptly give notice of an order granting, denying, or modifying intervention to the petitioner for intervention and to all parties.

(Section 84-912.02, R.R.S. 2008. January 30, 2010)

REG-33-011 PREHEARING PROCEDURES

011.01 Prehearing conferences and orders. A hearing officer designated to conduct a hearing may determine, subject to the Department’s regulations, whether a prehearing conference will be conducted. If a prehearing conference is not held, the Hearing Officer may issue a prehearing order, based on the pleadings, to regulate the conduct of the proceedings.

011.01A If a prehearing conference is conducted,

011.01A(1) The Hearing Officer shall promptly notify the Department and the petitioner or claimant of the determination that a prehearing conference will be conducted. The Department may assign another Hearing Officer for the prehearing conference.

011.01A(2) The Hearing Officer for the prehearing conference shall set the time and place of the prehearing conference and give reasonable written notice to all parties and to all persons who have filed written petitions to intervene in the matter. The notice shall include the following:

011.01A(2)(a) The names and mailing addresses of all parties and other persons to whom notice is being given by the Hearing Officer;

011.01A(2)(b) The name, official title, mailing address, and telephone number of any counsel or employee who has been designated to appear for the Department;

011.01A(2)(c) The official docket or other reference number, the name of the proceeding, and a general description of the subject matter;

011.01A(2)(d) A statement of the time, place, and nature of the prehearing conference;

011.01A(2)(e) A statement of the legal authority and jurisdiction under which the prehearing conference and the hearing are to be held;

011.01A(2)(f) The name, official title, and telephone number of the Hearing Officer for the prehearing conference;

011.01A(2)(g) A statement that a party who fails to attend or participate in a prehearing conference, hearing, or other stage of a contested case or who fails to make a good faith effort to comply with a prehearing order may be held in default under the Administrative Procedure Act; and

011.01A(2)(h) Any other matters that the Hearing Officer considers desirable to expedite the proceedings.

011.01A(3) The Department shall give notice to other persons entitled to notice.

011.01B The Hearing Officer may conduct a prehearing conference, as may be appropriate, to deal with such matter as:

011.01B(1) Exploring settlement possibilities;

011.01B(2) Preparing stipulations;

011.01B(3) Establishing a method and address for service of motions and pleadings for all parties, including, but not limited to electronic mail or facsimile;

011.01B(4) Clarifying issues;

011.01B(5) Rulings on identity and limiting the number of witnesses;

011.01B(6) Objections to proffers of evidence, determination of the extent to which direct evidence, rebuttal evidence, or cross-examination will be presented in written form and the extent to which telephone, television, or other electronic means will be used as a substitute for proceedings in person;

011.01B(7) Order of presentation of evidence and cross-examination;

011.01B(8) Rulings regarding issuance of subpoenas, discovery orders, and protective orders;

011.01B(9) Rulings regarding whether or not a nonlawyer may represent the petitioner under section 008.04 of these regulations;

011.01B(10) Rulings regarding whether or not the hearing will be transcribed; and

011.01B(11) Any other issues that will promote the orderly and prompt conduct of the hearing.

011.01C The Hearing Officer shall issue a prehearing order incorporating the issues determined at the prehearing conference.

011.01D The Hearing Officer may conduct all or part of the prehearing conference by telephone, television, or other electronic means if each person in the conference has an opportunity to participate in, to hear, and, if technically feasible, to see the entire proceeding while it is taking place.

011.02 Discovery in contested cases. The Nebraska Supreme Court’s rules of procedure for discovery in civil cases shall apply in contested cases before the Department.

011.02A The Hearing Officer, at the request of any party or upon the Hearing Officer’s own motion, may issue subpoenas, discovery orders, and protective orders in accordance with the rules of civil procedure except as may be otherwise prescribed by law. Subpoenas and orders issued under this subsection may be enforced by the district court.

011.02B Any prehearing motion to compel discovery, motion to quash, motion for protective order, or other discovery-related motion shall:

011.02B(1) Quote the interrogatory, request, question, or subpoena at issue, or be accompanied by a copy of the interrogatory, request, subpoena or excerpt of a deposition;

011.02B(2) State the reasons supporting the motion;

011.02B(3) Be accompanied by a statement setting forth the steps or efforts made by the moving party or his or her counsel to resolve by agreement the issues raised and that agreement has not been achieved; and

011.02B(4) Be filed with the Department. The moving party must serve copies of all such motions to all parties to the contested case.

011.02C Other than as provided in subsection 011.02B(4) above, discovery materials need not be filed with the Department.

011.03 Motions. Any party may file a motion with the Hearing Officer as soon as a party becomes aware of facts requiring the motion. The motion must state a request for relief and support for the relief requested. If the consent of all parties is not obtained, a hearing on the motion may be scheduled and the parties notified. The burden will be on the party filing the motion to show good cause why the motion should be granted. Notice will be given to all parties of the ruling of the Hearing Officer on the motion.

011.03A Types of motions. Types of motions which may be made include but are not limited to:

011.03A(1) Motion for continuance. The Hearing Officer may, in his or her discretion, grant extensions of time or continuances of hearings upon the Hearing Officer’s own motion or at the timely request of any party for good cause shown. A party seeking a continuance must file a written motion for continuance which states in detail the reasons why a continuance is necessary and serve a copy of the motion on all other parties.

011.03A(1)(a) Good Cause. Good cause for an extension of time or continuance includes, but is not limited to:

011.03A(1)(a)(i) Illness of the party, legal counsel or witness;

011.03A(1)(a)(ii) A change in legal representation; or

011.03A(1)(a)(iii) Settlement negotiations are underway.

011.03A(2) Motion for dismissal. The Hearing Officer may grant a motion for dismissal for, but not limited to, the following grounds:

011.03A(2)(a) Lack of jurisdiction, including but not limited to whether the petitioner is the proper party in the proceeding, whether there was a notice of proposed deficiency determination, or whether the protest petition was filed within the statutory time limit; or

011.03A(2)(b) Upon a party being held in default under the Administrative Procedure Act for failure to attend or participate in a prehearing conference, hearing, or other stage of a contested case, or who fails to make a good faith effort to comply with a prehearing order.

011.03A(3) Motion for consolidation. Motions for consolidation may be granted in the following instances.

011.03A(3)(a) The same taxpayer has received separate notices of proposed deficiency determination relating to different taxable years or companies and has filed a separate petition for each notice.

011.03A(3)(b) Different taxpayers have received notices of deficiency determination based on the same general issues. Some examples are:

011.03A(3)(b)(i) Stockholders, as to basis of stock sold or exchanged, gain or loss on reorganization, status of dividends received;

011.03A(3)(b)(ii) Partners;

011.03A(3)(b)(iii) Affiliated corporations;

011.03A(3)(b)(iv) A husband and wife who received separate notices of proposed deficiency determination;

011.03A(3)(b)(v) Transferees;

011.03A(3)(b)(vi) A lessor and lessee;

011.03A(3)(b)(vii) Corporations involved in reorganizations;

011.03A(3)(b)(viii) Beneficiaries of estates or trusts;

011.03A(3)(b)(ix) Trusts created by the same grantor;

011.03A(3)(b)(x) Officers of a corporation as to status of salaries disallowed to the corporation as a deduction;

011.03A(3)(b)(xi) A corporation and its stockholder(s).

011.03A(3)(c) The same taxpayer has received separate notices of proposed deficiency determination regarding his or her own tax and regarding his or her liability as transferee, or has received separate proposed deficiency notices regarding his or her liability as transferee of two or more different transfers.

011.03A (3)(d) Different corporations, which have the same stockholders.

011.04 Amendments.

011.04A A petition or claim may be amended at any time before notice of the hearing is issued. In all other cases, a petitioner or claimant must request permission to amend from the Hearing Officer.

011.04B The Hearing Officer may also allow, in his or her discretion, the filing of supplemental pleadings alleging facts material to the case occurring after the original pleadings were filed. The Hearing Officer may also permit amendment of pleadings where a mistake appears or where amendment does not materially change a claim or defense.

011.05 Informal Disposition. Unless otherwise precluded by law, informal disposition may be made of any contested case by stipulation, agreed settlement, consent order, dismissal, or default.

(Sections 77-369, and 77-375, R.R.S. 2008, and sections 84-909, 84-909.01 and 84-913.01 to 84-913.03, R.R.S. 2008. January 30, 2010)

REG-33-012 CONDUCTING A CONTESTED CASE HEARING

012.01 Scheduling of hearings. The time and place of any hearing shall be set by the Hearing Officer after proceedings have commenced. The hearing shall be scheduled as soon as practicable. Written notice of the time and place of any hearing shall be given at least ten days prior to the date of hearing unless notice is waived by the parties.

012.02 Conduct of hearing. A hearing shall be conducted by a Hearing Officer who, among other things, will open the proceedings, take appearances, administer oaths, subpoena witnesses, hear the evidence, rule on the motions and objections, question witnesses, and close the proceedings. If the petitioner or claimant is not represented by anyone qualified to make an appearance on his or her behalf, the Hearing Officer shall explain to the petitioner or claimant the Rules of Practice and Procedure and generally conduct the hearing in a less formal manner than that used when a petitioner or claimant has a representative qualified to appear on his or her behalf.

012.02A In any hearing, every party has the right to present evidence and testimony of witnesses and to cross-examine any witness who testifies on behalf of an adverse party. Every party shall have an opportunity to present evidence and testimony as rebuttal to evidence presented by another party, except that repetitious evidence shall be excluded. The parties should be prepared to make oral argument as to the law at the conclusion of a hearing. A written memorandum of law may be filed at the time of the hearing at the discretion of any party or at a subsequent time if the Hearing Officer orders.

012.02B At the discretion of the Hearing Officer the hearing may be conducted in the following order.

012.02B(1) The hearing is called to order by the Hearing Officer. Any preliminary motions, stipulations or agreed orders are entertained.

012.02B(2) Each party may make an opening statement. Opening statements take place in the same order as the presentation of evidence.

012.02B(3) Presentation of Evidence.

012.02B(3)(a) Evidence will be received in the following order:

012.02B(3)(a)(i) Evidence is presented by the petitioner;

012.02B(3)(a)(ii) Evidence is presented by the respondent;

012.02B(3)(a)(iii) Rebuttal evidence is presented by the petitioner; and

012.02B(3)(a)(iv) Surrebuttal evidence is presented by the respondent.

012.02B(3)(b) With regard to each witness who testifies, the following examination may be conducted:

012.02B(3)(b)(i) Direct examination conducted by the party who calls the witness;

012.02B(3)(b)(ii) Cross-examination by the opposing party;

012.02B(3)(b)(iii) Redirect examination by the party who called the witness; and

012.02B(3)(b)(iv) Recross-examination by the opposing party.

012.02B(3)(c) After evidence is presented, each party may have the opportunity to make a closing argument. Closing arguments shall be made in the same order as the presentation of evidence. The Hearing Officer may order that parties submit briefs in lieu of closing arguments.

012.02C Hearings will usually be recorded electronically and not transcribed at the time of the hearing. A court reporter will be retained for the hearing if:

012.02C(1) The Hearing Officer determines that the complexity of the facts and issues require a court reporter to be present to make a verbatim transcript of the proceedings, or

012.02C(2) Any party requests that a court reporter be present to make a verbatim transcript of the proceedings and agrees to make the arrangements for the court reporter and pay the initial cost.

012,02C(3) The cost of the court reporter shall be part of the costs to be assessed under subsection 012.09 of this regulation.

012.03 Production of evidence and testimony. The Hearing Officer may administer oaths and issue subpoenas, in accordance with the rules of civil procedure except as may otherwise be prescribed by law. Subpoenas and orders issued under this subsection may be enforced by the district court.

012.03A If a subpoena is desired, the requesting party shall indicate to the Hearing Officer the name of the case and names and last known addresses of the witnesses to be subpoenaed. If evidence other than oral testimony is required, each item to be produced must be adequately described. When properly prepared, the subpoena will be returned to the requesting party for service. Service may be made either by mailing a copy by certified mail, return receipt requested, not less than six days before the hearing date of the cause which the witness is required to attend or, personally, by any person not interested in the action. No costs for serving a subpoena will be allowed.

012.03B All testimony presented before the Hearing Officer shall be given under oath.

012.04 The Hearing Officer may admit and give probative effect to evidence which possesses probative value commonly accepted by reasonably prudent persons in the conduct of their affairs, and may exclude incompetent, irrelevant, immaterial, and unduly repetitious evidence.

012.04A Any party may request that the proceeding be bound by the Nebraska Evidence Rules as applicable in the district courts. The party shall file with the Hearing Officer, at least three days prior to the date of the scheduled hearing, a written request that the hearing be so conducted. The request for the application of the Nebraska Evidence Rules as applicable in the district courts shall be in writing and shall include the requesting party’s agreement to be liable for the payment of costs incurred upon any appeal or review, including the cost of court reporting services, which the requesting party shall procure for the hearing.

012.04B Documentary evidence may be received in the form of copies or excerpts or incorporated by reference. A copy of any book, record, paper, or document may be offered directly in evidence in lieu of the original, where the original is unavailable or where there is no objection, and where the original is admitted in evidence, a copy may be substituted later for the original or any part that may be material or relevant upon leave granted in the discretion of the Hearing Officer.

012.04C All evidence, including records and documents in the possession of the Department which the Department desires to use, shall be offered and made a part of the record in the case. No factual information or evidence other than the record shall be considered in the determination of the case.

012.04D Evidence of a federal tax determination including, but not limited to, a Treasury Department determination letter, a federal court decision, or an Internal Revenue Service assessment relating to issues raised in the proceeding, shall be presumed to be accurate unless rebutted.

012.04E The Hearing Officer shall give effect to the rules of privilege recognized by law.

012.04F The Hearing Officer may take official notice of cognizable facts, and in addition, may take official notice of general, technical, or scientific facts within the specialized knowledge of the Department and the rules and regulations adopted and promulgated by the Department, if:

012.04F(1) The parties are notified either before or during the hearing or by reference in preliminary reports or otherwise of materials so noticed;

012.04F(2) The parties are afforded an opportunity to contest facts so noticed; and

012.04F(3) The record contains a written record of each item officially noticed.

012.05 Conducting the hearing by electronic means. The Hearing Officer may, at his or her discretion, conduct all or a part of the hearing by telephone, television, or other electronic means if each participant in the hearing has an opportunity to participate in, to hear, and if technically feasible, to see the entire proceeding while it is taking place.

012.06 Exhibits.

012.06A Identification of exhibits. Exhibits attached to a stipulation or entered in evidence shall be numbered serially, i.e., 1, 2, 3, etc.

012.06B Disposition of exhibits. Any party desiring the return of any exhibit, at his or her own expense, shall apply in writing to the Hearing Officer within 30 days after an order of the Tax Commissioner has become final, suggesting a practical manner of delivery. In all other cases, exhibits may be disposed of as the Hearing Officer deems advisable.

012.07 Evidence outside the record. Except as provided by these regulations, the Hearing Officer will not consider factual information or evidence in the determination of any proceeding unless it has been offered and made a part of the record in the proceeding.

012.08 Official record. The Department shall prepare an official record, which shall include testimony and exhibits, in each contested case.

012.08A The Department shall maintain an official record of each contested case under the Administrative Procedure Act for at least four years following the date of the final order.

012.08B The Department’s official record shall consist only of the following:

012.08B(1) Notices of all proceedings;

012.08B(2) Any pleadings, motions, requests, preliminary or intermediate rulings and orders, and similar correspondence to or from the Department relating to the contested case;

012.08B(3) The record of the hearing, including all exhibits and evidence introduced during the hearing, a statement of matters officially noticed by the Hearing Officer during the proceeding, and all proffers of proof and objections and rulings thereon; and

012.08B(4) The final order.

012.08C It shall not be necessary to transcribe the record of the proceedings unless requested for purpose of rehearing or appeal, in which event the transcript and record shall be furnished by the agency upon request and payment of the cost of preparation.

012.08D As provided in subsection 009.04 of these regulations, the Hearing Officer, Tax Commissioner, or employee who is or may reasonably be expected to be involved in the decision making process of the contested case, who receives or who makes or knowingly causes to be made an ex parte communication as set forth in that subsection, shall make the appropriate filings which shall be included in the official record of the contested case.

012.08E Except to the extent that the Administrative Procedure Act or another statute provides otherwise, the Department’s official record shall constitute the exclusive basis for Department action in contested cases under the act and for judicial review.

012.08F Any party to the case may request and obtain a certified copy of the Department’s official record of the hearing. Charges for preparing the certified copy of the record shall be paid by the party requesting it.

012.09 Costs. All costs of a formal hearing shall be paid by the party or parties against whom a final decision is rendered.

(Sections 77-369, 77-375, 77-376, 77-2709, 77-2711, 77-2792, and 77-27,119, R.R.S. 2009, and sections 84-909, 84-909.01, 84-913, 84-914, 84-915, 84-915.01 and 84-916, R.R.S. 2008. January 30, 2010)

REG-33-013 BURDEN OF PROOF

013.01 The burden of proof in any proceeding shall be on the permitholder, petitioner, or claimant except for the following issues where the burden of proof is on the Tax Commissioner:

013.01A Whether the petitioner is guilty of fraud with attempt to evade tax.

013.01B Whether the petitioner is liable as the transferee of property of a taxpayer. The burden of proof on the issue of the transferor’s liability remains with the petitioner.

013.01C Whether the petitioner is liable for any increase in a proposed deficiency determination which is asserted after a notice of proposed deficiency determination was mailed and after a protest petition under section 77-2778, R.S.Supp., 2008 was filed. The burden of proof on issues relating to increases resulting from changes or corrections of federal taxable income reportable under Section 77-2775, R.S. Supp., 2008, remains with the petitioner if the Tax Commissioner had no notice of the federal change when the notice of proposed deficiency determination was mailed.

013.01D Whether the petitioner is liable for any penalty imposed under subsection (7) or (8) of section 77-2790, R.S. Supp., 2008.

(Section 77-2781, R.R.S. 2009. January 30, 2010)

REG-33-014 DETERMINATION BY THE TAX COMMISSIONER

014.01 The Tax Commissioner may utilize the Department’s experience, technical competence and specialized knowledge in the evaluation of the evidence presented to him or her.

014.02 Every decision and order adverse to a party to the proceeding, rendered by an agency in a contested case, shall be in writing or stated in the record and shall be accompanied by findings of fact and conclusions of law.

014.03 The Tax Commissioner’s decision and order should include:

014.03A The Department’s name and the name of the proceeding;

014.03B The time and place of the hearing;

014.03C The names of all parties and any representative who entered an appearance on behalf of a party at the hearing;

014.03D The findings of fact, consisting of a concise statement of the conclusions upon each contested issue of fact;

014.03E The conclusions of law consisting of the applications of the controlling law to the facts found and the legal results arising from the law and facts; and

014.03F The order consisting of the action taken by the Department as a result of the facts found and the legal conclusions arising from the law and facts.

014.04 Parties to the proceeding shall be notified of the decision and order in person or by mail. A copy of the decision and order and accompanying findings and conclusions shall be delivered or mailed upon request to each party or his or her attorney of record. If service is by mail, service upon the petitioner will be considered to have been completed as of the date the decision was mailed. If notice is served personally, service upon the petitioner will be considered to have been completed as of the date of delivery.

(Neb. Rev. Stat. §§ 77-1780, 77-2796, 77-27,126, 84-915, 84-917. November 17, 2013.)

REG-33-015 APPEALS

015.01 Any person aggrieved by a final decision in a contested case is entitled to judicial review under the Administrative Procedure Act or to resort to such other means of review as may be provided by law.

015.02 Parties desiring to appeal a final order of the Tax Commissioner must file a petition for review in the appropriate district court within 30 days after the service of the final order of the Tax Commissioner. The period for appeal commences to run from the date of service of the notification of a determination by the Tax Commissioner to the parties or their attorneys of record. Service of the petition and summons must be made in accordance with Nebraska law.

015.02A Except as provided in subsections 015.02B and 015.02C, parties desiring to appeal a final order must file the petition for review in the district court of the county where the action was taken.

015.02B Except as provided in subsection 015.02C, parties desiring to appeal a final order of the Tax Commissioner issued under the Revenue Act must file the petition for review in the district court of Lancaster County.

015.02C Parties desiring to appeal a final order of the Tax Commissioner denying an income tax refund claim may file the petition for review in the district court where the taxpayer resides or the district court of Lancaster County.

(Section 9-624, R.R.S., 2007, sections 77-1781, 77-2780, 77-2796, 77-2798, 77-27,127, and 77-27,128, R.R.S. 2009, section 84-919, R.R.S. 2008, and section 84-917, R.S. Supp. 2009. January 30, 2010)

History

• Effective 2014-11-17

Chapter 34 Practice and Procedures Governing Declaratory Orders

Neb. Admin. Code tit. 316, ch. 34 Practice and Procedures Governing Declaratory Orders {#sec-316-nac-34 omnilex-key=us-ne-regs-official--title-316--316 NAC 34}

REG-34-001 SCOPE AND DEFINITIONS

001.01 Scope of this Chapter. This Chapter of these regulations is to be used only by persons seeking issuance of a declaratory order by the Department.

001.02 Definitions. As used in this Chapter:

001.02A Applicability means the relation of the law or action to the person, property, or state of facts, or its relevance under the circumstances given. It may include such questions as whether the law or action applies at all, to whom it applies, when it applies, how it applies, or which law or action applies.

001.02B Authorized representative means a person who is authorized by the petitioner, or any party to represent the petitioner, or any party for purposes of the declaratory order proceeding consistent with the requirements of Chapter 33, Article 8 of these regulations.

001.02C Declaratory order proceeding means a proceeding initiated by a petitioner seeking issuance of a binding order by the Department as to the applicability of specified circumstances to a law or action that is within the primary jurisdiction of the Department.

001.02D Department means the Nebraska Department of Revenue.

001.02E Hearing Officer means the Tax Commissioner or individual or individuals designated by the Tax Commissioner to conduct a declaratory order proceeding pursuant to the Administrative Procedure Act.

001.02F Law or action means a statute, regulation, revenue ruling, or order of the Tax Commissioner.

001.02G Necessary party means a person who or an entity which has a specific interest in the applicability of the law or action, as distinguished from a general interest, such as may be the concern of the public at large. A necessary party is one which is, or would be affected, in a legally cognizable way if the Department issues a declaratory order regarding the uncertainty sought to be resolved.

001.02H Party means the petitioner, the Department, any necessary party, and any other person allowed to intervene in the declaratory order proceeding.

001.02I Person means bodies politic and corporate, county officials, societies, communities, nonprofit organizations, nonprofit corporations, the public generally, individuals, partnerships, limited liability companies, joint stock companies, associations, and other entities and organizations.

001.02J Petition means a written request for a declaratory order filed in accordance with section 003 of this Chapter.

001.02K Petitioner means a person who files a petition for a declaratory order proceeding before the Department that contains all the necessary information.

001.02L Tax Commissioner means the chief executive officer of the Department.

(Section 84-912.01, R.R.S. 2008. November 6, 2010.)

REG-34-002 PETITION FOR DECLARATORY ORDER

002.01 Who May File. Any person may petition the Department to issue a declaratory order as to the applicability to specified circumstances of a law or action which is within the primary jurisdiction of the Department.

002.02 When Declaratory Orders Are Appropriate. A declaratory order may be requested on the applicability of a law or action enforced by the Department. A declaratory order may be requested only on the applicability of existing laws or actions. A declaratory order may be requested to obtain an analysis of proposed conduct, not to obtain an analysis of conduct that has already occurred.

002.03 When Declaratory Orders Are Inappropriate. The Department shall not issue a declaratory order where:

002.03A The petition requests a declaratory order on a matter that is outside the scope of the authority of the Department;

002.03B The petition requests review or appeal of a decision made by the Department in a contested case;

002.03C The petition requests a declaratory order on the effect of past conduct;

002.03D An investigation for purposes of a formal adjudication, a contested case, or a petition to issue, amend, or repeal regulations is pending before the Department involving the petitioner on substantially the same or similar facts or issues raised in the petition;

002.03E The petition seeks a declaratory order that a statute, rule, regulation, or revenue ruling is unconstitutional or invalid;

002.03F The issue raised in the petition has been settled by a change in circumstances or other means;

002.03G A declaratory order would substantially prejudice the rights of a necessary party who does not consent in writing to a declaratory order proceeding;

002.03H A declaratory order would not resolve the controversy or uncertainty; or

002.03I The question posed or facts presented are insufficiently specific, overly broad, or are otherwise inappropriate.

002.04 The Department may refuse to issue a declaratory order where:

002.04A Refusal is necessary to assure adequate Department resources are available for issuing rulings on petitions raising questions of greater urgency or significance;

002.04B The question presented is so complex that the Department has not had sufficient opportunity or resources to develop an appropriate declaratory order; or

002.04C The petitioner failed to submit any additional information requested by the Department or submitted such information after the date established by the Department.

002.05 Form and Contents of Petition. A petition for declaratory order shall be in writing and shall:

002.05A Contain a caption, which includes:

002.05A(1) The words: BEFORE THE DEPARTMENT OF REVENUE, STATE OF NEBRASKA;

002.05A(2) A heading specifying the subject matter and the name of the petitioner; and

002.05A(3) The words: PETITION FOR DECLARATORY ORDER.

002.05B Bear the signature of the petitioner, or an authorized representative of the petitioner;

002.05C Contain the name and address of the petitioner, and when his or her authorized representative is an attorney, the name, address, telephone number, and bar number of the attorney;

002.05D Include any documents that relate to the petition;

002.05E Contain the name and address of all persons or entities, known to the petitioner, who may have a specific interest in the applicability of the law or action, or who may be affected by resolution of the issue sought to be resolved by the petitioner;

002.05F Cite the law or action upon which the petitioner seeks a declaratory order;

002.05G Contain a detailed statement of all of the material facts and specific circumstances which apply to petitioner’s request for a declaratory order;

002.05H State all legal or factual contentions asserted by the petitioner;

002.05I State a demand for the relief sought by the petitioner;

002.05J State the petitioner’s position as to how the Department should rule and why the Department should rule in the manner requested;

002.05K Include any documents pertinent to the petition that the petitioner wishes to be considered by the Department; and

002.05L State a request for hearing if one is desired.

002.06 The petitioner must also attach any written consents to the proceeding obtained from any necessary party that the petition may be determined by use of a declaratory order proceeding.

002.07 The form of the petition.

002.07A The petition must be legibly typewritten, photocopied, printed, or handwritten on only one side of each page on white, 8-1/2 by 11 inch paper. If handwritten, the petition must be written in ink.

002.07B Any documents attached to a petition must be securely fastened to the petition, meet the requirements of 002.07A and, if possible, be reproduced on 8-1/2 by 11 inch paper or placed in an 8-1/2 by 11 inch envelope and clearly marked as an attachment to the petition.

002.07C When the Tax Commissioner approves and implements an electronic form or method for filing a petition, any petition for declaratory order may be filed electronically with the Department if it contains all the information required by this section. The petition may be filed using the Web site of the Department (www.revenue.ne.gov).

002.08 The petition shall be filed with the Tax Commissioner by mail, in person, or electronically during the Department’s normal business hours.

002.09 The petition shall be deemed to be filed when it is actually received by the Department. The Department shall date stamp all petitions upon receipt.

002.10 At the same time the petition is filed with the Department, the petitioner must also serve a copy of the petition, by certified mail, return receipt requested, on all necessary parties.

002.11 The petition must be subscribed and verified by the petitioner. If the petitioner is a corporation, political subdivision, or other entity, the petition must be subscribed and verified by a duly authorized agent of the petitioning entity.

002.12 The petitioner may use the sample form of a petition in section 002.13 of this regulation. The petitioner may also prepare a reasonable facsimile of the sample petition if the requirements of sections 002.07 through 002.11 of this regulation are satisfied.

002.13 Sample Petition:

REG-34-003 DISPOSITION OF THE PETITION

003.01 Generally. The Tax Commissioner may consider the petition or delegate the matter to a designated Hearing Officer to consider and recommend a decision to the Tax Commissioner. In considering the petition, the Tax Commissioner or Hearing Officer may do one or more of the following:

003.01A Require that additional information be submitted before the petition will be further considered;

003.01B Require the petitioner to provide notice to persons or entities who may be necessary parties that a request for a declaratory order has been filed with the Department;

003.01C Schedule a date, time, and location at which the petitioner and any other parties to the proceeding may make an oral argument on the petition;

003.01D Consider the petition and any attachments without oral argument.

003.02 Within 30 days after the petition is filed, the Tax Commissioner shall, in writing:

003.02A Issue a declaratory order applying the law or action in question to the specified circumstances;

003.02B Agree to issue a declaratory order by a specified time applying the law or action in question to the specified circumstances;

003.02C Set the matter for proceedings as set forth in subsection 003.01 of this Chapter; or

003.02D Decline to issue a declaratory order, stating the reasons for the Tax Commissioner’s decision.

003.03 The Tax Commissioner may decide at any time to not issue a declaratory order if issuing an order under the circumstances would be contrary to any provision of section 002.03 of this Chapter. The Tax Commissioner shall notify the petitioner and any party in writing when he or she decides not to issue a declaratory order.

(Section 84-912.01, R.R.S. 2008. November 6, 2010.)

REG-34-004 INTERVENTION IN DECLARATORY ORDER PROCEEDING

004.01 Intervention by any person or entity in a declaratory order proceeding shall be allowed if:

004.01A A petition for intervention is submitted in writing to the Department. Copies must be mailed to all parties to the proceeding.

004.01B The contents of the petition are as specified in subsection 004.02 of this regulation.

004.01C The Hearing Officer determines that the interests of justice and the orderly and prompt conduct of the proceedings will not be impaired by the intervention.

004.02 The petition for intervention must be submitted to the Department in writing on white, 8-1/2 by 11 inch paper. In addition to the requirements of section 002.05 of these regulations, the petition must include:

004.02A The law or action that may apply to or effect the person or fact at issue in the matter.

004.02B A statement of facts sufficient to show the intervenor’s interest;

004.02C A statement of facts which demonstrate that the intervenor’s legal rights, duties, privileges, immunities, or other legal interests may be substantially affected by the proceeding or that the intervenor may intervene pursuant to a provision of law;

004.02D All legal and factual contentions asserted by the petitioner;

004.02 E A statement of the specific relief requested by the intervenor.

004.03 The Department may invite any person to file a petition for intervention.

004.04 Except as provided in subsection 004.05 of these regulations, the Hearing Officer shall grant a petition for intervention if the requirements of subsections 004.01 and 004.02 of this section are satisfied.

004.05 The Hearing Officer shall deny a petition for intervention if the interests of justice or the orderly and prompt conduct of the proceedings would be impaired by allowing the intervention.

004.06 The Hearing Officer’s decision to grant or deny a petition for intervention shall be in writing and served upon all parties.

(Section 84-912.02, R.R.S. 2008. November 6, 2010.)

REG-34-005 DECLARATORY ORDER PROCEEDINGS

005.01 Oral Argument, When. Any party may submit a motion for oral argument to the Hearing Officer. If an opportunity for oral argument is granted, then argument shall be scheduled to be conducted no more than 45 days after the petition was filed. The petitioner and all other parties shall be served by the Department with notice of the date, time, and location for oral argument. The Department shall provide all parties with notice of the proceeding not less than seven days in advance of the scheduled date. Service shall be made by certified mail, return receipt requested.

005.02 Oral Argument, Procedure. Oral argument will be made before the Hearing Officer. The Hearing Officer shall control the proceeding and shall:

005.02A Identify the proceeding, introduce himself or herself, and identify each party for the record;

005.02B Hear the oral arguments of the petitioner, Department, intervenors, and necessary parties; and

005.02C Close the proceedings.

005.03 At the declaratory order proceeding, Department staff has the right to present oral argument.

005.04 The Hearing Officer may impose reasonable limits on the amount of time allocated for oral arguments.

005.05 The parties and Department staff may file briefs in support of their positions. The Hearing Officer may fix the time and order of filing briefs and may direct that briefs be submitted prior to the date of oral arguments.

005.06 Oral arguments may be conducted either in person or by conference call.

(Section 84-912.01, R.R.S. 2008. November 6, 2010.)

REG-34-006 ISSUANCE OF DECLARATORY ORDER

006.01 The Tax Commissioner shall issue his or her declaratory order within 60 days after the date the petition was filed.

006.02 The declaratory order shall be in writing and include the following:

006.02A The names of all parties to the proceeding;

006.02B The facts upon which the order is based;

006.02C The statute, rule, regulation, revenue ruling, or order at issue in the matter;

006.02D The Tax Commissioner’s conclusions as to the applicability of the law or action to the facts;

006.02E The Tax Commissioner’s conclusions as to the legal effect or result of applying the law or action to the facts; and

006.02F The reasons relied upon by the Tax Commissioner to support his or her conclusions.

006.03 A copy of the declaratory order shall be served upon each party by certified mail, return receipt requested.

006.04 A declaratory order has the same status and binding effect as an order issued in a contested case.

006.05 If the Tax Commissioner has not issued a declaratory order within 60 days after the petition has been filed, the petition shall be deemed to have been denied.

(Section 84-912.01(5), (6), and (7), R.R.S. 2008. November 6, 2010.)

REG-34-007 APPEAL

007.01 A declaratory order may be appealed in the manner provided for review of contested cases by the Administrative Procedure Act.

007.02 Parties desiring to appeal a declaratory order of the Tax Commissioner must file a petition for review in the appropriate district court within 30 days after the service of the declaratory order of the Tax Commissioner. The period for appeal commences to run from the date of service of the notification of the declaratory order the Tax Commissioner to the parties or their attorneys of record. Service of the petition and summons must be made in accordance with Nebraska law.

007.02A Except as provided in subsection 015.02B, parties desiring to appeal a declaratory order must file the petition for review in the district court of the county where the action was taken.

007.02B Parties desiring to appeal a declaratory order of the Tax Commissioner issued under the Revenue Act must file the petition for review in the district court of Lancaster County.

(Sections 84-912.01(6), and 84-917, R.R.S. 2008. November 6, 2010.)

History

• Effective 2010-11-06

Chapter 35 Charitable Gaming

Neb. Admin. Code tit. 316, ch. 35 Charitable Gaming {#sec-316-nac-35 omnilex-key=us-ne-regs-official--title-316--316 NAC 35}

BINGO

REG-35-200 SCOPE AND DEFINITIONS

200.01 Bingo, Lottery, Raffle and Lottery by Pickle Card Regulations 35-200 through 35-222 are adopted to carry out the provisions of the Nebraska Bingo Act.

200.01A For purposes of the Nebraska Bingo Regulations, unless the context otherwise requires, the definitions found in this regulation and sections 9-204 to 9-225.01 of the Nebraska Bingo Act shall be used.

200.02 Admission means the price paid to enter a premises where bingo is being played.

200.02A Money paid to attend a special function or to board a railroad coach car of a dinner or excursion train where bingo is conducted is not considered an admission, provided such charge does not exceed the fair market value of the food, refreshments, or entertainment, excluding bingo, which is being offered.

200.03 Auxiliary means an organization affiliated with, and organized in accordance with, the bylaws and regulations formulated by a companion or parent organization, and at least seventy-five percent of the members of one organization are either members of the parent or companion organization, spouses of members of the parent or companion organization, or are the parents, children, brothers, sisters, grandparents, or grandchildren of a member of the parent or companion organization.

200.04 Bingo card monitoring device means a technological aid used by a bingo player to monitor bingo cards purchased at the time and place of a licensed organization's bingo occasion, and which:

200.04A Provides a means for bingo players to automatically or manually input numbers announced by a bingo caller;

200.04B Compares or otherwise automatically conceals the numbers entered to the numbers contained on bingo cards previously stored in the electronic data base of the device;

200.04C Identifies winning bingo patterns; and

200.04D Signals only the bingo player when a winning bingo pattern is achieved.

200.05 Bingo equipment means any equipment which is made, sold, or used to conduct bingo and shall include, but is not limited to, blower devices, mechanical cages or machines or other devices from which bingo balls are withdrawn, bingo balls, flash boards, instant bingo boards, reusable shutter bingo cards, bingo hard cards, disposable paper bingo cards, a facsimile of a bingo card electronically displayed on a bingo card monitoring device, instant bingo cards, bingo card monitoring devices and site systems, and any other device used in the direct operation of the game.

200.05A Bingo equipment shall not mean or include tables, chairs, cash registers, and other personal property not directly used in the operation of the game, bingo supplies, or bingo game sets commonly manufactured and sold as a children's game, unless the set, or portion thereof, is actually used in bingo games required to be licensed.

200.06 Bingo prize means something of value awarded to a bingo player for achieving a predetermined pattern on a bingo card.

200.07 Bingo supplies means any item used by a bingo player to assist him or her in the playing of bingo. Bingo supplies include, but are not limited to, ink daubers, chips used to mark the numbers on the player's bingo card, and glue sticks.

200.08 Department means the Nebraska Department of Revenue.

200.09 Disposable paper bingo card means a bingo card manufactured with preprinted numbers that is not reusable after a bingo game or series of progressive bingo games has been completed. For purposes of this regulation, an instant bingo card is considered a disposable paper bingo card. The following definitions shall also apply to disposable paper bingo cards:

200.09A Color - means the border color of the disposable paper bingo card.

200.09B Cut - means the direction that a sheet of faces is cut from a master sheet. A cut can be either square, horizontal or vertical; e.g., a 3 ON vertical cut is 3 faces arranged in one vertical row.

200.09C Face - means one individual bingo card.

200.09C(1) In the case of traditional 75-number bingo, the card shall contain 24 preprinted numbers plus the center free space; or

200.09C(2) In the case of 90-number bingo, the card shall be a strip of six faces, with each face containing 27 squares arranged in nine columns of five squares, with 15 squares of each face containing one number from 1 to 90 which is not repeated on the strip.

200.09D Free Space Number or face number - means the number in the center of the bingo card which is consecutively numbered throughout the series and allows for the verification of a winning card against a master book containing all of the faces in the series.

200.09E ON - means the number of bingo faces on a single sheet. A 12 ON would have 12 faces per sheet.

200.09F Serial Number - means the unique identification number of a set of disposable paper bingo cards.

200.09G Series - means the manufacturer's permutation of a number of unique faces in a single set of disposable bingo paper; e.g., 1 to 64,000 series contains 64,000 unique faces.

200.10 Fair market value means the price that one would normally pay for an item in an arm's length transaction with a retail business.

200.11 Gross receipts means the total receipts received by a licensed organization from the conduct of bingo, including, but not limited to, receipts from admissions when such admissions are directly related to the playing of bingo, the sale, rental, or use of regular bingo cards, special bingo cards, and instant bingo cards, any fee charged for the use of bingo card monitoring devices, and the value of in-kind payments.

200.11A Gross receipts shall not include the receipts derived from concession activity at the bingo occasion, or from the sale of bingo supplies.

200.12 Host system means the computer hardware, software, and peripheral equipment of a licensed manufacturer which are used to generate and download an electronic facsimile of a bingo card to a licensed organization's site system, and which monitors sales and other activities of a site system.

200.13 In-kind payment means the tendering of an item having a particular dollar value when sold on a retail basis. If a licensed organization accepts in-kind payments, the value of the in-kind payment must have a value at least equal to the dollar value charged those using currency or checks to purchase or use the same items.

200.14 Instant bingo card means a disposable paper bingo card which is constructed so that the face(s) of the card are concealed and cannot be determined by any means until it is dispensed to and opened by the player.

200.15 Member means an individual who meets the written membership requirements contained in the organization's articles of incorporation, bylaws, charter, statement of purpose, or other written rules or statement governing membership of the organization.

200.15A One whose only participation in the activities of the organization involves the conduct of gaming activities shall not be considered a member.

200.16 Occasion or bingo occasion means a single gathering or session at which a bingo game or series of successive bingo games are played.

200.17 Regular bingo card means a bingo card which affords an individual the opportunity to participate in all regular games played at a bingo occasion.

200.18 Site system means the computer hardware, software and peripheral equipment used by a licensed organization at the site of its bingo occasion which download electronic facsimiles of bingo cards into bingo card monitoring devices, receipt the sale or use of such cards and devices, and generate reports relative to such sales or use.

200.19 Special bingo card means a specially marked or colored bingo card which affords an individual the opportunity to participate in a special bingo game played at a bingo occasion.

200.20 Substantial interest means connected, interested in, or otherwise concerned directly or indirectly with an individual, organization, firm, or corporation as follows:

200.20A With respect to a sole proprietorship, an individual or his or her spouse who owns, operates, manages, or conducts directly or indirectly a part of the sole proprietorship;

200.20B With respect to a partnership, an individual, his or her spouse, or a partnership, limited liability company, or corporation who owns, operates, manages, or conducts directly or indirectly a part of the partnership activity, or shares in any of the profits or potential profits of the partnership activity;

200.20C With respect to a limited liability company, an individual, his or her spouse, or a partnership, limited liability company, or corporation who owns, operates, manages, or conducts directly or indirectly a part of the limited liability company activity, or shares in any of the profits or potential profits of the limited liability company activity;

200.20D With respect to a corporation, an individual, his or her spouse, or a partnership, limited liability company, or corporation who owns, operates, manages, or conducts directly or indirectly a part of the corporation activity, or who is an officer or director of the corporation or is a holder directly or indirectly of ten percent or more of any class of stock in the corporation;

200.20E With respect to an individual, such individual or his or her spouse who provides ten percent or more of the capital, whether in cash, goods, or services for the operation of a manufacturer, distributor, or commercial lessor during a calendar year; and

200.20F With respect to an organization, association, or business not covered by subdivisions A, B, C, D, or E of this regulation:

200.20F(1) An individual or his or her spouse who is an officer or director of or manages the business affairs of the organization, association, or business; or

200.20F(2) An individual or his or her spouse who owns or controls ten percent or more of the assets of the organization, association, or business.

200.21 Youth amateur athletics or youth sports means activities sponsored by an organization which organizes, supervises, or administers team or individual activities which consist of an element of enjoyment or recreation involving the practice of individual skill and in which all those participating on the team or in an individual activity are under the age of 19.

(Sections 9-204.02, 9-204.03, 9-205, 9-206, 9-207.01, 9-208, 9-209, 9-209.01, 9-209.02, 9-210, 9-214.01, 9-215, 9-216, 9-226, 9-241.06, 9-241.10, 9-255.01, and 9-255.06, R.R.S. 1997. Sections 9-204, 9-204.01, and 9-204.04, R.S.Supp., 2004. September 5, 2005.)

REG-35-201 QUALIFICATION FOR LICENSE TO CONDUCT BINGO

201.01 Any nonprofit organization, volunteer fire company, or volunteer first-aid, rescue, ambulance, or emergency squad applying for a bingo license shall be incorporated in this state as a nonprofit corporation or organized or established in this state as a religious or nonprofit organization.

201.01A An organization incorporated in a foreign state holding a certificate of authority to conduct affairs in Nebraska is not considered to be incorporated in Nebraska and shall not qualify for a license.

201.01B A corporation incorporated in a foreign state which has domesticated in this state shall not be considered incorporated in Nebraska and shall not qualify for a license.

201.02 Any nonprofit organization holding a certificate of exemption under sections 501(c)(3), (4), (5), (8), (10), or (19) of the Internal Revenue Code or any volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad is eligible to apply for and obtain a license to conduct bingo.

201.02A A nonprofit organization is considered exempt under section 501 of the Internal Revenue Code if it can provide a copy of the exemption ruling or exemption determination letter issued by the Internal Revenue Service when making application for an initial license.

201.02A(1) Subsequent application by an organization to renew its bingo license is not required to be accompanied by the proof of exemption unless the circumstances under which the exemption was issued or the nature of the licensed organization have changed substantially to the extent that the exempt status may no longer be applicable, or the Department specifically requests the exemption determination letter.

201.02B An organization may be exempt under a group exemption letter issued by the Internal Revenue Service. A group exemption letter is a ruling or determination letter issued to a parent organization recognizing on a group basis the exemption under section 501(c) of the subordinate organizations on whose behalf the parent organization has applied for recognition of exemption.

201.02B(1) A parent organization is an organization that has one or more subordinates under its general supervision or control.

201.02B(2) A subordinate is a chapter, local, post, or unit of a parent organization, such as the American Legion, Veterans of Foreign Wars, or Fraternal Order of Eagles.

201.02B(3) A subordinate organization applying for an initial license must provide the Department with a copy of the group exemption letter issued to the parent organization or indicate the Group Exemption Number (GEN).

201.03 Limitations on licenses between related organizations. Each nonprofit organization, volunteer fire company, or volunteer first-aid, rescue, ambulance, or emergency squad wishing to conduct bingo must obtain its own license. Related organizations may not use a license obtained by one organization to conduct bingo on behalf of one or more related organizations. For example, the auxiliary of a Veterans of Foreign Wars post must obtain its own license and cannot use the bingo license of the post. Related organizations, each conducting separate bingo occasions, must obtain separate licenses.

201.03A For purposes of this regulation, related organization means:

201.03A(1) An organization affiliated with, and organized in accordance with, the bylaws and regulations formulated by a companion or parent organization; and

201.03A(2) At least seventy-five percent of the members of one organization are either members of the parent or companion organization, spouses of members of the parent or companion organization, or are the parents, children, brothers, sisters, grandparents, or grandchildren of a member of the parent or companion organization.

201.03B Related or unrelated organizations may conduct a co-sponsored bingo game, provided each organization applies for and obtains its own bingo license from the Department.

201.04 In addition to the requirements contained in Regulations 35-201.01 and 35-201.02, to be eligible for a bingo license an organization, volunteer fire company, or volunteer first-aid, rescue, ambulance, or emergency squad must have been in existence in this state for at least five years immediately preceding its application for a license and have had an active and bona fide membership engaged in furthering a lawful purpose during that period.

201.04A To verify the applicant organization's five-year existence, the Department may require the applicant organization to provide additional documentation which includes, but is not limited to, any of the following:

201.04A(1) Dated bylaws of the applicant organization;

201.04A(2) Dated Articles of Incorporation of the applicant organization;

201.04A(3) Dated minutes of the applicant organization's meetings;

201.04A(4) Dated charter of the applicant organization; or

201.04A(5) Other dated documents of the applicant organization which would provide evidence of the organization's existence and the purposes for which it was organized.

201.04B An organization defined in section 21-608 of the Nebraska Revised Statutes, as amended, which is chartered in Nebraska under a state, grand, supreme, national, or other governing body may use the charter date of its parent organization to satisfy the five-year existence requirement.

201.05 The Department may also require an applicant organization to produce evidence of charitable or community betterment activities conducted by the organization's membership during the five-year period preceding its application for a license. Such evidence may include, but is not limited to:

201.05A Filings with any governmental agencies regarding charitable activities of the applicant organization;

201.05B Internal documents, including membership lists, dues statements, minutes of meetings of directors of the applicant organization, copies of corporate resolutions of the applicant organization, and/or correspondence and memoranda relating to nonprofit, charitable activities conducted by the applicant organization or its membership;

201.05C Documents regarding day-to-day activities of the applicant organization such as bank statements of organization bank accounts, bills, statements, receipts, leases, documents affecting title to property, ledgers, account books, tax returns, employee lists, and/or any other documents pertaining to the applicant organization's administrative activities;

201.05D The names, addresses, and phone numbers of individuals, firms, and organizations with whom the applicant organization has dealt in conducting its activities; or

201.05E Other documentation showing participation by the applicant organization and its membership in charitable or community betterment activities.

201.06 Notwithstanding the requirements of this regulation, a senior citizens group which has been in existence in Nebraska for at least five years and whose membership consists entirely of individuals who are at least sixty years of age may apply for a bingo license when bingo is played only by members of the senior citizens group. If a bingo game sponsored by a senior citizens group is open to the general public, all license eligibility criteria apply to its application for license.

(Sections 9-212, and 9-215, R.R.S. 1997. Sections 9-225.02, 9-226, and 9-231, R.S.Supp., 2002. November 12, 2002.)

REG-35-202 LICENSE REQUIREMENTS: CLASS I AND CLASS II BINGO

202.01 Except for special event bingo as provided in Regulation 35-222, a bingo license is required whenever a charge is made to participate or any bingo prize to be awarded exceeds $25 in value. A bingo license must be applied for on a form prescribed by the Department. An organization seeking a bingo license may apply for either a Class I or Class II license. The class of license which an organization is granted is determined by the following:

202.01A A licensed organization with bingo gross receipts of less than $100,000 for the annual reporting period July 1 through June 30 will be issued a Class I license.

202.01B A licensed organization with bingo gross receipts of $100,000 or more for the annual reporting period July 1 through June 30 will be issued a Class II license.

202.01C When a bingo occasion is conducted on a joint basis by two or more licensed organizations, the class of license required is determined based upon the combined gross receipts of all licensed organizations involved in the conduct of the bingo occasion.

202.01D The base period for determining bingo gross receipts for license classification purposes is the annual reporting period July 1 to June 30. For license renewal purposes, the Department will use the licensed organization's gross receipts from the most recently completed annual reporting period in determining the appropriate class of license to be issued. If the organization was not licensed for the entire reporting period, the Department will annualize the reported gross receipts to determine the appropriate class of license.

202.01D(1) For an organization not previously licensed, the following factors will be used to determine the class of license to be issued:

202.01D(1)(a) The size of the premises to be used for the conduct of bingo;

202.01D(1)(b) The prices the organization intends to charge for admissions and bingo cards, and the prizes the organization intends to award; and

202.01D(1)(c) The number of players the organization expects to attract.

202.01E If, during the course of the licensing period, an organization conducting bingo under a Class I license determines that its gross receipts for the first annual reporting period after issuance of the license will equal or exceed $100,000 , it shall apply for an upgrade to a Class II license. The application shall be accompanied by the difference in license fees between a Class I and Class II license and a completed Nebraska Application for Gaming Manager License, Form 50C, and the statutorily required license fee.

202.01E(1) Upon issuance of the Class II license, the organization must discontinue the use of any reusable hard bingo card or shutter card and shall adhere to all regulations and requirements for a Class II bingo licensee.

202.01E(2) Within seven days after the issuance of the Class II license, the organization shall return the original Class I license issued by the Department and conduct a physical inventory of any disposable paper bingo cards on hand immediately prior to the first bingo game conducted under the Class II license. The inventory shall be reported to the Department with the licensed organization's first quarterly report immediately following the upgrade of the license.

202.01F A Class II license may be downgraded to a Class I license only if a Class II bingo licensee's gross receipts fall below $100,000 for the annual reporting period July 1 to June 30, and the license may only be downgraded (a) for the second 12-month period of a biennial licensing period, or (b) upon the renewal of a biennial license.

202.02 An application for a bingo license shall contain the following information:

202.02A The name and location address of the applicant organization and a mailing address if different from the location address;

202.02B The county in which the applicant organization's principal office is located;

202.02C Any state or federal identification numbers held by the applicant organization;

202.02D The class of bingo license applied for and the statutorily required license fee;

202.02E The type of organization, the subsection of section 501(c) of the Internal Revenue Code (IRC) under which the organization is tax exempt, number of members, and affiliation, if any, with a state or national organization;

202.02F The name and complete address of the financial institution where the applicant organization will have its bingo checking account and the account number;

202.02G The names, social security numbers, dates of birth, and titles of the principal officers of the applicant organization;

202.02H The complete address, including the county, of the premises where bingo is to be conducted, and an indication of whether the premises and bingo equipment to be used are owned or rented by the applicant organization;

202.02I If applicable, the name of the lessor of the premises where bingo will be conducted and the lessor of any bingo equipment and the amount of rent to be paid;

202.02J The frequency that bingo will be conducted, including the calendar days of the week and the beginning and ending times for the bingo occasions;

202.02K A statement indicating whether another licensed organization will be co- sponsoring the bingo occasion and, if applicable, the name and state identification number of the co-sponsoring organization;

202.02L The name, complete address, social security number, date of birth, and years of membership of one member as defined in Regulation 35-200.15, of the applicant organization who will serve as the bingo chairperson and, at the applicant organization's option, the names, complete addresses, social security numbers, dates of birth, and years of membership of up to three members, as defined in Regulation 35-200.15, of the applicant organization who will serve as alternate bingo chairpersons; and

202.02M If the applicant organization is applying for a Class II license for the first time, the proposed price structure for the sale or use of bingo cards and bingo card monitoring devices.

202.03 In addition to the license application required by Regulation 35-202.02, each applicant organization is required to apply for and obtain a license for at least one of its members, as defined in Regulation 35-200.15, to serve as the organization's utilization of funds member (see Regulation 35-204). A Class II bingo licensee must also apply for and obtain a license for at least one individual to serve as a gaming manager (see Regulation 35-206).

202.04 It is the responsibility of the bingo chairperson and a utilization of funds member of the licensed organization to keep the organization's license application information current. The Department must be informed within 30 days of any changes in the information supplied by the licensed organization in its most recent filing with the Department.

202.04A The licensed organization's bingo chairperson or gaming manager must submit a 30 day advance notification to the Department, in writing, and must receive approval from the Department prior to:

202.04A(1) Changing the location of its bingo premises; or 202.04A(2) Changing the days or times it conducts bingo.

202.04B All other application changes must be reported in writing and the Department may require the filing of a new application or schedule. All changes to a licensed organization's application information submitted by a bingo chairperson or gaming manager, other than changes to the days or times of the bingo occasions or a change of the premises at which bingo is conducted, must be confirmed by the signature of an officer of the licensed organization or a utilization of funds member.

202.04C Any individual signing the most current application obligates the licensed organization to comply with the Nebraska Bingo Act and Regulations for that licensing period.

202.05 In addition to all other information requested by the Department, each applicant for a bingo license and each subsequent renewal may, at the discretion of the Department, be required to provide:

202.05A A copy of the applicant organization's articles of incorporation or bylaws or, if not a corporation, a copy of any bylaws or other documents which set forth the organization's structure and purpose;

202.05B Additional evidence of a parent-subordinate relationship if the applicant organization is utilizing the charter date of its parent organization to satisfy the five-year existence requirement; or

202.05C A current roster of all active members.

202.06 All Class I and Class II bingo licenses expire and may be renewed on a biennial basis, according to the following schedule:

202.06A A license to conduct bingo issued to a nonprofit organization holding a certificate of exemption under section 501(c)(3) or (c)(4) of the IRC and any license issued to a utilization of funds member or gaming manager for the nonprofit organization expires on September 30 of each odd-numbered year.

202.06B A license to conduct bingo issued to a nonprofit organization holding a certificate of exemption under section 501(c)(5), (c)(7), (c)(8), (c)(10) or (c)(19) of the IRC, or to any volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad and any license issued to a utilization of funds member or gaming manager for the organizations expires on September 30 of each even-numbered year.

202.07 Applications for license renewal are due 45 days prior to the expiration date of the license, or as otherwise provided in regulation, unless the application pertains only to a limited period bingo occasion. Licenses are not transferable. An organization, utilization of funds member, or gaming manager is not considered licensed and shall not conduct any activity for which a license is required until the organization or individual has physical possession of the printed license issued by the Department.

202.08 The licensed organization shall post conspicuously, at the place where bingo is being conducted, the organization's bingo license and, if applicable, the gaming manager's license. The organization's utilization of funds member license is not required to be posted.

202.08A A licensed organization which has obtained authorization from the Department to conduct a limited period bingo occasion or a restricted limited period bingo occasion as defined in Regulation 35-213 shall post conspicuously, at the premises where bingo is conducted, the Limited Period Bingo Authorization, Form 52.

202.08B The licensed organization must post its current licenses and authorizations issued by the Department. A copy of the license or authorization may not be substituted for the original.

202.08B(1) A licensed organization, utilization of funds member, or gaming manager whose license has been lost, stolen, or destroyed must notify the Department as soon as possible. A duplicate license will be issued for no additional fee.

202.09 Any licensed organization, utilization of funds member, or gaming manager who no longer desires to be licensed and any individual who no longer desires to be designated as the licensed organization's bingo chairperson or alternate bingo chairperson, shall notify the Department in writing of his or her intention to cancel the licenses or designation. The notification shall be signed by:

202.09A An officer of the organization in the case of a licensed organization;

202.09B An officer of the licensed organization and the individual holding the license in the case of a utilization of funds member or gaming manager; or

202.09C An officer of the licensed organization and the individual designated as bingo chairperson or alternate bingo chairperson in the case of a bingo chairperson or alternate bingo chairperson.

202.09D All notifications of license cancellation must be accompanied by the original licenses issued by the Department.

202.10 If a license is suspended, canceled, or revoked, the licensee shall surrender physical possession of the license to the Department immediately upon receipt of the order of suspension, cancellation, or revocation from the Department.

202.10A In the case of suspension, the Department shall return the licenses to the licensee at the end of the suspension period.

202.10B In the case of cancellation, the former licensee may reapply for a license when the period of cancellation has expired.

202.10C In the case of revocation, the former licensee may not reapply for any license at any time in the future under the Nebraska Bingo Act unless otherwise authorized by the Department.

202.10D When a licensee has successfully appealed an order of suspension, revocation, or cancellation, the Department shall return physical possession of the license which has been suspended, revoked, or canceled.

(Sections 9-202, 9-204.02, 9-205, 9-207, 9-209.01, 9-212, 9-213 9-214, 9-215, 9-216, 9-220, 9-224, 9-225, 9-225.01, 9-225.02, 9-226, 9-230, 9-232.01, 9-232.02, 9-233, 9-237, 9-241.10, and 9-255.05, R.R.S. 2007. November 6, 2010.)

REG-35-203 LAWFUL PURPOSE

203.01 A licensed or previously licensed organization shall spend its bingo profits solely for lawful purposes.

203.01A For purposes of this regulation, bingo profits means the gross receipts collected from one or more bingo games, less reasonable sums necessarily and actually expended for prizes, taxes, license fees, bingo equipment, the cost of renting or leasing a premises for the conduct of bingo, and other allowable expenses.

203.02 Bingo profits may be used internally by a licensed or previously licensed organization or donated outside of the organization, subject to the following:

203.02A Internal use of bingo profits. Lawful purpose uses of bingo profits internally by a licensed or previously licensed organization include:

203.02A(1) Charitable, benevolent, humane, religious, philanthropic, youth sports, educational, civic, or fraternal activities conducted by the licensed or previously licensed organization for the benefit of its members, such as:

203.02A(1)(a) Religious activities including, but not limited to, creating, operating, or maintaining a church, church school, and their programs and facilities;

203.02A(1)(b) Educational activities including, but not limited to, paying the operating expenses of a school or establishing or continuing scholarship funds;

203.02A(1)(c) Charitable or humane activities including, but not limited to, purchasing food for the needy or to help provide medical care for individuals in need;

203.02A(1)(d) Youth sports activities including, but not limited to, the support or maintenance of team or individual activities which consist of an element of enjoyment or recreation, involving the practice of individual skill, and in which all of the participants are under 19 years of age. Such donations may include the construction, acquisition, improvement, or maintenance of facilities used in conjunction with youth sports activities; and

203.02A(1)(e) Civic or fraternal activities including, but not limited to, those activities which confer a benefit on the membership as a whole, such as paying the reasonable and necessary expenses for officers to travel to regional or national conventions where organization business is discussed; funding ceremonies commemorating religious or patriotic holidays; paying for the construction, acquisition, improvement, or maintenance of the licensed or previously licensed organization’s facilities; or paying the general operating expenses of the licensed or previously licensed organization such as non-bingo related payroll expenses, taxes, insurance, or utilities.

203.02A(2) A licensed or previously licensed organization may not use bingo profits for purely social or recreational purposes such as stocking a bar with alcoholic beverages, defraying the cost of a dinner or dance, or paying the expenses for a New Year's Eve party.

203.02B Outside donations of bingo profits. Donating bingo profits outside of the licensed or previously licensed organization is considered a lawful purpose usage of the bingo profits provided the donation is made to an eligible recipient. Only the following entities are eligible to receive an outside donation:

203.02B(1) The State of Nebraska or any political subdivision of the state, if the funds are used exclusively for public purposes such as the funding of parks or the creation or maintenance of public facilities or projects;

203.02B(2) A corporation, trust, community chest, fund, or foundation:

203.02B(2)(a) Created or organized under the laws of Nebraska, which has been in existence for five consecutive years immediately preceding the date of the donation, and which has its principal office located in Nebraska. A licensed or previously licensed organization shall not donate its bingo profits to foreign corporations, trusts, community chests, funds, or foundations, but may donate to a local chapter of such organizations provided that the local chapter has been created or organized under the laws of Nebraska, has been in existence for five years, and has its principal office located in this state;

203.02B(2)(b) Organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, for the prevention of cruelty to children or animals, or to foster national or international amateur sports competition;

203.02B(2)(c) Organized and operated so that no part of the net earnings of which inures to the benefit of any private shareholder or individual; 203.02B(2)(d) Which is not disqualified for tax exemption under section 501(c)(3) of the IRC by reason of attempting to influence legislation; and 203.02B(2)(e) Which does not participate in any political campaign on behalf of any candidate for political office.

203.02B(3) A post or organization of war veterans or an auxiliary unit or society of, trust for, or foundation for any such post or organization:

203.02B(3)(a) Organized in the United States or in any territory or possession of the United States; and

203.02B(3)(b) Organized and operated so that no part of the net earnings of which inures to the benefit of any private shareholder or individual; or

203.02B(4) A volunteer fire department or volunteer first-aid, rescue, or emergency squad or volunteer fire company serving any city, village, county, township, or rural or suburban fire protection district.

203.03 No part of the bingo profits may:

203.03A Benefit any individual member or shareholder of the licensed or previously licensed organization making the donation, except to the extent it is in furtherance of the purposes described in this regulation. A licensed or previously licensed organization may make a direct donation to an individual member of its organization if that organization's activities include (a) making charitable donations to fire, catastrophic illness, or disaster victims, and the individual member is a victim thereof, or (b) making charitable donations to other charitable, benevolent, humane, religious, philanthropic, youth sports, educational, civic, or fraternal activity and the individual member is a beneficiary thereof or a participant in the activity; or

203.03B Be used for any activity which attempts to influence any legislation, regulation, or ordinance, or participating in or contributing to any political campaign on behalf of any elected official or individual who is or has been a candidate for public office.

203.04 In the case of scholarship funds, the licensed or previously licensed organization may either donate to its own internal scholarship fund, an outside scholarship fund, or an educational institution meeting the guidelines for recipients of outside donations under these regulations.

203.04A A donation to a scholarship fund that does benefit an individual member of the licensed or previously licensed organization or a dependent or immediate family member of the individual member, may qualify as a lawful purpose and may be made either through the organization's own scholarship fund or through a donation directly to the educational institution or scholarship fund meeting the requirements of this regulation.

203.05 Upon dissolution of a licensed organization or upon suspension, cancellation, revocation, or expiration of an organization's license, all remaining profits derived from the conduct of bingo must be utilized for a lawful purpose and may not be distributed to any private individual or shareholder. The disbursement of the remaining profits is subject to the reporting and disbursement requirements contained in Regulation 35-217.01A(1).

203.06 A licensed or previously licensed organization may commingle its revenue from the conduct of bingo with its other operating accounts only after initially depositing the bingo receipts into its bingo checking account. Bingo revenues transferred to other accounts of the licensed or previously licensed organization must be done by writing a check from the bingo checking account or by electronic funds transfer from the bingo checking account. Bingo revenues transferred to other accounts must still be used for lawful purposes.

203.06A It is the duty of the licensed utilization of funds member to keep and maintain records sufficient to prove that bingo revenues transferred from the bingo checking account have been used for lawful purposes.

203.07 All lawful purpose donations must be made by a check written from the licensed or previously licensed organization's bingo checking account, directly to the donee for the ultimate use of the donation. For example, a lawful purpose donation to an eligible recipient must go directly to the recipient for use in a manner complying with section 9-211 of the Nebraska Bingo Act and this regulation.

203.07A All checks must be signed by a licensed utilization of funds member of the licensed organization. An electronic funds transfer must be authorized by a licensed utilization of funds member of the licensed organization.

203.08 No licensed or previously licensed organization, or any representative, may donate or promise to donate any portion of its bingo profits to a recipient outside of the organization in exchange for a payment, gift, or other thing of value from the recipient to any individual, organization, or corporation, including, but not limited to, the licensed or previously licensed organization or any of its members, employees, or agents. Unlawful outside donations include, but are not limited to:

203.08A A licensed or previously licensed organization donating all or a portion of its bingo profits to a second organization in return for a donation or a transfer of all or a portion of the donation from the second organization to the original organization or any representative.

(Sections 9-202, 9-211, 9-217, 9-226, 9-255.03, and 9-255.05, R.R.S. 2007, and section 9-255.04, R.S. Supp., 2009. November 6, 2010.)

REG-35-204 UTILIZATION OF FUNDS MEMBER; LICENSING REQUIREMENTS AND DUTIES

204.01 Each licensed organization must have at least one of its members licensed as a utilization of funds member. To be eligible for a utilization of funds member license, an individual must have been an active and bona fide member of the organization for at least one year prior to applying for the license.

204.01A If a licensed organization can provide evidence that the one-year membership requirement will impose an undue hardship, the Department may waive such requirement. An officer of the licensed organization must provide a written explanation of the nature of the hardship with the utilization of funds member's license application.

204.01B An individual may act as a utilization of funds member for more than one gaming activity of a licensed organization by paying only one licensing fee per licensing period.

204.01C An individual may be licensed as a utilization of funds member for more than one licensed organization by applying for a separate license for each organization and paying a separate licensing fee for each organization.

204.01D A utilization of funds member may also be designated by a licensed organization to serve as the bingo chairperson or alternate bingo chairperson; however, a utilization of funds member may not be licensed as a gaming manager for any licensed organization or hold any other type of license issued under the Nebraska Bingo Act, the Nebraska Lottery and Raffle Act, or the Nebraska Pickle Card Lottery Act.

204.02 An individual is not considered to be licensed as a utilization of funds member and shall not conduct any activity for which such license is required until he or she has obtained physical possession of the printed license issued by the Department. The licensed organization shall apply for the license on a form supplied by the Department. The application shall contain, at a minimum, the following:

204.02A The name and state identification number of the licensed organization on whose behalf the individual is seeking the utilization of funds member license;

204.02B The name, address, social security number, and date of birth of the individual applying for the utilization of funds member license;

204.02C The date the individual became a member of the licensed organization;

204.02D The signature of the individual applying for the license;

204.02E A statement signed by an officer of the licensed organization indicating the organization's approval of the individual to act as the utilization of funds member on behalf of the organization; and

204.02F The statutorily required license fee. Such fee may be paid by the licensed organization.

204.03 The information contained in the application shall be kept current. An individual licensed as a utilization of funds member shall notify the Department within thirty (30) days of any changes to his or her most recent application filing. Changes must be reported in writing and the Department may require the filing of a new application.

204.04 A utilization of funds member license shall expire as provided in Regulation 35-202.06 and may be renewed biennially. A utilization of funds member license is not transferrable.

204.05 The licensed organization is not required to post the utilization of funds member's license at the premises where it conducts bingo.

204.06 A utilization of funds member for an organization licensed to conduct bingo shall have the following responsibilities:

204.06A Preparation of all applications, reports, and documents filed with any governmental agency by the licensed organization in connection with its bingo activities. If the utilization of funds member is assisted in the preparation of such applications, reports, and documents by any other individual or business, the utilization of funds member shall ensure that the information contained in those reports is true, accurate, and kept up to date;

204.06B Ensuring that bingo equipment and supplies purchased, rented, or leased by the licensed organization are paid for by a check written from the licensed organization's bingo checking account;

204.06C In the case of a Class II bingo licensee, approving individuals to act as gaming managers for the licensed organization;

204.06D With the exception of prizes, ensuring that the licensed organization pays all expenses incurred in the conduct of bingo and its bingo taxes on a timely basis, with a check drawn on the licensed organization's bingo checking account;

204.06E Ensuring that his or her signature is on each check written from the licensed organization's bingo checking account. If an electronic funds transfer is utilized in lieu of a check, such transfers must be authorized by a utilization of funds member;

204.06E(1) A licensed organization may require that checks written by the utilization of funds member be co-signed by one or more parties.

204.06F Ensuring that complete and accurate records of all gaming activities conducted at each bingo occasion are kept to include the date of the bingo occasion, whether it is a regular, limited period, or restricted limited period bingo occasion, the gross receipts, the bingo prizes paid, the fair market value of promotional prizes awarded, the number of players at the occasion, expenses incurred by the licensed organization relating to the bingo occasion, the taxes due and paid and, if the licensed organization will be using pickle card proceeds to pay bingo-related expenses, the gross proceeds from the sale of pickle cards at the bingo occasion;

204.06G Depositing or ensuring that the bingo chairperson or gaming manager deposits all revenues derived from the conduct of all gaming activities conducted at each bingo occasion into the proper bank account of the licensed organization, and ensuring that the revenues derived from bingo are segregated from other income of the licensed organization;

204.06H If bingo revenues are transferred to the licensed organization's general fund account or any other account of the licensed organization, ensuring that the transfer is done only by a check written from the bingo checking account or by an electronic funds transfer from such account, and that bingo revenues transferred in such manner are used only for a lawful purpose as defined in Regulation 35-203;

204.06I Ensuring that the bingo gross receipts of the licensed organization are spent only for lawful purposes as defined in Regulation 35-203, the awarding of prizes, bingo taxes, and bingo expenses as identified in Regulation 35- 214, and ensuring that all lawful purpose donations and all expenses with the exception of prizes are paid only by a check written from the licensed organization's bingo checking account;

204.06I(1) It shall be the duty of the licensed utilization of funds member to keep and maintain records sufficient to prove that bingo revenues transferred from the bingo checking account have been used only for allowable expenses and lawful purposes.

204.06J Ensuring that, upon proper request, all records and documents relating to the licensed organization's bingo activities are made available to the Department or its representatives; and

204.06K If the licensed organization is also licensed to conduct a lottery by the sale of pickle cards, purchasing pickle card units on behalf of the licensed organization to be sold at its bingo occasions.

204.07 An individual licensed as a utilization of funds member shall not have a substantial interest, as defined in Regulation 35-200.20, in any individual or business licensed as a manufacturer, distributor, or commercial lessor.

(Sections 9-202, 9-204.02, 9-207.01, 9-209, 9-209.01, 9-215, 9-225.01, 9-239, 9-240, 9-241.10, 9-255.03, 9-255.07, 9-255.09, and 9-342, R.R.S. 1997. Sections 9-214.01, 9-226, 9-232.01, 9-232.02, 9-233, 9-255.02, 9-255.04, 9-255.05, 9-255.06, and 9-331 R.S.Supp., 2002. November 12, 2002.)

REG-35-205 BINGO CHAIRPERSON AND ALTERNATE BINGO CHAIRPERSON; RESPONSIBILITIES AND DUTIES

205.01 Each licensed organization must designate one bona fide and active member of the organization to be its bingo chairperson. The licensed organization may also designate up to three additional members, as defined in Regulation 35-200.15, to serve as alternate bingo chairpersons.

205.01A A bingo chairperson or alternate bingo chairperson may also be licensed as the organization's utilization of funds member; however, a bingo chairperson or alternate bingo chairperson may not be licensed as a gaming manager for any licensed organization.

205.01B A Class I bingo licensee must have at least one bingo chairperson or alternate bingo chairperson present for the duration of each bingo occasion, including limited period bingo occasions, which the licensed organization conducts.

205.01C The presence of a bingo chairperson or alternate bingo chairperson at a Class II bingo occasion is optional. A Class II bingo licensee is required to have a gaming manager present for the duration of each bingo occasion. A Class II bingo licensee's bingo chairperson or alternate bingo chairperson may substitute for its gaming manager only in an emergency situation.

205.01D In the case of a co-sponsored bingo occasion, each co-sponsoring licensed organization must have at least one bingo chairperson, alternate bingo chairperson, or gaming manager present for the duration of each bingo occasion.

205.02 The bingo chairperson or, in his or her absence, the alternate bingo chairperson, has the following responsibilities and duties:

205.02A Acting as the Department's primary contact for the licensed organization’s bingo activities;

205.02B Ensuring, in cooperation with the licensed organization's utilization of funds member, that the organization's bingo license application information filed with the Department is kept current;

205.02C Requesting, in cooperation with the licensed organization's gaming manager (when applicable), Departmental approval for changes to the days, times, or premises where the licensed organization conducts bingo, notifying the Department as required in Regulation 35-209.05 of any changes or additions to the licensed organization's bingo card pricing structure, and requesting approval for the rescheduling of a bingo occasion which was canceled due to an act of God;

205.02D Supervising and directing individuals working at the licensed organization's bingo occasions;

205.02E Ensuring that no one under 18 years of age participates in bingo or a lottery by the sale of pickle cards conducted at the bingo occasion and , except in the case of a limited period bingo occasion, ensuring that no alcoholic beverages are served in the area of the premises in which bingo is conducted;

205.02E(1) Ensuring, in the case of a restricted limited period bingo occasion where individuals under 18 years of age are permitted to play bingo, that such individuals do not sell, purchase, or play pickle cards, and that no alcoholic beverages are served;

205.02F Ensuring that all gaming activities conducted at the licensed organization's bingo occasion are conducted in accordance with the Nebraska Bingo Act, Nebraska Pickle Card Lottery Act, Nebraska Lottery and Raffle Act, or Nebraska Small Lottery and Raffle Act, and any rules and regulations promulgated pursuant to those Acts;

205.02G Resolving any gaming related disputes which may occur at the bingo occasion; 205.02H Ensuring that the licensed organization awards at least 50 percent of its bingo gross receipts in prizes on a quarterly basis;

205.02I Ensuring that no prize awarded exceeds $1,000 in value for any single regular or limited period bingo game or $25 in value for any single restricted limited period bingo game;

205.02J Ensuring that the total value of prizes awarded for bingo at the occasion does not exceed $4,000;

205.02K Ensuring that the total fair market value of promotional prizes awarded does not exceed $100 for a regular bingo occasion or $250 for a limited period bingo occasion;

205.02L Ensuring that complete and accurate records of all gaming activities conducted at the bingo occasion are kept, including the date of each bingo occasion, whether it is a regular, limited period, or restricted limited period bingo occasion, the gross receipts, the bingo prizes paid, the fair market value of promotional prizes awarded, the number of players at each occasion, and, if the licensed organization will be using pickle card proceeds to pay bingo related expenses, the gross pickle card sales at each bingo occasion;

205.02M Ensuring that prizes awarded in cash of $500 or more are properly receipted; 205.02N Ensuring that all revenues received from the conduct of gaming activities at the bingo occasion are turned over to the licensed organization's utilization of funds member or deposited directly into the appropriate bank account of the licensed organization;

205.02O Ensuring that the licensed organization conspicuously posts, at each bingo occasion, its bingo license, the percentage of its bingo gross receipts paid out in prizes for the last preceding quarter, and, when applicable, its gaming manager’s license and limited period bingo authorizations; and

205.02P Ordering pickle card units from a licensed distributor on behalf of the licensed organization to be sold at its bingo occasions if the licensed organization is also licensed to conduct a lottery by the sale of pickle cards.

205.03 If a Class II bingo licensee requires both the presence of a gaming manager and a bingo chairperson, the gaming manager is the ultimate authority on gaming related issues at the bingo occasion; however, the bingo chairperson may assist the gaming manager and act as the licensed organization's representative at the bingo game when the gaming manager is not a member of the licensed organization.

205.04 An individual designated as a bingo chairperson or alternate bingo chairperson may not have a substantial interest, as defined in Regulation 35-200.20, in any individual or business licensed as a manufacturer, distributor, or commercial lessor.

(Sections 9-202, 9-204.02, 9-207.01, 9-209, 9-209.01, 9-214.01, 9-225.01, 9-226, 9-232.01, 9-232.02, 9-232.03, 9-241.06, 9-241.08, 9-241.09, 9-241.10, 9-255.02, 9-255.03, 9-255.06, 9-255.07, 9-255.09, 9-331, and 9-342, R.R.S. 2007. November 6, 2010.)

REG-35-206 GAMING MANAGER; LICENSING REQUIREMENTS AND DUTIES

206.01 A Class II bingo licensee must license at least one individual to serve as its gaming manager. This individual is not required to be a member of the licensed organization. The licensed gaming manager shall be the individual responsible for the conduct of all gaming activities at each bingo occasion of the licensed organization.

206.01A An individual may be licensed as a gaming manager for more than one licensed organization, but must obtain a separate gaming manager's license for each organization. A separate license application and license fee is required for the individual, from each organization for which he or she is seeking a gaming manager's license.

206.01B A gaming manager cannot be designated as a bingo chairperson or alternate bingo chairperson for any licensed organization, or hold any other type of license issued pursuant to the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, or the Nebraska Lottery and Raffle Act.

206.02 An individual is not considered to be licensed as a gaming manager and may not conduct any activity for which a license is required until he or she has physical possession of the gaming manager's license issued by the Department. An individual seeking a gaming manager's license must apply for a license on a form supplied by the Department. The application must contain the following information:

206.02A The name and state identification number of the licensed organization;

206.02B The name, address, social security number, date of birth, and signature of the individual applying for the gaming manager's license;

206.02C A statement signed by the licensed organization's utilization of funds member stating its approval of the gaming manager to operate and manage the bingo game on behalf of the organization; and

206.02D The statutorily required license fee. The fee may be paid by the licensed organization.

206.03 The information contained in the application shall be kept current. The gaming manager must notify the Department within 30 days of any changes to the application information. Changes must be reported in writing and the Department may require the filing of a new application.

206.03A The gaming manager's license must be conspicuously posted with the organization's bingo license at the premises where bingo is conducted.

206.04 A gaming manager's license expires as provided in Regulation 35-202.06 and may be renewed biennially. A gaming manager's license is not transferrable.

206.05 An individual applying for a license as a gaming manager must be fingerprinted for criminal background investigation purposes. Two sets of fingerprints on cards supplied by the Department must be submitted to the Nebraska State Patrol, Criminal Investigation Division, along with the required fees.

206.05A If an individual applying for a gaming manager's license has been issued a license by the Nebraska Liquor Control Commission, the Department may, at its discretion, waive the fingerprinting requirement.

206.05B An individual renewing his or her gaming manager's license shall not be required to submit additional fingerprint cards or pay additional fingerprinting fees unless specifically requested to do so by the Department.

206.06 A Class II bingo licensee must have at least one of its gaming managers present for the duration of each bingo occasion or limited period bingo occasion which the licensed organization conducts, except that the organization's bingo chairperson or alternate bingo chairperson may substitute for the gaming manager in an emergency situation.

206.07 The gaming manager is the ultimate authority on gaming related issues on the premises of the bingo occasion. If the licensed organization requires both the presence of a gaming manager and a bingo chairperson, the bingo chairperson or, in his or her absence, the alternate bingo chairperson, may assist the gaming manager and act as the organization's representative at the bingo occasion when the gaming manager is not a member of the organization. The gaming manager has the following responsibilities and duties:

206.07A Supervising and directing all bingo workers and other individuals assisting in the conduct of gaming activities at the bingo occasion;

206.07B Ensuring that no one under 18 years of age participates in bingo or a lottery by the sale of pickle cards and , except in the case of a limited period bingo occasion, that no alcoholic beverages are served in the area of the premises in which bingo is conducted;

206.07B(1) Ensuring, in the case of a restricted limited period bingo occasion where individuals under 18 years of age are permitted to play bingo, that such individuals do not sell, purchase, or play pickle cards, and that no alcoholic beverages are served;

206.07C Resolving any gaming related disputes which may occur during the bingo occasion;

206.07D Ensuring that the licensed organization awards at least 50 percent of its bingo gross receipts in prizes on a quarterly basis;

206.07E Ensuring that no prize awarded exceeds $1,000 in value for any single regular or limited period bingo game, or $25 in value for any single restricted limited period bingo game;

206.07F Ensuring that the total value of prizes awarded for bingo at the occasion does not exceed $4,000;

206.07G Ensuring that the total fair market value of promotional prizes awarded does not exceed $100 for a regular bingo occasion or $250 for a limited period bingo occasion;

206.07H Ensuring that prizes awarded in cash of $500 or more are properly receipted; 206.07I Ensuring that all bingo card sales are properly receipted;

206.07J Ensuring that all revenues received from the conduct of gaming activities at the bingo occasion are turned over to the licensed organization's utilization of funds member or deposited directly into the appropriate bank account of the organization; 206.07K Ensuring that complete and accurate records of all gaming activities conducted at the bingo occasion are kept, including the date of each bingo occasion, whether it is a regular, limited period, or restricted limited period bingo occasion, the gross receipts, the bingo prizes paid, the value of promotional prizes awarded, the number of players at each occasion, and, if the licensed organization will be using pickle card proceeds to pay bingo related expenses, the gross proceeds from the sale of pickle cards at each bingo occasion;

206.07L Ensuring that all gaming activities at the bingo occasion are conducted in accordance with the Nebraska Bingo Act, Nebraska Pickle Card Lottery Act, Nebraska Lottery and Raffle Act, and Nebraska Small Lottery and Raffle Act, and any rules and regulations promulgated pursuant to those Acts;

206.07M Requesting, in cooperation with the licensed organization's bingo chairperson, Department approval for changes to the days, times, or premises where the organization conducts bingo, notifying the Department as required in Regulation 35-209.05 of any changes or additions to the organization's bingo card pricing structure, and requesting approval for the rescheduling of a bingo occasion which was canceled due to an act of God;

206.07N Ensuring that the licensed organization conspicuously posts, at each bingo occasion, its bingo license, the percentage of its bingo gross receipts paid out in prizes for the last preceding quarter, and, when applicable, its gaming manager license(s) and limited period bingo authorization(s); and

206.07O Ordering, if the licensed organization is also licensed to conduct a lottery by the sale of pickle cards, pickle card units from a licensed distributor on behalf of the organization to be sold at its bingo occasions.

206.08 An individual licensed as a gaming manager may not have a substantial interest, as defined in Regulation 35-200.20, in any individual or business licensed as a distributor, commercial lessor, or manufacturer.

(Sections 9-202, 9-204.02, 9-207.01, 9-209, 9-209.01, 214.01, 9-215, 9-226, 9-232.01, 9-232.02, 9-233, 9-241.06, 9-241.08, 9-241.09, 9-241.10, 9-255.02, 9-255.03, 9-255.04, 9-255.05, 9-255.06, 9-255.07, 9-255.09, 9-331, and 9-342, R.R.S. 2007. November 6, 2010.)

REG-35-207 BINGO AND CONCESSION WORKERS; REQUIREMENTS, RESTRICTIONS, AND COMPENSATION

207.01 Bingo workers, other than the bingo chairperson and alternate bingo chairpersons, are not required to be members of the licensed organization conducting the bingo occasion; however, all bingo workers, whether working at a regular, limited period, or restricted limited period bingo occasion, must be at least 18 years of age.

207.01A For purposes of this regulation, bingo worker shall mean and include:

207.01A(1) The bingo chairperson, alternate bingo chairperson(s), and gaming manager(s);

207.01A(2) An individual typically referred to as the caller, who operates the bingo ball selection device and announces to the bingo players the number and letter of the balls selected;

207.01A(3) An individual typically referred to as the cashier, who sells and distributes bingo cards to the bingo players;

207.01A(4) An individual typically referred to as a floor worker who:

207.01A(4)(a) Monitors bingo players during the course of a bingo occasion by walking the floor;

207.01A(4)(b) Sells special bingo cards on the floor to the players;

207.01A(4)(c) Verifies the numbers and winning pattern(s) on bingo cards; and

207.01A(4)(d) Pays bingo winners the appropriate prize; and

207.01A(5) An individual typically referred to as a pickle card seller, who sells or redeems individual pickle cards, or reconciles the inventory of pickle cards at a bingo occasion.

207.02 Only the licensed organization may compensate bingo workers for performing their bingo related duties. Such compensation shall be at an hourly or occasion rate determined by the licensed organization. Compensation of bingo workers must be included within the licensed organization's 14 percent limitation for bingo expenses.

207.02A If a bingo worker is compensated, the compensation must be paid by a check drawn on the licensed organization's bingo checking account, made payable directly to the worker. No bingo worker shall be paid in cash.

207.02B Notwithstanding the restrictions otherwise contained in this regulation, a licensed organization may compensate bingo workers with food and beverages. For example, a licensed organization may allow the bingo workers free concession items at its bingo occasion or the organization may have an annual dinner for the bingo workers. However, the cost of such food and beverage compensation must be paid for by a check drawn on the licensed organization's bingo checking account. The value of such compensation must be included within the licensed organization's 14 percent limitation for bingo expenses.

207.03 A bingo worker shall not play bingo at any bingo occasion where he or she performs any bingo related duty AFTER the first bingo number of the occasion has been called, EXCEPT when:

207.03A The worker is strictly a pickle card seller at the bingo occasion and has absolutely no bingo related duties after the first bingo number of the occasion has been called. Such worker may be permitted to play bingo at a bingo occasion at which he or she is on duty.

207.03B The worker is a bingo chairperson or alternate bingo chairperson. A bingo chairperson or alternate bingo chairperson shall not be permitted to play bingo at a bingo occasion when he or she has performed duties as a bingo chairperson or alternate bingo chairperson. A bingo chairperson or alternate bingo chairperson may be permitted to play bingo at a bingo occasion when he or she has not performed bingo related duties.

207.03C The worker is a gaming manager. A gaming manager shall not be permitted to play bingo at any time, regardless of whether he or she is off duty, at a bingo occasion of an organization for which he or she is licensed as a gaming manager.

207.04 A bingo worker may monitor the bingo cards of a player who is unable to do so for a short time, in an emergency situation, when the player will return promptly to resume play. If a bingo worker monitors the cards of a player, the bingo worker shall not be entitled to share in any prize awarded to that player.

207.05 An individual who merely sets up or takes down tables and chairs or performs only janitorial duties at a bingo occasion may be permitted to play bingo at a bingo occasion at which he or she has performed such duties.

207.05A If an individual is compensated by the licensed organization for performing janitorial duties at a bingo occasion, such compensation must be included within the licensed organization's 14 percent limitation for bingo expenses, and must be paid by a check written from the licensed organization's bingo checking account.

207.05B An individual may be less than 18 years of age and perform the janitorial duties described by this section; however, with respect to participating in gaming activities at the bingo occasion, any such individual shall be subject to all of the age participation restrictions set forth in the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, and the Nebraska Lottery and Raffle Act.

207.06 A concession worker at a bingo occasion may be permitted to play bingo at a bingo occasion at which he or she performs concession related duties.

207.06A If an individual is compensated for performing concession duties at a bingo occasion, such individual shall not be paid by using revenues derived from the licensed organization's bingo or pickle card activities.

207.06B An individual may be less than 18 years of age and perform concession duties as described by this section; however, with respect to participating in gaming activities at the bingo occasion, any such individual shall be subject to all of the age participation restrictions set forth in the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, and the Nebraska Lottery and Raffle Act.

207.07 Any licensed organization may establish a house rule to further prohibit the playing of bingo by any of its bingo workers, concession workers, other employees, volunteers, officers, or governing officials. Such rule shall be in writing and must be conspicuously posted at the bingo occasion along with any other house rules adopted by the licensed organization. A licensed organization shall not permit by house rule the playing of bingo by anyone prohibited to do so by this regulation.

(Sections 9-202, 9-204.02, 9-209.01, 9-214, 9-215, 9-226, 9-232.01, 9-241.06, 9-241.08, 9-241.10, 9-255.03, and 9-255.04, R.R.S. 1997. March 10, 2002.)

REG-35-208 BINGO PREMISES

208.01 Regardless of the number of licensed organizations authorized to hold bingo occasions within a single structure, building, or aboard a railroad coach car of a dinner or excursion train, not more than two regular bingo occasions per calendar week may be held within the same structure or building or aboard the same dinner or excursion train. For purposes of this regulation, calendar week shall mean 12:01 a.m. Sunday to 12:00 midnight Saturday.

208.01A No more than four limited period bingo occasions with an aggregate of no more than 12 days per 12-month period and no more than two special event bingo occasions with an aggregate of no more than fourteen days per calendar year may be held within a single premises.

208.01B Limited period bingo occasions and special event bingo occasions shall not count against the number of regular bingo occasions allowed within a premises per calendar week.

208.01C Nothing in this regulation shall prohibit the Department from authorizing the use of a premises for the conduct of bingo more than two times per calendar week in the event that a licensed organization has requested and been granted permission to reschedule a bingo occasion canceled due to an act of God.

208.02 The two regular bingo occasions permitted per calendar week in a single premises may be conducted on the same day as long as the occasions are distinct from one another and are not used to award more in prizes than is permitted for a single bingo occasion.

208.02A If two regular bingo occasions are held on the same day, there must be a break of at least three hours between the end of one occasion and the start of the second occasion.

208.03 No premises shall be subdivided to provide multiple premises where games of bingo are managed, operated, or conducted, whether or not the multiple premises have different mailing addresses or legal descriptions. Any building, distinct portion of a building, or a railroad coach car of a dinner or excursion train shall constitute one premises, regardless of the number of addresses or entrances, rooms, halls, enclosures, areas, or separate cars of a dinner or excursion train used to conduct bingo.

208.04 A premises rented or leased by a licensed organization to conduct bingo must be rented or leased from a licensed commercial lessor except when:

208.04A The lessor of the premises receives $250.00 or less per month in the aggregate from renting or leasing such premises for the conduct of bingo. For purposes of this regulation, the $250.00 threshold includes the total amount received from the rental or lease of the premises for all regular and limited period bingo occasions, regardless of how many licensed organizations rent or lease the premises, and is solely limited to bingo premises rental or lease payments; or

208.04B The premises is rented or leased by a nonprofit organization solely to its own auxiliary for the conduct of bingo by the auxiliary.

208.05 A licensed organization may conduct bingo only in the county in which the organization has its principal office.

208.05A For purposes of this regulation, a licensed organization's principal office is the place where the principal affairs and business of the organization are transacted, including where the officers and members assemble to discuss and transact the business of the organization, where its meetings are held, and generally where the organization's records are kept.

208.06 Prior to changing the premises where, or the days or time of day when a licensed organization conducts bingo, authorization shall be obtained thirty (30) days in advance from the Department. Such authorization shall be requested in writing by the licensed organization's bingo chairperson or gaming manager and confirmed by the signature of the utilization of funds member. If any such changes result in a change of the rental or lease agreement for the premises or any bingo equipment, or in a change to the existing terms or conditions of any such agreement, the authorization request must be accompanied by a copy of the proposed rental or lease agreement.

208.06A For purposes of this regulation, adding another regularly scheduled bingo occasion is considered a change that requires thirty (30) day advance notification and authorization.

208.07 No alcoholic beverages shall be served at a premises during the conduct of bingo except that alcoholic beverages are permitted at a limited period bingo occasion when no one under 18 years of age is permitted to play bingo.

208.07A If the premises at which bingo or a restricted limited period bingo occasion is conducted contains a lounge or bar area that is licensed to serve or sell alcoholic beverages, the area in which bingo is conducted and played must be completely and physically separate from the lounge or bar area. If a lounge or bar area is completely and physically separate from the area in which bingo is conducted, alcoholic beverages may be served in the lounge or bar area during the conduct of bingo; however, no alcoholic beverages shall be taken from the lounge or bar area to the area where bingo is being conducted or played.

208.07B Near beer, which is defined as beer containing less than one-half of one percent of alcohol by volume, is considered an alcoholic beverage and, therefore, may not be sold or served at any regular or restricted limited period bingo occasion.

208.08 The fair market value which may be charged for the rental or lease of a premises for the conduct of bingo shall not exceed the fair market value charged for the same premises or similar facilities in similar locations when rented or leased for public or social gatherings such as wedding receptions, parties, meetings, or other similar gatherings. The following factors shall be used by the Department in determining compliance with the fair market rental or lease value of a premises:

208.08A The square footage, location, condition, and lawful seating capacity of the premises;

208.08B Parking availability and conditions;

208.08C The day of the week and time of day that bingo will be conducted;

208.08D The terms and conditions of the rental or lease agreement including length of rental or lease commitment and what, if any, services or tangible personal property are included in the agreement;

208.08E The number of similar facilities near the location of the premises; and

208.08F Any other factors having a bearing on the potential rental or lease value of the premises.

None of the above shall be a sole determining factor on the issue of fair market value, but each of them shall be given some weight in assessing whether a premises is being rented or leased for fair market value.

208.09 In determining fair market value, the Department shall also review the total amount of money charged by the commercial lessor for the use of the premises by the licensed organization, including any separate fees charged for all real and personal property, including but not limited to charges for security, janitorial service, concession services, bingo equipment, and the use of furnishings such as tables and chairs.

(Sections 9-202, 9-207.01, 9-216, 9-241.01, 9-241.02, 9-241.04, and 9-241.06, R.R.S. 1997. Sections 9-226, 9-232.01, 9-241.03, 9-255.04, 9-255.06, and 53-103, R.S.Supp., 2002. November 12, 2002.)

REG-35-209 BINGO CARDS

209.01 All bingo cards made available for play by a licensed organization, regardless of whether at a regular bingo occasion or a limited period bingo occasion, must contain numbers preprinted by the licensed manufacturer of the bingo cards. No cards shall be made available for play which require anyone to fill in numbers in blank spaces on a card, or choose or arrange numbers on a card.

209.01A Each card in use at a particular bingo occasion must have a different distribution of playing numbers than any other card in use at that occasion. No two bingo cards in play at the same time may have the same distribution of numbers.

209.01B Duplicating or making copies of bingo cards for sale or use at a bingo occasion is prohibited. A licensed organization must purchase or otherwise obtain bingo cards only from a licensed distributor, unless otherwise authorized by the Department.

209.01C For purposes of compliance with this regulation, an electronic image of a bingo card containing numbers which is downloaded by a licensed manufacturer to a licensed organization's site system shall be considered preprinted by a licensed manufacturer.

209.02 A Class II bingo licensee is required to use only disposable paper bingo cards or facsimiles of bingo cards electronically displayed on a bingo card monitoring device. Use of disposable paper bingo cards or facsimiles of bingo cards electronically displayed on a bingo card monitoring device by a Class I bingo licensee is optional.

209.02A Disposable paper bingo cards and facsimiles of bingo cards electronically displayed on a bingo card monitoring device must be consecutively numbered from the first card to the last card, or from the first sheet of cards to the last sheet of cards or consecutively numbered through the set. Each card or sheet must have printed on its face both its individual card number (free space number), and the serial number assigned by the manufacturer to that set of disposable cards or facsimiles of bingo cards electronically displayed on a bingo card monitoring device.

209.03 No licensed organization may reserve, or allow to be reserved, any bingo card or cards for use by a particular individual, except braille, large print, or other specially designed cards for use by visually impaired or disabled players.

209.03A Visually impaired or disabled players may use personal braille, large print, or otherwise specially designed bingo cards when a licensed organization does not provide such cards. The licensed organization has the right to inspect, and to reject, any personal card.

209.03B A visually impaired or disabled individual, using a specially designed bingo card or hard card in place of a disposable paper bingo card or hard card, must be charged for using such card at the same rate as other players, regardless of whether or not the licensed organization supplied the specially designed bingo card.

209.04 The price structure for all bingo cards must be posted at the location in the premises where bingo cards are sold. The licensed organization must offer the same price structure for the purchase or use of all bingo cards, to all players at the bingo occasion. A licensed organization shall not offer any promotion or discount on the price of any bingo cards, unless such promotion or discount is made available to all players.

209.04A A licensed organization may have a graduated price structure for the purchase of different types or packets of bingo cards; however, the organization shall not offer discounts on the price charged for disposable paper bingo cards or packets unless the discounted cards or packets are of a different color and of a different series than the regular priced cards or packets. For example, a licensed organization could have the following price structure on disposable paper bingo cards or packets:

3 ON Red Booklet $ 5.00 AND 3 ON Yellow Booklet 2 for $9.00

6 ON Blue Booklet 9.00 AND 6 ON Green Booklet 2 for 15.00

9 ON Orange Booklet 12.00 AND 9 ON Purple Booklet 2 for 20.00

However, it would not be permissible to sell a 3 ON booklet and a 6 ON booklet for the price of a 9 ON booklet. A licensed organization must have a predetermined price structure for different types of bingo cards or packets.

209.05 Prior to changing the price structure or adding a new card or packet to the price structure, the gaming manager or bingo chairperson for a Class II bingo licensee must notify the Department in writing of such price changes or additions, at least ten (10) days in advance of the proposed changes or additions, and include the date the price changes or additions will be implemented.

209.05A Prior to the date the price change takes effect, the gaming manager or bingo chairperson and utilization of funds member shall ensure that a physical inventory is taken of the disposable paper bingo cards which will be affected by the price change. Such inventory shall be reported to the Department with the licensed organization's quarterly report for the period in which the price change was implemented.

209.06 The extension of credit by a licensed organization for the purchase or use of bingo cards or bingo card monitoring devices is prohibited. The only acceptable forms of payment for the sale or use of bingo cards or bingo card monitoring devices are cash, check, bank credit or debit card, or in-kind payment as defined in Regulation 35-200.13.

209.06A A licensed organization may sell gift certificates to be used exclusively for the purchase of bingo cards.

Any such gift certificate shall clearly indicate the name of the licensed organization issuing the certificate, and indicate that it is redeemable only for the purchase of bingo cards.

209.06A(1) The only acceptable methods of payment for a gift certificate shall be cash, check, or bank credit or debit card. The sale of gift certificates must be receipted by the licensed organization.

209.06A(2) The proceeds from the sale of bingo card gift certificates shall be deposited in the licensed organization's bingo checking account. The value of a gift certificate shall be included in the bingo gross receipts of the bingo occasion at which it is redeemed.

209.07 A Class II bingo licensee must receipt, by a cash register, the sale of all regular and special bingo cards, instant bingo cards, disposable paper bingo cards used in conjunction with a bingo card monitoring device which are not downloaded by a site system, and any fee charged for the use of a bingo card monitoring device. Receipts must be sequentially numbered and prepared in duplicate. One copy of the receipt shall be given to the player at the time of purchase, and the other copy shall be retained by the licensed organization with its records for each bingo occasion. The receipt shall contain, at a minimum, the following information:

209.07A A description, by cash register key, of the bingo card or packet sold (e.g., 3 ON booklet, 6 ON booklet, instant bingo card, 3 ON special, disposable paper bingo card used in conjunction with a bingo card monitoring device which is not downloaded by a site system, and any fee charged for the use of a bingo card monitoring device, etc.);

209.07B The quantity of each type of bingo card or packet sold;

209.07C The price charged for each type of bingo card or packet sold;

209.07D The extended total price of the bingo cards or packets sold; and

209.07E The date of the bingo occasion.

209.08 Additional bingo cards or packets sold during the course of a bingo occasion must be sold by the cashier and must be receipted in the same manner as bingo cards and packets sold prior to the start of the bingo occasion.

209.08A Special bingo cards may be sold by a floor worker during the course of a bingo occasion but must be receipted in the same manner as bingo cards and packets sold prior to the start of the bingo occasion, or by the following method:

209.08A(1) The cashier must receipt the sale of all bingo paper sold by floor workers through the cash register by type of bingo paper. The cashier must maintain a record to reflect the amount of bingo paper checked out to each floor worker, the number of bingo cards checked back in to the cashier by the floor worker, and the corresponding amount of money returned to the cashier by the floor worker.

209.09 A licensed organization may not give free bingo cards to participants at a bingo occasion; however, coupons redeemable for bingo cards may be awarded as a bingo prize, promotional prize, or as a prize in a lottery or raffle provided the bingo cards are accounted for in the following manner:

209.09A The licensed organization must issue a sequentially numbered coupon to the winner which can be redeemed for the bingo cards. The coupon shall contain the name of the licensed organization and a description of the bingo cards for which the coupon can be redeemed. The value of the coupon shall be determined by the licensed organization's posted selling price of the bingo cards described on the coupon. The value of the coupon shall be included in the licensed organization's bingo gross receipts for the bingo occasion at which the coupon is redeemed.

209.09A(1) The value of any coupon awarded for bingo cards as a "bingo" prize must be included in determining the licensed organization's compliance with the $4,000.00 bingo prize limitation per bingo occasion. As a bingo prize, the value of the coupon would not be subject to the 14 percent expense limitation.

209.09A(2) The value of any coupon awarded for bingo cards as a "promotional" prize must be included in determining the licensed organization's compliance with the $100.00 promotional prize limitation for a regular bingo occasion, or $250.00 promotional prize limitation for a limited period bingo occasion. As a promotional prize, the value of the coupon would not be an expense of conducting bingo which is subject to the 14 percent expense limitation.

209.09A(3) If the bingo cards are to be awarded as a lottery or raffle prize, the licensed organization must pay for the coupon with proceeds from the organization's lottery/raffle account.

209.10 Instant bingo, as defined in Regulation 35-200.14, is an acceptable form of bingo and instant bingo cards may be sold throughout the bingo occasion. Instant bingo shall be conducted in the following manner:

209.10A A predetermined number of bingo balls for instant bingo shall be drawn at the start of the bingo occasion and witnessed by no fewer than three bingo players. The letters and numbers of the balls drawn must be displayed so they are visible to all players throughout the bingo occasion;

209.10B The serial number(s) of the instant bingo cards being sold must be posted at the location in the premises where regular bingo cards are sold;

209.10C Prizes to be awarded for the instant bingo game must be posted at the location in the premises where regular bingo cards are sold;

209.10D The particular arrangement of numbers or "pattern" required to be covered in order to win must be clearly posted at the location in the premises where regular bingo cards are sold;

209.10E Prizes awarded for instant bingo must be included in the $4,000.00 prize limitation for a bingo occasion and no single prize awarded for instant bingo may exceed $1,000.00; and

209.10F If there are no winners by the end of the bingo occasion, additional bingo balls must be drawn and called until there is a winner; however, the winning prize does not have to be the full amount of the jackpot but could be a consolation prize of lesser value.

(Sections 9-202, 9-226, 9-233, 9-241.05, 9-255.01, and 9-255.02, R.R.S. 1997. Sections 9-204.01 and 9-241.10, R.S.Supp., 2004. September 5, 2005.)

REG-35-210 CONDUCT OF THE GAME

210.01 No bingo occasion, except for a limited period bingo occasion, shall last for longer than six consecutive hours. A bingo occasion begins when the first number for the first bingo game is called, or when the first gaming activity starts, whichever comes first, and ends when the last number for the last game is called. A bingo occasion shall not begin without the presence of:

210.01A In the case of a Class I licensee, the bingo chairperson or alternate bingo chairperson; or

210.01B In the case of a Class II licensee, the gaming manager or, in an emergency situation only, the bingo chairperson or alternate bingo chairperson.

210.02 A licensed organization may adopt "House Rules" regarding the conduct of bingo provided such rules are consistent with the provisions of the Nebraska Bingo Act and all rules and regulations adopted and promulgated pursuant to the Act. All "House Rules" shall be conspicuously posted at the location in the premises where bingo cards are sold, and announced to all players prior to the start of the first game.

210.03 A licensed organization may charge an admission fee for entry to the bingo occasion and, upon payment of that fee, the player shall be furnished with a regular bingo card. The licensed organization may accept cash, checks, bank credit or debit cards, or in-kind payments, as defined in Regulation 35- 200.13, to satisfy the admission fee. The fair market value of in-kind payments accepted for an admission fee shall be included in determining the gross receipts for the bingo occasion.

210.04 Bingo cards must be sold and paid for prior to the start of a specified game or specified number of games when they are progressive. Cards may not be sold for a game in progress after the first number of that game is called.

210.05 No player may play or have in his or her possession more bingo cards than the number for which payment was made. This regulation shall not prohibit a player from sharing purchased cards with another individual; however, no one other than a licensed manufacturer or distributor shall be permitted to cut or alter a disposable paper bingo card packet.

210.06 The particular arrangement of numbers or "pattern" required to be covered in order to win a bingo game must be clearly described and announced to the players immediately before each game begins.

210.07 Only the following methods of bingo ball selection are permitted:

210.07A An electrically operated blower machine containing balls which the operator may take from the air one at a time while the blower is in operation, or which provides a trap or other mechanical means for automatically catching not more than one ball at a time while the blower is in operation; or

210.07B A mechanically or manually operated cage which provides a trap or other mechanical means for automatically catching not more than one ball at a time while the cage is in operation.

210.08 Immediately following the drawing of each ball, the caller shall display the letter and number of the ball to the players in that room. If an electrically operated blower machine is used, the letter and number displayed must be visible to the majority of players at all times.

210.08A If more than one room is used to conduct bingo, the bingo caller and the ball selection device must be located in the room where the greatest number of players are present.

210.08B Each Class II bingo licensee must utilize a video camera to monitor the bingo ball selection. The video camera must be focused on the throat or trap of the bingo ball selection device and must clearly display, on a monitor for player viewing, each individual bingo ball as it is selected. If bingo players are seated in more than one room, a display monitor must be located in each room so that all players are able to clearly view the bingo ball selection.

210.09 The letter and number of the ball selected must be called out prior to the selection of the next ball. Once a ball has been selected, it may not be returned to the receptacle until after the conclusion of the game or series of games, if progressive.

210.09A A "House Rule" requiring that the caller must always call the letter and number if a ball is removed from the receptacle is not permissible. If nothing has been called or only the letter preceding the number has been called and "bingo" is claimed, the caller must not continue. If the caller calls the number or any portion of the number and "bingo" is claimed, the caller must continue to call the number in its entirety and the ball drawn does count towards the determination of winners.

210.09B If a player declares a bingo and a ball has been selected and removed from the receptacle, it must be the next ball to be called in the event the declared winning bingo is not valid or in the event that the game is progressive.

210.10 In the case of a Class II bingo licensee, after the letter and number are called, the corresponding letter and number must be displayed for player viewing on a flash or display board; however, the number and letter lit is not necessarily official. Bingo caller errors in announcing the letter and/or number are correctable. A "House Rule" to the contrary is not permissible.

210.10A The use of a flash or display board by a Class I bingo licensee is optional.

210.11 A winner is determined when the specified pattern of called letters and numbers appears on a bingo card. A "House Rule" requiring that a player must obtain "bingo" on the last number called is permissible provided that this rule is clearly posted for all players to see and announced just before the first game begins.

210.12 Immediately upon a player declaring "bingo", the winning card numbers must be stated aloud by a bingo worker. The winning card must be verified by a bingo worker and at least one neutral player unless an electronic bingo verifier system is used.

210.12A In the case of a Class II licensee, the bingo worker shall also check the winning player's receipt to verify that the player paid for the bingo cards in his or her possession.

210.13 After a winner has been verified, any player may call for a verification of all balls not selected. This verification shall be made in the immediate presence of a gaming manager, bingo chairperson or alternate chairperson, and at least one neutral player.

210.14 Once a winner has been verified, the bingo caller shall ask if there are any other "bingos" and, upon receiving no affirmative response, declare the game closed. Once the game has been declared closed, the licensed organization is not responsible for paying any further prizes for the closed game.

210.15 The winning player or players shall receive the designated prize upon verification of the win. If multiple wins occur on a particular game, the game prize is to be apportioned between all players having a verified "bingo". Each licensed organization must establish a "House Rule" regarding its policy for the payment of multiple winners, using one of the following methods:

210.15A The prize is to be equally apportioned based upon the number of players having one or more valid bingos, so that an individual with two winning cards would not receive more of the prize than an individual with only one winning card; or

210.15B The prize is to be equally apportioned based upon the number of winning bingo cards, so that a player with two winning cards would receive double the amount of a player with only one winning card.

210.16 Progressive bingo games in which the winning combination or pattern progresses in difficulty are permissible. For example, a progressive bingo game may consist of a single bingo, double bingo, frame, and fill, all played on the same card.

210.16A For purposes of determining compliance with the prize limitations for a single game, each portion of the progressive game shall be considered a single bingo game, even though the balls are not returned to the receptacle after a winner has been determined and verified.

(Sections 9-202, 9-204.02, 9-209, 9-209.01, 9-210, 9-214, 9-214.01, 9-226, 9-241.02, 9-241.09, 9-241.10, 9-255, and 9-255.02, R.R.S. 1997. March 10, 2002.)

REG-35-211 BINGO PRIZES; JACKPOT AND OTHER SPECIAL BINGO GAMES

211.01 A licensed organization may not award a single bingo prize that exceeds $1,000.00 in value, or award more than $4,000.00 in bingo prizes per bingo occasion. A licensed organization must award at least 50 percent of its bingo gross receipts in bingo prizes on a quarterly basis.

211.02 The amount of the bingo prize for each bingo game shall be conspicuously posted where the bingo cards are sold. A licensed organization may not deviate from the bingo prize amounts posted, unless such posting identifies the minimum attendance required for those prize amounts to be awarded.

211.02A If the minimum attendance is not realized, the licensed organization shall announce the revised bingo prize payouts to all players prior to the call of the first bingo ball, and players shall have the option of obtaining a full refund of monies paid for a bingo card or packet if such a request is made before the first ball is called.

211.03 Merchandise awarded as a bingo prize shall be valued at its fair market value and shall not be redeemable or convertible into cash directly or indirectly by the licensed organization.

211.04 If there is more than one winner on a particular bingo game where merchandise is to be awarded as the bingo prize, and equal division of the merchandise among the multiple winners is not possible, the licensed organization shall:

211.04A Award substitute merchandise prizes to each winner, the aggregate fair market value of which shall be approximately equal to the fair market value of the original merchandise prize; or

211.04B Award cash prizes to each winner, the aggregate amount of which shall be equal to the fair market value of the original merchandise prize.

211.05 If real or personal property is to be awarded as a bingo prize, the licensed organization shall have paid for in full or otherwise become the owner without lien or interest of others of all the real or personal property prior to the bingo occasion at which the property is to be awarded as a prize.

211.05A For purposes of this regulation, real estate and savings bonds are not considered merchandise prizes and must be valued at their purchase price value. Merchant gift certificates are considered to be merchandise prizes and are to be valued at their face value.

211.05B Bingo cards, admissions to future bingo occasions, bingo supplies, and State Lottery tickets may be awarded as bingo prizes. Bingo cards must be accounted for as required in Regulation 35-209.09.

211.06 Real or personal property donated to a licensed organization and awarded as a bingo prize shall be valued at its fair market value and shall be included in the determination of compliance with the limitations on the value of bingo prizes which may be awarded in any single bingo game and overall at a bingo occasion.

211.06A The value of real or personal property donated to a licensed organization and awarded as a bingo prize shall not be recorded as a bingo expense of the licensed organization.

211.07 Jackpot bingo games which incorporate a carryover bingo prize feature are permissible when conducted in accordance with the Nebraska Bingo Act and the following provisions:

211.07A Any conditional aspects of the jackpot game and the corresponding bingo prizes to be awarded must be conspicuously posted at the premises where bingo is conducted. The winning combinations and the bingo prizes to be awarded must be clearly described and announced to the players immediately before the jackpot game;

211.07B If the jackpot combination or pattern is not achieved at a particular bingo occasion, the jackpot bingo game must be continued until such time as a consolation winner is determined. The consolation prize does not have to be the full amount of the jackpot but could be a prize of lesser value; and

211.07C If the full amount of the jackpot bingo prize is not awarded at a particular bingo occasion, it may be carried over to the next bingo occasion and increased in value, provided the jackpot bingo prize never exceeds $1,000.00 and the total value of bingo prizes awarded at the bingo occasion does not exceed $4,000.00.

211.08 Special jackpot bingo games, for example, "Hot Number", "Hot Ball", or "Share the Pot", where only those players who have paid an additional fee are eligible to participate, are permissible when conducted in accordance with the Nebraska Bingo Act, Regulation 35-211.07, and the following provisions:

211.08A An individual pays an additional amount and receives a ticket or other evidence of payment verifying that he or she has paid to be a participant in the special jackpot bingo game;

211.08A(1) Class II bingo licensees must receipt participants in the same manner as prescribed by Regulation 35-209.07.

211.08B Only the individuals holding a ticket or other evidence of payment are eligible to win the special jackpot bingo prize;

211.08C To begin the game, the number of the first bingo ball called on the initial bingo game is the special jackpot number;

211.08D A player must achieve bingo on the special jackpot number in order to win the special jackpot bingo prize;

211.08E The special jackpot bingo prize can be won on any bingo game played during the bingo occasion;

211.08F If no one achieves a bingo on the special jackpot number by the completion of the last scheduled bingo game, an additional bingo game must be played to determine a consolation winner;

211.08G Only individuals holding a ticket or other evidence of payment for the special jackpot bingo game are allowed to play the additional consolation bingo game;

211.08H The prize for winning the consolation bingo game does not have to be the full amount of the special jackpot but could be a prize of lesser value; and

211.08I If the full amount of the special jackpot bingo prize is not awarded at a particular bingo occasion, it may be carried over to the next bingo occasion and increased in value, provided the special jackpot bingo prize never exceeds $1,000.00 and the total value of all bingo prizes awarded at the bingo occasion does not exceed $4,000.00.

211.09 Bingo prizes awarded at a limited period bingo occasion or restricted limited period bingo occasion are subject to the same requirements and limitations as a regular bingo occasion except that the value of a single prize awarded during a restricted limited period bingo occasion shall not exceed $25.00 in value.

211.09A The aggregate value of all bingo prizes awarded during a limited period bingo occasion or a restricted limited period bingo occasion shall not exceed $4,000.00 per day for each day of the limited period bingo occasion or restricted limited period bingo occasion. For purposes of this regulation, "day" means a calendar day.

211.10 Prizes awarded for instant bingo games during any bingo occasion are considered bingo prizes and are subject to all requirements and limitations in this regulation. The aggregate value of instant bingo prizes is to be included in the $4,000.00 total bingo prize limitation for a bingo occasion.

211.11 Promotional game prizes, prizes awarded for winning pickle cards sold by the licensed organization at the bingo occasion, and lottery and raffle prizes awarded at the bingo occasion are not considered bingo prizes and are not to be included in the $4,000.00 total bingo prize limitation for a bingo occasion.

211.12 A bingo prize of $500.00 or more in value must be receipted. The gaming manager or bingo chairperson shall insure that the receipt contains:

211.12A The name, address, and telephone number of the winner;

211.12B The date and amount of payment; and

211.12C The name of the individual who paid the winner.

211.13 The individual paying a $500.00 or greater bingo prize shall make a good faith effort to insure that the information contained on the receipt is legible and correct. Such receipts may be prepared in a manner of the licensed organization's choice, provided all prescribed information is recorded and retained in the organization's records for a period of three years from the date of payment.

211.13A A licensed organization may satisfy the bingo prize receipting requirement by paying the winner by a check drawn on the organization's bingo checking account, provided the check contains all of the information required by Regulation 35-211.12.

(Sections 9-202, 9-214, 9-226, 9-232.03, 9-241.10, 9-255.02, 9-255.03, and 9-255.04, R.R.S. 1997. March 10, 2002.)

REG-35-212 PROMOTIONAL GAMES AND PRIZES; BINGO ADVERTISING; CONCESSION SALES AND ALCOHOLIC BEVERAGES

212.01 In addition to conducting bingo games and awarding bingo prizes at a bingo occasion, a licensed organization may also conduct promotional games and award promotional game prizes at a bingo occasion.

212.02 A promotional game means a game, scheme, or promotion conducted by a licensed organization at its bingo occasion whereby:

212.02A Participation in the promotional game is restricted to bingo players who are present at the bingo occasion;

212.02B No consideration is charged to participate in the promotional game, other than that charged to play bingo;

212.02C The winner of a promotional game is determined by an element of chance or by some other factor, except that a winner cannot be determined by using any type of pickle card, the game of keno, a scratch-off or rub-off ticket, a promotional game ticket as authorized in section 9-701 of the Nebraska Revised Statutes, any type of non- telecommunication-related, player-activated electronic or electromechanical facsimile of any game of chance, or by using any type of slot machine; and

212.02D The winner is present at the bingo occasion.

212.03 The total fair market value of promotional game prizes for a regular bingo occasion shall not exceed $100.00. The total fair market value of promotional game prizes for a limited period bingo occasion shall not exceed $250.00 per day for each day of the limited or restricted limited period bingo. For purposes of this regulation, "day" means a calendar day.

212.03A The total fair market value of promotional game prizes shall not be included when determining the licensed organization's compliance with the statutory limitation on the value of bingo prizes which may be awarded for a single bingo game or overall at a bingo occasion.

212.03B A promotional game prize shall not be used to increase the prize amount to be awarded for winning a bingo game.

212.04 The licensed organization's cost of promotional game prizes is not subject to the 14 percent of bingo gross receipts limitation on bingo expenses.

212.04A Real or personal property donated to a licensed organization and awarded as a promotional game prize shall be valued at its fair market value and included in the determination of compliance with the limitation on the value of promotional game prizes which may be awarded in any single bingo game and overall at a bingo occasion.

However, the value of such donated prizes shall not be recorded as a bingo expense of the licensed organization.

212.05 Real or personal property awarded as a promotional game prize shall be valued at its fair market value and, once awarded, shall not be redeemable or convertible into cash directly or indirectly by the licensed organization.

212.05A A licensed organization shall have paid for in full or otherwise become the owner without lien or interest of others of all real or personal property to be awarded as a promotional prize, prior to the bingo occasion at which such prize is to be awarded.

212.05B For purposes of this regulation, real estate and savings bonds are not considered merchandise prizes and must be valued at their purchase price. Merchant gift certificates are considered to be merchandise prizes and shall be valued at their face value.

212.05C Bingo cards, admissions to future bingo occasions, bingo supplies, and Nebraska State Lottery tickets may be awarded as promotional game prizes. Bingo cards awarded as a promotional prize must be accounted for as required in Regulation 35-209.09.

212.06 A licensed organization shall not reimburse players for the cost of their own transportation to a bingo occasion. A licensed organization may, however, provide players with transportation to its bingo occasion either at no charge or for a fee. All costs associated with providing transportation to bingo players shall be subject to the 14 percent of bingo gross receipts limitation on bingo expenses.

212.07 Only the licensed organization conducting the bingo occasion shall be permitted to advertise such bingo occasion. The licensed organization's cost of such advertising is a bingo expense which is subject to the 14 percent of bingo gross receipts expense limitation on bingo expenses.

212.07A Unless otherwise restricted by federal law or local ordinance, a licensed organization may use any media to advertise its bingo occasion including, but not limited to, television, radio, newspaper, yellow pages, and billboards; however, no advertisement shall make reference to an aggregate value of bingo prizes exceeding $4,000.00.

212.08 Concessions such as food or beverages may be served and sold at a bingo occasion provided all the profits from such concession sales are retained by the licensed organization conducting the bingo occasion.

212.08A Revenues received from concession sales shall not be commingled with bingo, pickle card, or lottery/raffle proceeds of the licensed organization or placed in any bingo, pickle card, or lottery/raffle bank account of the organization. Concession sales may be deposited in the General Fund account of the licensed organization, or any other fund or account of the organization, provided the fund or account is not used for gaming activity of the organization.

212.08B A licensed organization shall not use any of the bingo receipts or proceeds derived from its other gaming activities conducted pursuant to Chapter 9 of the Nebraska Revised Statutes to support or supplement its concession activity.

212.08C Concession workers are not considered to be bingo workers and shall not be paid using funds from the licensed organization's bingo activity. Concession workers, if compensated, shall not receive any compensation from bingo, pickle card, or lottery/raffle proceeds of the licensed organization.

212.08D Concession workers at a bingo occasion are not required to be 18 years of age provided they are not involved with any gaming related sales of the licensed organization such as the sale of bingo cards or pickle cards.

212.08E If a concession worker is involved solely with the preparation, sale and serving of food and beverages at the bingo occasion, and is not directly involved with any gaming related activity being conducted at the bingo occasion, and meets the age restriction requirements otherwise provided in these regulations, the concession worker may play bingo at a bingo occasion at which he or she is serving as a concession worker.

212.09 Except as provided in Regulation 35-208.07A, no alcoholic beverages may be served at a premises during the conduct of a licensed bingo occasion except that alcoholic beverages may be served at a limited period bingo occasion when no one under 18 years of age is permitted to play bingo.

(Sections 9-202, 9-210, 9-214, 9-224, 9-241.06, 9-241.07, and 9-255.03, R.R.S. 1997. Sections 9-226, 9-255.02, and 9-255.04, R.S.Supp., 2002. November 12, 2002.)

REG-35-213 LIMITED PERIOD BINGO

213.01 Any Class I or Class II bingo licensee is eligible to request a limited period bingo authorization from the Department. A limited period bingo is a bingo occasion which the Department authorizes a licensed organization to conduct in addition to the organization's regularly scheduled bingo occasions.

213.01A A restricted limited period bingo is a limited period bingo where individuals under 18 years of age are allowed to play bingo, no prize exceeds $25.00 in value, and no alcoholic beverages may be served.

213.02 A licensed organization seeking to conduct a limited period bingo occasion must request authorization from the Department, in writing, at least ten (10) days in advance of the beginning of the limited period bingo occasion. The request shall be signed by the bingo chairperson or gaming manager of the licensed organization and must include:

213.02A The date or dates of the limited period bingo occasion;

213.02B The location where the limited period bingo occasion is to be conducted;

213.02C The daily starting and ending time of the limited period bingo occasion; and

213.02D An indication of whether individuals under 18 years of age will be allowed to play bingo.

Upon approval of the request, the Department will issue the licensed organization a limited period bingo authorization which must be posted at the location during the time of the limited period bingo occasion.

213.03 A licensed organization may be issued no more than four limited period bingo authorizations in any 12-month period beginning October 1 of each year, for an aggregate total of not more than 12 days in duration.

213.03A A licensed organization may use all 12 days of limited period bingo for one authorization or divide the 12 days available among two, three, or four authorizations.

For example, a licensed organization may conduct a seven- day limited period bingo occasion in the summer and a five- day limited period bingo occasion in the fall.

213.03B In the event that a limited period bingo occasion extends into a new 12-month period, the beginning date stated on the limited period bingo authorization form issued by the Department shall be the determining factor as to which 12-month period the limited period bingo shall be attributable.

213.04 Unless specifically provided otherwise in these regulations, limited period bingo occasions are to be conducted in the same manner as prescribed for regular bingo occasions, and are subject to the same prize restrictions, record keeping, reporting, and tax requirements.

213.05 A licensed organization shall not award a prize that exceeds $1,000.00 in value in any single limited period bingo game or that exceeds $25.00 in value in any single restricted limited period bingo game.

213.05A The aggregate value of all bingo prizes awarded during a limited period bingo occasion or a restricted limited period bingo occasion shall not exceed $4,000.00 per day for each day of the limited or restricted limited period bingo. For purposes of this regulation, "day" means a calendar day.

213.06 Alcoholic beverages may be served at a limited period bingo occasion. Alcoholic beverages may not be served at a restricted limited period bingo occasion.

(Sections 9-202, 9-214, 9-226, 9-232.01, 9-232.03, 9-239, 9-241.02, 9-241.03, 9-241.06, 9-241.07, 9-241.08, 9-241.10, and 9-255.02, R.R.S. 1997. March 10, 2002.)

REG-35-214 BINGO EXPENSES

214.01 A licensed organization may spend no more than 14 percent of its bingo gross receipts for reasonable and necessary expenses relating to the conduct of bingo. The following bingo expenses are exempt from the 14 percent expense limitation:

214.01A Bingo license fees paid to the Department;

214.01B Bingo taxes paid to the Department;

214.01C Bingo prizes and promotional prizes awarded at the bingo occasions;

214.01D The cost of purchasing, renting, or leasing bingo equipment including the purchase of disposable paper bingo cards; and

214.01E The cost of the rental or lease of a premises for the conduct of bingo and the purchase, rental, or lease of personal property necessary for the conduct of bingo such as tables, chairs, video monitors, public address systems, etc.

214.01F All other expenses are subject to the 14 percent expense limitation.

214.02 Bingo supplies such as daubers, chips, tape, and glue sticks must be purchased by a check written on the licensed organization's bingo checking account. The organization's cost of these items are subject to the following restrictions:

214.02A If a licensed organization awards a bingo supply as a prize for a bingo game, the organization's cost of the bingo supplies are not subject to the 14 percent expense limitation;

214.02B If a licensed organization awards bingo supplies as promotional game prizes, the organization's cost of the supplies is considered an advertising/promotional game expense that is subject to the expense limitation. For purposes of complying with the promotional game prize limitations contained in Regulation 35-212, the supplies must be valued at their fair market value;

214.02C If a licensed organization provides bingo supplies at no charge to players, the organization's cost of the supplies is an advertising/promotional expense that is subject to the expense limitation;

214.02D If a licensed organization resells the bingo supplies at a price less than its cost, the difference between the organization's cost and the proceeds received through the resale of such items is considered an advertising/promotional expense that is subject to the expense limitation;

214.02E If a licensed organization resells the bingo supplies and recovers its cost or makes a profit from the sales, the organization's cost of the supplies is not subject to the expense limitation.

214.02F All revenues received by a licensed organization from the sale of bingo supplies must be deposited in the organization's bingo checking account; however, the revenues shall not be considered part of the organization's bingo gross receipts for purposes of determining the bingo tax due.

214.03 For purposes of determining a licensed organization's compliance with the statutory limitation on expenses, the 14 percent limitation is calculated using the organization's bingo gross receipts on an annual basis, based upon the time period which coincides with the annual reporting requirements contained in Regulation 35-217.

214.04 A licensed organization which is also licensed to sell pickle cards at its bingo occasions may transfer a portion of its pickle card proceeds to its bingo checking account to pay bingo expenses. The portion of the pickle card proceeds which may be transferred to pay bingo expenses is calculated using the bingo gross receipts and pickle card gross proceeds from the annual reporting period as prescribed in Regulation 35-217, based upon the percent that the gross proceeds from the sale of pickle cards at the bingo occasions represents to the total of bingo gross receipts and pickle card gross proceeds at the bingo occasions for the same period. For example:

If annual bingo gross receipts are: $500,000; and annual pickle card gross proceeds at bingo are: $750,000; Then total annual bingo/pickle activity is: $1,250,000.

In this example, the annual pickle card gross proceeds at bingo represent 60 percent of the total of the bingo and pickle card activity at the bingo occasions ($750,000 divided by $1,250,000 equals 60 percent). Therefore, up to 60 percent of the bingo expenses, excluding prizes and taxes, may be transferred from the licensed organization's pickle card checking account to its bingo checking account to pay bingo expenses. If the annual bingo expenses were $120,000, 60 percent of $120,000 would be $72,000. Thus the licensed organization may transfer up to $72,000 from its pickle card checking account to its bingo checking account to pay the bingo expenses.

214.05 A licensed organization that uses pickle card proceeds to pay bingo expenses is required to maintain records of pickle card sales at its bingo occasions as provided in Regulation 35-216, and to report such sales as provided in Regulation 35-217.

214.06 Any amount which a licensed organization transfers from the pickle card checking account to the bingo checking account which is not used for the payment of bingo expenses must be used by the organization for a lawful purpose.

214.07 Related organizations, as defined in Regulation 35-201.03A, which are co-sponsoring a bingo occasion where only one of the organizations is licensed to sell pickle cards at the bingo occasions, may also allocate bingo expenses as provided in Regulation 35-214.04.

214.08 All bingo expenses must be paid by checks written on the licensed organization's bingo checking account. The checks must be made payable directly to the parties with whom the expenses were incurred. No bingo expenses may be paid directly from the licensed organization's pickle card checking account. Any proceeds from the sale of pickle cards at the bingo occasions which are used to pay bingo expenses must be transferred to the bingo checking account in order to pay the bingo expenses.

(Sections 9-202, 9-210, 9-226, 9-241.10, 9-255.02, 9-255.03, 9-255.05, 9-302, 9-308, 9-312, and 9-347, R.R.S. 2007, and section 9-255.04, R.S. Supp., 2009. November 6, 2010.)

REG-35-215 BINGO AND OTHER TAXES

215.01 Each Class I and Class II bingo licensee shall remit to the Department a state bingo tax in the amount of three percent of its bingo gross receipts.

215.01A For purposes of calculating the bingo tax due, gross receipts shall include revenues received from admission fees when such admissions are directly related to the playing of bingo, the sale or use of bingo cards, the use of bingo card monitoring devices, and the fair market value of any in-kind payments, as defined in Regulation 35- 200.13.

215.01B Concession revenue received by the licensed organization from the sale of food and beverages at the bingo occasion and revenue generated from the sale of bingo supplies shall not be included in gross receipts for the purposes of calculating the bingo tax.

215.02 The state bingo tax shall be remitted by the licensed organization on a quarterly basis, no later than thirty (30) days after the close of the preceding calendar quarter. The tax shall be reported on a Nebraska Bingo Tax Return, Form 51B, and accompanying schedules supplied by the Department. Additional reporting requirements for the tax return are contained in Regulation 35-217.05.

215.02A A quarterly tax return must be filed with the Department even if the licensed organization conducted bingo for only a portion of the reporting period. For example, if the licensed organization did not begin conducting bingo until the second month of the reporting period, or ceased its bingo activities before the end of the reporting period, a quarterly tax return would still be due. A tax return shall also be filed even if the licensed organization had no bingo activity to report during the quarterly reporting period.

215.03 Returns properly signed and accompanied by remittance will be considered timely filed if mailed, postage prepaid, or personally delivered to the Department on or before the thirtieth (30th) day of the month following the close of the quarter.

215.03A When the thirtieth (30th) day of the month falls on a Saturday, Sunday, or a day considered a holiday by the Tax Commissioner's office, the return shall be considered timely filed if mailed postage prepaid or personally delivered to the Department on the next succeeding day which is not a Saturday, Sunday, or a day considered a holiday by the Tax Commissioner's office.

215.03B A United States Postal Service postmark will be conclusive evidence of the date of mailing for the purpose of timely filing a return.

215.03C Failure to file the return or remit the tax due by the due date will subject the licensed organization to assessment of a penalty of $25.00 or ten percent of the tax due, whichever is greater. In addition, interest will be imposed at the rate specified in section 45-104.02 of the Nebraska Revised Statutes, as amended, from the due date to the date paid.

215.04 All licensed organizations are required to pay the Nebraska Sales and Use Tax on the cost of bingo equipment and supplies purchased, unless exempt from Nebraska Sales and Use Tax as set forth in the Nebraska Sales and Use Tax Regulations.

215.05 All licensed organizations are required to collect and remit sales tax on bingo supplies sold to bingo players, and on any fee charged for the use of a bingo card monitoring device. Licensed organizations are not required to collect or remit sales tax from bingo players for the sale or use of bingo cards.

215.05A A licensed organization may purchase bingo supplies and not pay sales tax at the time of purchase on items it intends to resell, by purchasing the items for resale. A licensed organization must present a properly completed Resale Certificate, Section A, of the Nebraska Resale and Exempt Sale Certificate, Form 13, to the distributor or other retail outlet from which it purchases the bingo supplies. The licensed organization is then required to collect and remit sales tax on the full selling price of the bingo supplies when sold to bingo players.

215.05B If a licensed organization pays sales tax on the bingo supplies at the time of purchase, the organization should then collect sales tax on the full selling price of the supplies when sold to bingo players, but only remit sales tax on the difference between its cost and the price charged the players.

(Sections 77-2706, 77-2708, and 77-27,125, R.R.S. 1996. Sections 9-202, 9-226, 9-239, and 9-240, R.R.S. 1997. Sections 77-2702.16, 77-2703, 77-2704.12, and 77-2704.15, R.S.Supp., 2002. November 12, 2002.)

REG-35-216 ORGANIZATION RECORD KEEPING REQUIREMENTS

216.01 Each Class I and Class II bingo licensee shall maintain complete and accurate accounting records with detailed supporting and subsidiary records sufficient to furnish information regarding all transactions pertaining to its bingo activities. Such records shall be maintained for a period of not less than three years after the Nebraska Bingo Tax Return, Form 51B, or the Nebraska and Local Sales and Use Tax Return, Form 10, is filed, or for a period not less than three years from the date of the end of the licensee's fiscal year, whichever is later.

216.01A All records required by the Nebraska Bingo Act and regulations adopted pursuant thereto shall be open to inspection by the Department as well as any law enforcement officials.

216.02 Each licensed organization shall maintain separate bingo activity records from all other records of the organization. The following types of records must be maintained by the licensed organization:

216.02A Invoices for all purchases of bingo equipment and supplies, including the types of equipment and supplies purchased, the name of the distributor or other entity from whom the supplies and equipment were purchased, the price paid, and the check number of the check used to purchase such equipment and supplies;

216.02B The date, gross receipts collected, and number of players at each bingo occasion, including limited period bingo occasions conducted by the licensed organization, and amounts received by the organization from the sale of bingo supplies to bingo players.

216.02B(1) If a licensed organization will be transferring pickle card proceeds into its bingo checking account to pay a portion of its expenses of conducting bingo, the organization must also keep a record of its gross proceeds from the sale of pickle cards at each bingo occasion.

216.02C For all sales of disposable paper bingo cards and electronic facsimiles of bingo cards downloaded to the organization's site system:

216.02C(1) A complete description, including color (if applicable), of each type of bingo card or packet sold at each bingo occasion (i.e., 3 ON red booklet, 6 ON yellow booklet, 3 ON green specials, instant bingo cards, singles, doubles, triples, etc.);

216.02C(2) The quantity of each type of bingo card or packet sold;

216.02C(3) The licensed organization's selling price of each type of bingo card or packet sold; and

216.02C(4) The serial numbers of the bingo cards or packets sold (for packets, the serial number of the top sheet of the packet; for instant bingo cards, the serial number of the series);

216.02D The number of bingo card monitoring devices issued to bingo players per bingo occasion;

216.02E The amount paid out in cash for bingo prizes at each bingo occasion, receipts required by Regulation 35- 211.12, and the fair market value of any merchandise awarded as bingo prizes at each bingo occasion;

216.02F The licensed organization's cost and the fair market value of promotional prizes awarded at each bingo occasion;

216.02G The complete name, address, and social security number of each bingo worker, gaming manager, utilization of funds member, bingo chairperson or alternate bingo chairperson, and any other individual or business who is paid for any work connected with the licensed organization's bingo activity and the corresponding wage, salary, or other compensation paid; and

216.02H All other expenses incurred in connection with bingo including, but not limited to, amounts paid to bookkeepers, attorney or janitorial staff, rent and utilities for the bingo premises, bingo license fees, bingo advertising costs, bad checks written to the licensed organization, and any state or federal gaming taxes paid.

216.03 Each licensed organization is required to have a separate bingo checking account to be used exclusively for the bingo activities of the organization. The licensed organization must maintain the following records in connection with that account:

216.03A All deposits, withdrawals, and transfers;

216.03B All canceled checks; and

216.03C All bank statements.

216.04 A licensed organization must maintain detailed records of all expenditures from any bank account in connection with its bingo activities. Such records shall include a description of the purpose of each expenditure.

216.04A A licensed organization must maintain a bingo checking account into which all bingo gross receipts less cash prizes paid must be initially deposited, and from which all bingo expenses and lawful purpose donations must be made.

216.04B A licensed organization may periodically transfer bingo revenues either by electronic funds transfer or by a check written from the bingo checking account to other bank accounts of the organization, including higher interest bearing savings accounts or certificates of deposit.

However, such transfer shall not be considered a lawful purpose donation in and of itself, and the organization must be able to show that the bingo revenues transferred to those accounts are either still maintained in those accounts or were used for a lawful purpose as set out in Regulation 35-203.

(Sections 9-202, 9-204.02, 9-209.01, 9-214, 9-225.01, 9-226, 9-239, 9-240, 9-241.10, 9-255.03, 9-255.04, 9-255.05, 9-266, 9-308, and 9-347, R.R.S. 1997. Sections 9-204, 9-204.01, and 9-204.04, R.S.Supp., 2004. September 5, 2005.)

REG-35-217 ORGANIZATION REPORTING REQUIREMENTS

217.01 Each Class I and Class II bingo licensee must file an annual report of its bingo activities on forms supplied by the Department. In addition, each Class II bingo licensee must file a quarterly report of its bingo activities on forms supplied by the Department.

217.01A The annual report covers the licensed organization's bingo activities from July 1 to June 30 and must be filed with the Department by August 15 of each year.

217.01A(1) An annual report must be filed with the Department by August 15 of each year even if the licensed organization does not intend to renew its bingo license or does not intend to retain its bingo license for the second year of the biennial licensing period, its license renewal application has been denied, or its license has been canceled, suspended, or revoked during the reporting period. In addition, a licensed organization which has had its license renewal application denied, or its license canceled, suspended, or revoked, is also required to:

217.01A(1)(a) Submit a written disbursement plan with the Department no later than 45 days after the expiration date of its bingo license or the effective date of the license renewal application denial or license cancellation, suspension, or revocation. The plan must identify the specific purpose s for which the remaining profits will be utilized, subject to approval by the Department; and

217.01A(1)(b) Continue to file a bingo revenues status report by August 15 of each year, on a form supplied by the Department, listing all disbursements of bingo revenue until all such revenues have been expended either for allowable expenses or for lawful purposes unless otherwise directed by the Department.

217.01A(2) An annual report must be filed with the Department even if the licensed organization conducted bingo for only a portion of the reporting period. For example, if the licensed organization did not begin conducting bingo until the second quarter of the reporting period, or ceased its bingo activities before the end of the reporting period, an annual report is still required.

217.01A(3) An organization's license will not be renewed unless and until complete and accurate annual reports, for all applicable reporting periods, are filed with the Department.

217.01B The quarterly reports are due 30 days after the end of the first, third, and fourth calendar quarters of each year. An annual report shall be filed in place of a quarterly report for the second calendar quarter.

217.01B(1) A quarterly report must be filed with the Department even if the licensed organization conducted bingo for only a portion of the quarterly reporting period. For example, if the licensed organization did not begin conducting bingo until the second month of the reporting period, or it ceased its bingo activities before the end of the quarter, a quarterly report is still required.

217.02 The licensed organization's utilization of funds member must ensure that a copy of the organization's annual report is submitted to the organization's membership by August 15 of each year. In addition, the utilization of funds member shall make a copy of the annual report available to any member of the licensed organization, upon request.

217.03 The annual and quarterly reports must include the following information:

217.03A The bingo gross receipts, including revenues received by the licensed organization for the sale or use of bingo cards, fees charged for admission to bingo occasions, fees charged for the use of bingo card monitoring devices, and the value of any in-kind payments;

217.03B Amounts received from the sale of bingo supplies to bingo players;

217.03C The bingo prizes paid by the licensed organization in cash and by check;

217.03D The licensed organization's cost of merchandise awarded as a bingo or promotional prize;

217.03E A breakdown of all expenses incurred by the licensed organization in connection with its bingo activities. This includes items such as compensation paid to bingo workers or any other individuals for work performed in connection with the licensed organization's bingo activities, payroll taxes, the cost of legal, bookkeeping, janitorial and security services in connection with the licensed organization's bingo activities, amounts paid for the rental or lease of a premises to conduct bingo including furniture or fixtures, maintenance, repairs, and janitorial expenses included in the rental or lease agreement , amounts paid for the purchase, rental, or lease of bingo equipment and bingo supplies; amounts paid for utilities at the premises where bingo is conducted; bingo license fees, state bingo taxes, and advertising expenses, including the licensed organization's cost of promotional game prizes;

217.03F All other expenses incurred or income derived by the licensed organization in connection with its bingo activities, whether paid from or deposited in the licensed organization's bingo checking account or another bank account of the organization including, but not limited to, such things as overages or shortages of bingo receipts, interest earned on the bingo bank accounts, and repairs and maintenance costs not covered in a current rental or lease agreement;

217.03G The licensed organization's net profit or loss from the conduct of bingo;

217.03H A detailed summary of the licensed organization's lawful purpose use of the bingo profits including:

217.03H(1) A detailed itemization of expenditures made from the bingo checking account for internal uses of bingo profits by the licensed organization. The itemization must include the date, amount, check number, and description of the purpose for the internal expenditure;

217.03H(2) Transfers of funds made from the licensed organization's bingo checking account to the general fund of the organization and a detailed itemization of how such funds were expended for a lawful purpose;

217.03H(3) Transfers of funds made from the bingo checking account to any special funds or trust funds which are not certificates of deposit or organization savings accounts and a detailed itemization of how the funds were expended for a lawful purpose; and

217.03H(4) A detailed itemization of expenditures of external donations. The itemization shall include the name and address of the party to whom the external donation was made, the date, amount, and check number of the donation, and a description of the intended use for the donation;

217.03I A summary of the licensed organization's bingo checking account activity and of any other bingo related bank accounts, savings accounts, or certificates of deposit including:

217.03I(1) The name and complete address of the financial institution where the account is maintained and the account number and balance of the account at the beginning of the reporting period; total deposits made during the reporting period; total interest earned during the reporting period; total disbursements made during the reporting period; and the balance of the accounts at the end of the reporting period;

217.03I(2) Bingo cash and checks on hand for the beginning and ending dates of the reporting period;

217.03I(3) Deposits or transfers to the bingo checking account which are not bingo receipts, such as transfers or deposits made from the licensed organization's pickle card checking account to the bingo checking account; and

217.03I(4) Any other disbursements from the bingo checking account which are not listed as bingo prizes, bingo expenses, or lawful purpose donations;

217.03J Regarding Class II bingo licensees only, a summary of the disposable paper bingo card inventory including:

217.03J(1) A description of each disposable paper bingo card packet (e.g., 6 ON 13 UP, 18 ON 13 UP) including the color; and

217.03J(2) The beginning and ending inventory for the reporting period; the quantity purchased by the licensed organization; and the quantity sold and the selling price of each type of card or packet; and

217.03K If the licensed organization is using bingo card monitoring devices to conduct bingo, the type of device, the number of electronic facsimiles of bingo cards or packets downloaded into the devices, the number of disposable paper bingo cards or packets sold to be monitored by the devices, the licensed organization's selling price for the electronic facsimiles of bingo cards or packets and disposable paper bingo cards or packets to be monitored by the devices, the total gross receipts from the sale of electronic facsimiles of bingo cards or packets and disposable paper bingo cards or packets to be monitored by the devices and, if players are charged a separate fee for the use of a bingo card monitoring device, the number of devices used during the reporting period, the fee (if any) charged per device, and the total gross receipts from the games monitored by the devices.

217.04 The annual and quarterly reports must be signed by an officer, the utilization of funds member of the licensed organization, and the preparer of the report signifying that, under penalty of law, they have reviewed the report and, to the best of their knowledge and belief, found it to be a complete, true, and accurate accounting of the organization's bingo activities.

217.05 Each Class I and Class II bingo licensee must also file a quarterly tax return and summary of its bingo activities on forms supplied by the Department. The tax return and summary must be accompanied by the remittance of the state bingo tax as provided in Regulation 35-215. The quarterly tax return and accompanying bingo activity summary must contain the following information for each bingo occasion conducted during the reporting period:

217.05A The date of the bingo occasion and the number of players in attendance;

217.05B The type of occasion (i.e., regular or limited period);

217.05C The bingo gross receipts including revenues received by the licensed organization for the sale or use of bingo cards, fees charged for admission to bingo occasions, fees charged for the use of bingo card monitoring devices, and the value of any in-kind payments;

217.05D The total value of the bingo prizes awarded including prizes paid in cash or by check and merchandise prizes. Merchandise awarded as a bingo prize must be listed at its fair market value;

217.05E The total value of promotional game prizes awarded in cash or by check and merchandise prizes. Merchandise awarded as a promotional prize must be listed at its fair market value; and

217.05F If the licensed organization uses pickle card proceeds to pay a portion of the operating expenses of conducting bingo, the gross proceeds from the sale of pickle cards at the bingo occasion.

217.06 The quarterly tax return must be signed by an officer, the utilization of funds member of the licensed organization, and the preparer of the tax return signifying that, under penalty of law, they have reviewed the return and accompanying summary and, to the best of their knowledge and belief, found them to be a complete, true, and accurate accounting of the organization's bingo activity.

(Sections 9-202, 9-204, 9-204.01, 9-204.04, 9-211, 9-217, 9-225.01, 9-226, 9-232.02, 9-233, 9-239, 9-240, 9-255.03, 9-255.05, and 9-347, R.R.S. 2007 and section 9-255.04 R.S. Supp., 2009. November 6, 2010.)

REG-35-218 COMMERCIAL LESSOR: LICENSE; REQUIREMENTS; AND DUTIES

218.01 No individual, organization, or business shall rent or lease a premises for the conduct of bingo without first obtaining a commercial lessor's license from the Department and registering the premises, except that such license and registration shall not be required:

218.01A When the individual, organization, or business renting or leasing the premises does not receive more than $250.00 per month in the aggregate from renting or leasing the premises for the conduct of bingo.

218.01A(1) The $250.00 threshold shall include rental or lease payments for the premises for the conduct of bingo only and shall be cumulative, regardless of the number of licensed organizations separately renting or leasing the premises to conduct bingo; or

218.01B If a nonprofit organization owning its own premises rents or leases the premises solely to its own auxiliary.

218.01B(1) If a nonprofit organization rents or leases a premises for the conduct of bingo to an organization other than its own auxiliary, it shall be required to obtain a commercial lessor's license and register the premises unless it meets the exception contained in Regulation 35-218.01A.

218.02 A commercial lessor's license shall only be issued to those applicants doing business in Nebraska or authorized to do business in Nebraska. Authorization to do business in Nebraska requires:

218.02A A domestic corporation to file Articles of Incorporation with the Nebraska Secretary of State's office;

218.02B A domestic limited liability company to file Articles of Organization with the Nebraska Secretary of State's office; or

218.02C A foreign corporation or foreign limited liability company to obtain a certificate of authority to transact business in Nebraska from the Nebraska Secretary of State's office or to become domesticated by filing the requisite documents with the Nebraska Secretary of State's office and paying any required fees.

218.03 An individual, organization, or business seeking a commercial lessor's license must apply for such license on a form prescribed by the Department. In addition, each premises to be rented or leased by the lessor for the conduct of bingo must be separately registered. The application and registration forms shall contain, at a minimum, the following information:

218.03A The name, address, and state and federal identification numbers of the applicant;

218.03B The type of ownership of the business and the name, social security number, home address, and date of birth of:

218.03B(1) If a sole proprietorship, the individual owner;

218.03B(2) If a partnership, each partner and spouse;

218.03B(3) If a limited liability company, each member and spouse;

218.03B(4) If a corporation, each officer and spouse and each individual or entity holding ten percent or more of the debt or equity of the corporation. If an entity holding ten percent or more of the debt or equity of the applicant corporation is a partnership, limited liability company, or corporation, the information required in Regulation 35-218.03B must be supplied for each partner of the partnership, each member of the limited liability company, or each officer of the corporation and every individual or entity holding ten percent or more of the debt or equity of the partnership or corporation; or

218.03B(5) If a nonprofit organization or nonprofit corporation, each officer and the individual designated as manager;

218.03C If the applicant is not the owner of the premises to be registered, the name, address, social security number, date of birth, type of involvement, and percent of ownership of each individual or business having ownership interest in the premises. The applicant shall also include, with the application and/or registration, copies of all rental, lease, or sublease agreements between the applicant and the owner of the premises;

218.03D If the applicant is not a resident or a corporation, the full name, business address, and home address of an individual who is a resident of and living in this state who is at least 19 years of age, to act as the lessor's resident agent for the purpose of receipt and acceptance of service of process and other communications on behalf of the lessor;

218.03E The location address and legal description of each premises to be registered;

218.03F The name and state identification number of each organization seeking to conduct bingo at the premises; and

218.03G The day(s) and time of day the organization intends to conduct bingo.

218.04 The applicant shall also be required to complete a supplemental questionnaire providing detailed information regarding physical characteristics of the premises to be rented or leased including, but not limited to, the square footage of the premises, the lawful seating capacity of the premises, the appraised value of the premises, the amount of rent or other consideration which is charged directly or indirectly for each bingo occasion to be conducted in the premises, the amount of rent or other consideration charged for use of the premises for functions other than bingo, a description of any tangible personal property included in the rental or lease agreement, and any other factors used by the commercial lessor in determining the rental or lease amount to be charged for use of the premises.

218.04A The amount which may be charged for the rental or lease of a premises for the conduct of bingo shall not exceed the fair market value amount charged for the same premises or for facilities in similar locations when rented or leased for public or social gatherings such as wedding receptions, parties, meetings, or other similar gatherings. Regulation 35-208.08 specifies other factors that are to be used in determining fair market value.

218.05 A copy of the written rental or lease agreement between the organization and the applicant shall also accompany the commercial lessor's license application and premises registration. Rental or lease agreements may cover both real and personal property rented or leased to the licensed organization. Rental or lease agreements for bingo equipment shall be separate from rental or lease agreements for a premises.

218.05A All rental and lease agreements between a commercial lessor and a licensed organization must receive preapproval by the Department.

218.06 Each registration of a premises shall be accompanied by the statutorily required fee. Such registration and the commercial lessor's license shall expire on September 30 of each odd-numbered year and may be renewed biennially. An application to renew a commercial lessor's license and registration of a premises is due 45 days prior to the expiration date of the license and registration. A commercial lessor’s license and registration of a premises is not transferrable.

218.06A The original commercial lessor's license as well as the registration of premises issued by the Department must be publicly posted at the premises.

218.07 It shall be the responsibility of the commercial lessor to keep the application and registration information current. The Department shall be notified in writing within thirty (30) days of any changes to the application or registration information.

218.08 An individual, organization, or business is not considered to be licensed as a commercial lessor and a premises is not considered to be registered until physical possession of the license and/or registration issued by the Department has been obtained.

218.08A A commercial lessor who no longer desires to be licensed or who no longer intends to rent or lease a premises for the conduct of bingo shall notify the Department in writing. Such notification shall be accompanied by the original license and/or registration certificate.

218.09 A licensed commercial lessor, the owner of a premises, and all parties who rent, lease, or sublease a premises which ultimately is rented or leased to a licensed organization for the conduct of bingo, and any individual with a substantial interest in a commercial lessor, and the employees of a commercial lessor shall not be involved directly or indirectly with the conduct of any bingo occasion. Such parties shall not manage, operate, promote, advertise, or administer bingo, nor derive any financial gain from any gaming activities regulated under Chapter 9, except as provided in section 9-255.06 of the Nebraska Bingo Act.

218.09A As used in this regulation, the term "involved directly or indirectly" shall include, but not be limited to, the payment of any expense of a licensed organization, whether such payment is by loan or otherwise; conducting advertising on behalf of the licensed organization conducting the bingo game; or doing any acts which would constitute the conduct of the bingo game such as determining what games will be played at a bingo occasion, acting as a bingo caller, selling admissions or bingo cards, or preparing records for the bingo occasion.

218.09B Nothing in this regulation shall be construed to prohibit an individual, officer, or employee of an organization which is licensed to conduct bingo, but which may also hold a license as a commercial lessor, from involvement with its own bingo game. However, when a licensed organization acts as a commercial lessor to another licensed organization, no individual, officer, or employee of the organization acting as a commercial lessor shall be involved directly or indirectly with the conduct of bingo on behalf of another organization.

218.10 No commercial lessor, or individual or business connected to, interested in, otherwise involved directly or indirectly with or who has a substantial interest in a commercial lessor, shall be designated as a bingo chairperson or alternate bingo chairperson, or be licensed as a gaming manager, utilization of funds member, or sales agent. A licensed commercial lessor shall not be licensed as or have a substantial interest, as defined in Regulation 35-200.20, in any individual or business licensed as a distributor, manufacturer, or manufacturer-distributor pursuant to Chapter 9.

(Sections 9-202, 9-204.02, 9-207.01, 9-209, 9-209.01, 9-216, 9-225.01, 9-241.04, 9-241.07, 9-241.08, 9-241.10, 9-307, 9-313, 9-320, and 9-616, R.R.S. 1997. Sections 9-214.01, 9-226, 9-241.05, and 9-255.06, R.S.Supp., 2002. November 12, 2002.)

REG-35-219 DISTRIBUTOR OF BINGO EQUIPMENT: LICENSE; REQUIREMENTS; AND DUTIES

219.01 Any individual or business which intends to sell, rent, lease, or otherwise provide bingo equipment in this state to a licensed organization or licensed commercial lessor for use in a bingo game regulated by the Nebraska Bingo Act must first apply for and obtain a distributor's license from the Department. A distributor's license shall not be required of:

219.01A An individual or business which sells or otherwise supplies only bingo supplies;

219.01B A third party which provides only for the financing of bingo equipment retaining a security interest in such equipment until such time as the purchaser has clear title. However, a distributor's license would be required of the individual or business which is selling, renting, or leasing the equipment directly to the licensed organization or licensed commercial lessor;

219.01C A licensed organization when it lends, without charge, its bingo equipment, excluding disposable paper bingo cards, to another licensed organization on an emergency basis or to a qualifying nonprofit organization for use at a special event bingo conducted pursuant to Regulation 35-222;

219.01D A licensed organization which, with prior approval from the Department, sells or donates its old bingo equipment to another licensed organization when it is purchasing or intends to purchase new bingo equipment; or

219.01E An organization which has voluntarily canceled its bingo license, allowed the license to lapse, or has had its license suspended, canceled, or revoked and which, with prior approval from the Department, sells or donates its bingo equipment to another licensed organization.

219.02 To qualify for a distributor's license, the applicant must be authorized to conduct business in Nebraska and have its principal office located within this state.

219.02A Authorization to do business in Nebraska requires:

219.02A(1) A domestic corporation to file Articles of Incorporation with the Nebraska Secretary of State's office;

219.02A(2) A domestic limited liability company to file Articles of Organization with the Nebraska Secretary of State's office;

219.02A(3) A foreign corporation or foreign limited liability company to obtain a certificate of authority to transact business in Nebraska from the Nebraska Secretary of State's office or to become domesticated by filing the requisite documents with the Nebraska Secretary of State's office and paying any required fees; or

219.02A(4) A domestic partnership, foreign partnership, or limited liability partnership to file any forms that may be required by the Nebraska Secretary of State’s office.

219.03 Applicants seeking a distributor's license who intend to be engaged in business in this state, as defined in section 77-2702.06 of the Nebraska Revised Statutes, as amended, shall also submit a Nebraska Tax Application, Form 20, to obtain a Nebraska Sales and Use Tax Permit.

219.03A Licensed distributors are required to obtain a Nebraska sales tax permit and must collect and remit sales tax on the gross receipts derived from the sale, rental, or lease of all bingo supplies and equipment in Nebraska, except that sold for resale or sold, rented, or leased to organizations exempt as set forth in Sales and Use Tax Regulation 1-012, which have presented a properly completed Nebraska Resale or Exempt Sale Certificate, Form 13.

219.04 An individual or business applying for a distributor's license shall do so on a form prescribed by the Department. The applicant shall include with the application form the statutorily required license fee and, at a minimum, the following information:

219.04A The business name and address of the applicant and the name and address of each of the applicant's separate locations warehousing bingo equipment;

219.04B The type of ownership of the business and the name, social security number, home address, and date of birth of:

219.04B(1) If a sole proprietorship, the individual owner;

219.04B(2) If a partnership, each partner and spouse;

219.04B(3) If a limited liability company, each member and spouse; or

219.04B(4) If a corporation, each officer and spouse, each director or board member, and each individual or entity holding ten percent or more of the debt or equity of the corporation. If an entity holding ten percent or more of the debt or equity of the applicant corporation is a partnership, limited liability company, or corporation, the information required in Regulation 35-219.04B must be supplied for each partner of the partnership, each member of the limited liability company, or each officer of the corporation and every individual or entity holding ten percent or more of the debt or equity of the partnership or corporation.

219.04C A completed and notarized Personal History Record and Background Disclosure form supplied by the Department for each individual listed pursuant to Regulation 35- 219.04B, except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form; and

219.04D Two sets of fingerprints on cards supplied by the Department and the requisite fees established by the Nebraska State Patrol and the Federal Bureau of Investigation for each individual listed pursuant to Regulation 35-219.04B, except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form. Fingerprint cards and the required fees must be submitted to the Nebraska State Patrol, Criminal Identification Division.

219.05 The applicant or licensee shall notify the Department within thirty (30) days of any change in the information submitted on or with the application form. Changes must be reported in writing and the Department may require the filing of a new application.

219.05A Changes shall be confirmed by the signature of an owner, partner, member, or officer of the distributor. Any individual signing the most current application shall obligate the distributor to comply with the Nebraska Bingo Act and accompanying regulations for that licensing period.

219.06 A distributor's license shall expire on September 30 of every odd-numbered year and may be renewed biennially. An application for license renewal shall be due 45 days prior to the expiration date of the license. A distributor's license is not transferable.

219.07 A distributor is not considered licensed until it has physical possession of the printed license issued by the Department.

219.07A A distributor who has had its license lost, stolen, or destroyed must notify the Department as soon as possible. The distributor shall send a written statement to the Department signed by an owner, officer, member, or partner confirming the loss, theft, or destruction of the license. A duplicate license will be issued for no additional fee under such circumstances.

219.07B Any individual or business licensed as a distributor pursuant to section 9-330 of the Nebraska Pickle Card Lottery Act may act as a distributor pursuant to the Nebraska Bingo Act without submitting an additional licensing fee. Such individual or business shall comply in every other respect with the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, and all rules and regulations adopted and promulgated pursuant to such Acts.

219.07C A distributor which no longer desires to be licensed shall notify the Department, in writing, of its intention to cancel its license. Such notification shall be signed by an owner, officer, member, or partner of the distributorship. A notification of cancellation shall be accompanied by the original license issued by the Department.

219.08 A licensed distributor, or any individual or business having a substantial interest therein, is prohibited from holding any other licenses issued pursuant to the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act, except as provided in section 9-330 of the Nebraska Pickle Card Lottery Act, and section 9-632 of the Nebraska County and City Lottery Act.

219.08A A licensed distributor, or employee or spouse of a licensed distributor, shall not have a substantial interest, as defined in Regulation 35-200.20, in any other distributor, manufacturer, licensed organization, pickle card operator, or lottery operator conducting gaming activities under the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act.

219.08B A licensed distributor or employee or spouse of a licensed distributor shall not participate in the operation or conduct of any kind of gaming activity regulated under Chapter 9 of the Nebraska Revised Statutes, except to the exclusive extent of his or her duties as a licensed distributor or employee thereof.

219.08C A licensed distributor shall not be connected, interested, or otherwise concerned directly or indirectly with any individual or business licensed as a manufacturer or commercial lessor.

219.09 A licensed distributor shall purchase or otherwise obtain bingo equipment only from a licensed manufacturer. A licensed distributor shall sell or otherwise provide bingo equipment only to an organization licensed to conduct bingo, a licensed commercial lessor, or a qualifying nonprofit organization which has obtained a special event bingo permit, except that a licensed distributor shall not sell or otherwise provide disposable paper bingo cards to anyone in Nebraska other than (a) a licensed organization or, (b) a qualifying nonprofit organization which has obtained a special event bingo permit, without written authorization from the Department.

219.09A Nothing in this regulation shall be construed to prohibit a licensed distributor from selling or otherwise providing bingo equipment to:

219.09A(1) A federally recognized Indian tribe;

219.09A(2) Another distributor with prior approval by the Department; or

219.09A(3) A purchaser residing outside Nebraska provided the transaction is invoiced in the manner prescribed in Regulation 35-219.12.

219.10 The price charged by a licensed distributor for bingo equipment shall not be fixed or set by agreement among licensed distributors in any manner, either expressed or implied.

219.10A No distributor shall offer or agree to offer anything of value to any individual or licensee in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use bingo equipment sold by such distributor.

219.10B No individual or licensee shall accept or agree to accept anything of value from a distributor in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use bingo equipment sold by such distributor.

219.11 A licensed distributor shall not be prohibited from cutting and assembling disposable paper bingo cards into single sheet, booklet, or packet form for resale to a licensed organization or qualifying nonprofit organization which has obtained a special event bingo permit provided that such paper is manufactured by and obtained from a licensed manufacturer.

219.12 A distributor shall issue an invoice to each purchaser of bingo supplies and equipment. Each invoice shall contain the following information:

219.12A The name and complete address of the purchaser and, if the purchaser is a licensed organization, the organization's state identification number;

219.12B The name of the individual placing the order;

219.12C The date of the invoice and invoice number;

219.12D A description of the bingo supplies or equipment including serial numbers when applicable;

219.12E For all transactions involving disposable paper bingo cards and/or electronic facsimiles of bingo cards which are downloaded to a licensed organization’s site system:

219.12E(1) A complete description, including color (if applicable) of the bingo card or packet (i.e., 3 ON red booklet, 6 ON yellow booklet, 3 ON green specials, instant bingo cards, singles, doubles, triples, etc.),

219.12E(2) The quantity sold, exchanged, or returned (number of packets per case; for instant bingo cards and specials, the total number of sheets), and

219.12E(3) The serial numbers of the bingo cards or packets (if in packets, the serial number of the top sheet of the packet; for instant bingo cards, the serial number of the series);

219.12F For each organization to whom the distributor supplies bingo card monitoring devices, the number of and cost charged per device, per bingo occasion;

219.12G The price charged for the bingo supplies or equipment, applicable taxes, and the total amount to be paid, exchanged, or returned by the purchaser; and

219.12H The manner of delivery or shipment, including the name address, and telephone number of the entity with whom delivery or shipment is made.

219.13 A licensed distributor shall be required to keep the following records:

219.13A Copies of all invoices for the purchase of bingo supplies and equipment from licensed manufacturers or any other source;

219.13B Copies of all invoices for the sale, return, exchange, rental, or lease of bingo supplies and equipment to licensed organizations, commercial lessors, special event bingo permittees, federally recognized Indian tribes, and any other customers whether located within or outside this state;

219.13C Copies of all rental, lease, or other contractual agreements relating to bingo equipment or supplies between the distributor and a manufacturer, licensed organization, commercial lessor, special event bingo permittee, or any other individual or business; and

219.13D A detailed record of any bingo supplies or equipment lost, stolen, or destroyed by the distributor.

219.14 All records required by this regulation shall be maintained for a period of not less than three years from the date of the end of the licensee's fiscal year. The Department may request periodic reporting from a licensed distributor regarding any information required to be kept by this regulation.

(Sections 77-2702.06, 77-2702.08, 77-2706, and 77-2708, R.R.S. 2003. Sections 9-202, 9-207.01, 9-209, 9-212, 9-217.01, 9-224, 9-241.08, 9-241.10, 9-255.01, 9-255.07, 9-255.09, 9-330, and 9-616, R.R.S. 1997. Sections 9-1,104, 9-213, 9-214.01, 9-226, 9-230.01, 9-241.05, 9-255.08, 77-2702.16, 77-2703, 77-2704.11, 77-2704.12, 77-2704.15, and 77-2705, R.S.Supp., 2002. Sections 9-204, 9-204.01, and 9-204.04, R.S.Supp., 2004. September 5, 2005.)

REG-35-220 MANUFACTURER OF BINGO EQUIPMENT: LICENSE; REQUIREMENTS; AND DUTIES

220.01 Any individual or business which manufactures bingo equipment and intends to sell, rent, lease, or otherwise provide such equipment in this state, must first obtain a manufacturer's license from the Department. A manufacturer's license shall not be required of:

220.01A An individual or business which manufactures or intends to sell only bingo supplies such as ink daubers, chips, tape, or glue sticks; or

220.01B An individual or business which manufactures electronic equipment which is not an integral part of the conduct of bingo such as television monitoring systems, computer terminals or printers, or cash registers.

220.02 A manufacturer's license shall only be issued to those applicants doing business in Nebraska or authorized to do business in Nebraska.

220.02A Authorization to do business in Nebraska requires:

220.02A(1) A domestic corporation to file Articles of Incorporation with the Nebraska Secretary of State's office;

220.02A(2) A domestic limited liability company to file Articles of Organization with the Nebraska Secretary of State's office;

220.02A(3) A foreign corporation or foreign limited liability company to obtain a certificate of authority to transact business in Nebraska from the Nebraska Secretary of State's office or to become domesticated by filing the required documents with the Nebraska Secretary of State's office and paying any required fees; or

220.02A(4) A domestic partnership, foreign partnership, or limited liability partnership to file any forms that may be required by the Nebraska Secretary of State’s office.

220.02B Applicants seeking a manufacturer's license and who intend to be engaged in business in this state as defined in section 77-2702.06 of the Nebraska Revised Statutes, as amended, shall also submit a Nebraska Tax Application, Form 20, to obtain a Nebraska Sales and Use Tax Permit.

220.02B(1) A licensed manufacturer engaged in business in this state as defined in section 77- 2702.06 may accept a properly completed Resale Certificate, Section A, of the Nebraska Resale and Exempt Sale Certificate, Form 13, from a licensed distributor in Nebraska, in lieu of charging and collecting sales tax from the distributor.

220.03 An individual or business shall apply for and obtain a manufacturer's license from the Department prior to supplying any bingo equipment in this state, or engaging in any interstate activities relating to such bingo equipment. The applicant shall include with the application form prescribed by the Department the statutorily required license fee and, at a minimum, the following information:

220.03A The business name and address of the applicant and the name and address of each of the applicant's separate locations at which manufacturing, warehousing, selling, or promotion of bingo equipment occurs;

220.03B The type of ownership of the business and the name, social security number, home address, and date of birth of:

220.03B(1) If a sole proprietorship, the individual owner;

220.03B(2) If a partnership, each partner and spouse;

220.03B(3) If a limited liability company, each member and spouse;

220.03B(4) If a corporation, each officer and spouse, each director or board member, and each individual or entity holding ten percent or more of the debt or equity of the corporation. If an entity holding ten percent or more of the debt or equity of the applicant corporation is a partnership, limited liability company, or corporation, the information required in Regulation 35-220.03B must be supplied for each partner of the partnership, each member of the limited liability company, or each officer of the corporation and every individual or entity holding ten percent or more of the debt or equity of the partnership or corporation.

220.03C If the applicant is not a resident or a corporation, the full name, business address, and home address of an individual who is a resident of and living in this state who is 19 years of age or older, to act as the manufacturer's resident agent for the purpose of receipt and acceptance of service of process and other communications on behalf of the manufacturer;

220.03D Upon request, a list of all Nebraska licensed distributors in which the applicant has some financial interest and the details of such interest. For purposes of this regulation, financial interest shall include, among all other interests, any indebtedness from the applicant to another individual or business or from another individual or business to the applicant in excess of $500.00;

220.03E A completed and notarized Personal History Record and Background Disclosure form supplied by the Department for each individual listed pursuant to Regulation 35- 220.02B except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form; and

220.03F Two sets of fingerprints on cards supplied by the Department and the requisite fees established by the Nebraska State Patrol and Federal Bureau of Investigation for each individual listed pursuant to Regulation 35- 220.02B, except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form. Fingerprint cards and the required fees must be submitted to the Nebraska State Patrol, Criminal Identification Division.

220.04 The applicant or licensee shall notify the Department within thirty (30) days of any change in the information submitted on or with the application form.

220.04A Changes must be reported in writing, and the Department may require the filing of a new application.

220.04B Changes shall be confirmed by the signature of an owner, officer, member, or partner of the manufacturer.

Any individual signing the most current application shall obligate the licensee to comply with the Nebraska Bingo Act and accompanying regulations for that licensing period.

220.05 A manufacturer's license shall expire on September 30 of every odd-numbered year and may be renewed biennially. An application for license renewal shall be due 45 days prior to the expiration date of the license. A manufacturer's license is not transferable.

220.06 A manufacturer is not considered licensed until it has physical possession of the printed license issued by the Department.

220.06A A manufacturer which has had its license lost, stolen, or destroyed must notify the Department as soon as possible. The manufacturer shall send a written statement to the Department signed by an owner, officer, member, or partner confirming the loss, theft, or destruction of the license. A duplicate license will be issued for no additional fee under such circumstances.

220.06B Any individual or business licensed as a manufacturer pursuant to section 9-332 of the Nebraska Pickle Card Lottery Act may act as a manufacturer pursuant to the Nebraska Bingo Act without submitting an additional licensing fee. Such individual or business shall comply in every other respect with the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, and all rules and regulations adopted and promulgated pursuant to such Acts.

220.06C A manufacturer which no longer desires to be licensed shall notify the Department, in writing, of its intention to cancel its license. Such notification shall be signed by an owner, officer, member, or partner of the manufacturer. A notification of cancellation shall be accompanied by the original license issued by the Department.

220.07 A licensed manufacturer, or any person having a substantial interest therein, is prohibited from holding any other licenses issued pursuant to the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act, except as provided in section 9-332 of the Nebraska Pickle Card Lottery Act, and section 9-632 of the Nebraska County and City Lottery Act.

220.07A A licensed manufacturer or employee or spouse of a licensed manufacturer shall not have a substantial interest, as defined in Regulation 35-200.20, in any other manufacturer, distributor, manufacturer-distributor, licensed organization, or lottery operator conducting gaming activities under the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act.

220.08 A licensed manufacturer or employee or spouse of a licensed manufacturer shall not participate in the operation or conduct of any kind of gaming activity regulated under Chapter 9 of the Nebraska Revised Statutes, except to the exclusive extent of his or her duties as a licensed manufacturer or employee thereof.

220.09 Unless specifically authorized by the Department, a licensed manufacturer shall not sell or otherwise provide bingo equipment in Nebraska to anyone other than a licensed distributor. Nothing in this regulation shall be construed to prohibit a licensed manufacturer from:

220.09A Selling or otherwise providing bingo equipment to a federally recognized Indian tribe; or

220.09B Selling or otherwise providing bingo equipment, excluding disposable paper bingo cards, to a qualifying nonprofit organization conducting special event bingo as defined in Regulation 35-222.

220.10 The price charged by a licensed manufacturer for bingo equipment shall not be fixed or set by agreement among licensed manufacturers in any manner, either expressed or implied.

220.10A No manufacturer shall offer or agree to offer anything of value to any individual or licensee in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use bingo equipment sold by such manufacturer.

220.10B No individual or licensee shall accept or agree to accept anything of value from a manufacturer in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use bingo equipment sold by such manufacturer.

220.11 A licensed manufacturer shall not be connected, interested, or otherwise concerned directly or indirectly with any individual or business licensed as a distributor or commercial lessor.

220.12 No manufacturer shall affix to any bingo supply or equipment any statement indicating any endorsement of that particular bingo supply or equipment by the State of Nebraska, the Department, or any division thereof. Additionally, no other statement indicating any such endorsement shall be made verbally or in writing.

220.13 Only a licensed manufacturer shall produce by assembling from raw materials or subparts a whole or partial piece of bingo equipment.

220.13A Nothing in this regulation shall prohibit a licensed manufacturer, with prior approval by the Department, from subcontracting services with an individual or business to assemble, manufacture, produce, make, print, convert, or modify bingo equipment to be used in a bingo game regulated by the Nebraska Bingo Act; however, the Department may require such subcontracting entity to first apply for and obtain a manufacturer's license. This shall include, but not be limited to:

220.13A(1) The printing of disposable paper bingo cards and the printing and assembly of hard bingo cards or shutter cards;

220.13A(2) The placing of face numbers, serial numbers, or sequential numbers on any disposable paper bingo card, hard card, or shutter card;

220.13A(3) The development or modification of any proprietary computer program which is used in and is an integral part of a bingo card monitoring device, site system, or host system to conduct or play bingo; and

220.13A(4) The manufacturing of bingo balls or the printing of numbers or colors on such balls.

220.13B For purposes of this regulation, day-to-day maintenance or upkeep of bingo equipment such as replacing a light bulb or electrical plug, inserting or removing balls from a blower machine, or other routine maintenance conducted by the licensed organization shall not be prohibited.

220.13C Nothing in this regulation shall be construed to prohibit:

220.13C(1) A licensed distributor from obtaining disposable bingo paper from a licensed manufacturer and cutting and assembling such paper into booklets, packets, or single sheets, for resale to licensed organizations; or

220.13C(2) The conversion of an electronic facsimile of a bingo card by a licensed organization's site system to a printout containing the cards and corresponding face numbers loaded into a bingo card monitoring device.

220.14 A manufacturer shall issue an invoice for each transaction involving bingo supplies or equipment. The invoice shall contain the following information:

220.14A The name and complete address of the purchaser;

220.14B The date of the invoice and an invoice number;

220.14C A complete description of the bingo supply or equipment, including the serial number (if applicable) and for all transactions involving disposable paper bingo cards:

220.14C(1) A complete description, including color, of the bingo card or packet (e.g., 3 ON Red booklet, 6 ON Blue booklet, 3 ON Green specials, instant bingo cards in singles, doubles, triples, etc.);

220.14C(2) The quantity sold, returned, or exchanged (e.g., number of packets per case, or total number of sheets for instant bingo cards and specials); and

220.14C(3) The serial numbers of the bingo cards or packets (if in packets, the serial number of the top sheet of the packet; for instant bingo cards, the serial number of the series);

220.14D The price charged for the bingo supply or equipment and the total amount to be paid, exchanged, or returned by the distributor; and

220.14E The manner of delivery or shipment, including the name of the individual, firm, or corporation with whom shipment or delivery is made.

220.15 A licensed manufacturer must receive Departmental approval, prior to offering for resale in Nebraska, for any type of bingo card which does not comply with or which has additional features to those described in Regulation 35-200.09C(1) or 35- 200.09C(2). Approval by the Department shall be based upon, but not limited to, the manufacture, assembly, and packaging of the bingo cards and any other specifications imposed by the Nebraska Bingo Act or regulations.

220.16 A licensed manufacturer shall be required to keep the following records:

220.16A Copies of all invoices for the sale, return, exchange, rental, or lease of bingo supplies and equipment to licensed distributors and any other individual or business located in this state; and

220.16B Copies of all rental, lease, or other contractual agreements relating to bingo supplies and equipment between the manufacturer and a licensed distributor or any other individual or business in this state.

220.17 All records required by this regulation shall be maintained for a period of not less than three years from the last day of the manufacturer's fiscal year. The Department may request periodic reporting from a licensed manufacturer regarding any information required to be kept by this regulation.

(Sections 77-2702.06, 77-2702.08, 77-2702.16, 77-2704.11, 77-2705, 77-2706, and 77-2708, R.R.S. 2003. Sections 9-202, 9-207.01, 9-209, 9-212, 9-217.01, 9-224, 9-241.07, 9-241.08, 9-255.01, 9-255.07, 9-255.09, 9-255.10, 9-332, and 9-616, R.R.S. 1997. Sections 9-1,104, 9-204, 9-204.01, 9-204.04, 9-213, 9-214.01, 9-226, 9-230.01, 9-241.10, 9-255.08, 77-2703, 77-2704.12, and 77-2704.15, R.S.Supp., 2004. September 5, 2005.)

REG-35-221 BINGO CARD MONITORING DEVICES

221.01 Bingo card monitoring devices and site system software shall be sold, rented, leased, or otherwise provided in this state only by a licensed manufacturer. Licensed manufacturers shall sell, rent, lease, or otherwise provide such equipment only to a licensed distributor.

221.01A The price which a licensed manufacturer may charge a licensed distributor for the sale, rental, lease, or other use of a bingo card monitoring device, site system, or the electronic facsimiles of bingo cards downloaded to bingo card monitoring devices shall not be based upon a percentage of the bingo gross receipts of any licensed organization.

221.01B A copy of any contractual agreement between a licensed manufacturer and a licensed distributor relative to the marketing of the manufacturer's equipment in this state shall be provided to the Department.

221.02 No bingo card monitoring device or site system software shall be sold, rented, leased, or otherwise provided to any individual, business, or organization in this state for use in a bingo game conducted pursuant to the Nebraska Bingo Act unless and until such device and system software have been approved by the Department.

221.02A Approval of a bingo card monitoring device or site system software will be based upon conformance with the requirements contained in this regulation and testing criteria established by the Charitable Gaming Division.

221.03 A licensed manufacturer seeking approval of a bingo card monitoring device or site system software may be required to submit a prototype of the device or system software to the Department for testing and review. Pursuant to the Nebraska Bingo Act, the manufacturer shall be responsible for the actual costs of testing and examining bingo card monitoring devices and site system software.

221.03A Once approved, any subsequent hardware or software modifications must be preapproved by the Department. At the Department's discretion, such modifications may be subject to additional testing.

221.04 Each bingo card monitoring device which requires a site system to download electronic facsimiles of bingo cards into the device shall have a unique identification number coded into the device's software or otherwise assigned and protected, such as by password, so that such number can only be changed by the manufacturer. Such identification number must be communicated from the device to the site system whenever the device is connected to the site system, and printed on all transaction logs, including the player's receipt. Manual input of a device identification number into the site system or on any transaction log or receipt is prohibited.

221.05 Each bingo card monitoring device shall be programed to automatically erase all bingo cards and/or bingo card face numbers stored in the device (a) upon turning off the device after the last bingo game of the occasion has been played or upon placing the device into a charging unit, and (b) by some secondary timing method established by the manufacturer and approved by the Department.

221.06 No bingo card monitoring device shall be equipped to allow bingo players the ability to design their own bingo cards by choosing, rearranging, or placing numbers on a card.

221.07 A site system shall not be able to engage in any type of sale, void, or reload transaction unless a bingo card monitoring device is connected to and communicating with the site system.

221.08 A site system supplied for use in Nebraska must have the capability to restrict no more than 72 bingo card faces per bingo game from being downloaded into any one bingo card monitoring device.

221.08A The site system must also be interfaced with a printer which produces a hard copy transaction log and a receipt for the player. All electronic facsimiles of bingo cards downloaded to bingo card monitoring devices shall comply in every respect with Section 9-204.01 of the Nebraska Bingo Act and Nebraska Bingo Regulation 35-209.

In addition, the hard copy transaction log must provide the following information:

221.08A(1) The organization’s name; 221.08A(2) The organization’s Nebraska State Identification Number;

221.08A(3) The date and time of each transaction;

221.08A(4) The bingo card monitoring device identification number related to each transaction;

221.08A(5) The price and number of bingo cards and/or packets loaded into each device; and

221.08A(6) The dollar amount of the sale of bingo cards for each transaction.

The site system must also produce a summary report after each bingo occasion which includes all of the information required by Regulation 35-221.32.

221.08B A receipting function for bingo cards must be self-contained within the site system and must record and print out, on a copy which is given to the player, the following information:

221.08B(1) The organization’s name;

221.08B(2) The organization’s Nebraska State Identification Number;

221.08B(3) The bingo occasion site (location);

221.08B(4) A sequential transaction or receipt number;

221.08B(5) The bingo card monitoring device identification number (Which cannot be manually entered);

221.08B(6) The date and time of the transaction;

221.08B(7) The total number of bingo cards purchased and the price per card or packet of electronic facsimiles of bingo cards; and

221.08B(8) The series of electronic facsimiles of bingo cards.

221.09 Either the site system or a bingo card monitoring device shall be able to provide the winning game patterns required for the entire bingo occasion. A printout or electronic display of the winning patterns must be available upon demand at the bingo occasion, if requested by Department personnel.

221.10 If the Department detects or discovers any malfunction or problem with a bingo card monitoring device or site system that could affect the security or integrity of the bingo game, the bingo card monitoring devices, or the site system, the Department may direct the manufacturer, distributor, or licensed organization to cease providing or using the bingo card monitoring devices or site system, as applicable. The Department may require the manufacturer to correct the problem or recall the devices or system immediately upon notification by the Department to the manufacturer. Failure to take the corrective action requested may result in the seizure of the devices and/or site system.

221.10A If a manufacturer, distributor, or licensed organization detects or discovers any malfunction or problem with the bingo card monitoring devices or site system which could affect the security or integrity of the bingo game, bingo card monitoring devices, or site system, the manufacturer, distributor, or licensed organization, as applicable, shall discontinue use of the devices or site system and notify the Department by telephone by the next working day of such action and the nature of the problem detected. The Department may request further explanation in writing if deemed necessary.

221.11 A licensed distributor shall purchase, rent, lease, or otherwise obtain bingo card monitoring devices and site system software only from a manufacturer licensed by the Department. A licensed distributor shall sell, rent, lease, or otherwise provide only bingo card monitoring devices and site system software which have been approved by the Department.

221.12 A licensed distributor shall sell, rent, lease, or otherwise provide bingo card monitoring devices and site system software in this state only to an organization holding a Class I or Class II bingo license.

221.12A Bingo card monitoring devices and site system software shall not be sold, rented, leased, or otherwise provided to a licensed commercial lessor or special event bingo permittee.

221.13 Before the initial use of any bingo card monitoring devices or site system software by a licensed organization, the licensed distributor must notify the Department in writing of the sale, rental, lease, providing, and/or installation of any such devices or software. Such notification shall include:

221.13A The complete name and address of the licensed organization and its state identification number;

221.13B The type of equipment (including serial numbers) sold, rented, leased, provided, or installed;

221.13C The expected start-up date for use of the equipment by the licensed organization; and

221.13D A copy of the sale/purchase, rental, or lease agreement between the licensed distributor and the licensed organization for the equipment. Such agreement shall be in writing and shall not be based upon a percentage of the licensed organization's bingo gross receipts. All sale/purchase, rental and lease agreements shall be subject to approval by the Department.

221.14 The licensed distributor shall serve as the initial contact for the licensed organization with respect to requests for installation, service, maintenance, or repair of bingo card monitoring devices and site systems, and for the ordering of the electronic facsimiles of bingo cards to be downloaded to the organization's site system, if applicable. The distributor may, as needed, enlist the aid of the licensed manufacturer in providing service, repair, or maintenance of the devices or site system.

221.14A A licensed manufacturer may, with Departmental approval, authorize or subcontract with an individual or business to service, maintain, or repair bingo card monitoring devices and/or site systems; however, the ultimate liability for such service, maintenance, or repair shall be solely that of the licensed manufacturer.

221.15 The licensed distributor shall invoice the licensed organization and collect any and all payments for the sale of electronic facsimiles of bingo cards, and the sale, rental, lease, or other use of bingo card monitoring devices and site systems.

221.15A The distributor may, at its discretion, allow the licensed manufacturer to generate the invoice; however, all payments by the licensed organization must be remitted directly to the distributor. The licensed distributor must insure that its name, complete address, and telephone number appear on the invoice as well as the name, complete address, and state identification number of the licensed organization.

221.16 Bingo card monitoring devices and site systems may be transported by a licensed distributor, gaming manager, bingo chairperson, or alternate bingo chairperson from one premises to another for use by more than one licensed organization.

221.17 A licensed organization shall purchase, rent, lease, or otherwise obtain bingo card monitoring devices and site system software only from a Nebraska licensed distributor.

221.17A A licensed organization may obtain computer terminals and/or printers to be used in conjunction with its site system software from any source.

221.18 Bingo card monitoring devices shall be rented, leased, or otherwise provided to bingo players only by the licensed organization conducting the bingo occasion, and only at the time and place of the bingo occasion. A bingo player using a bingo card monitoring device must be physically present on the premises during the time of the bingo occasion in order to be eligible to play bingo or win any bingo prize.

221.18A The use of a player-owned bingo card monitoring device at a bingo occasion conducted pursuant to the Nebraska Bingo Act is prohibited. A player may utilize only a bingo card monitoring device which has been obtained from the licensed organization conducting the bingo occasion.

221.19 Bingo card monitoring devices shall be made available to players on a first-come, first-serve basis. No device may be reserved for any player, except that a device may be reserved for any player with a disability that would restrict his or her ability to mark cards and where such disability is consistent with definitions set forth in the Americans with Disabilities Act.

221.19A Regardless of the number of bingo card monitoring devices made available for play, at least one device shall be reserved by the licensed organization as a back-up device, in the event a device in play malfunctions.

221.20 No bingo player shall be allowed to utilize more than one bingo card monitoring device at any time during a bingo occasion.

221.20A A licensed organization may, at its discretion, allow two or more players to share the same bingo card monitoring device provided the device is not loaded with more than 72 bingo card faces per bingo game.

221.20B A licensed organization may establish a house rule prohibiting the sharing of a single bingo card monitoring device by more than one player.

221.21 No person shall be permitted to load a bingo card monitoring device with more than 72 bingo card faces per game. No bingo player shall be permitted to use a bingo card monitoring device to monitor more than 72 bingo cards per game. A bingo card monitoring device cannot be used to monitor hard bingo cards or shutter cards. A bingo card monitoring device may only be used to monitor electronic facsimiles of bingo cards or disposable paper bingo cards.

221.22 A licensed organization shall not permit a bingo player to choose or reject any bingo cards which are sold in conjunction with a bingo card monitoring device.

221.23 At the licensed organization's discretion, a bingo player may, in addition to the maximum 72 bingo cards per game which he or she purchases to monitor with a bingo card monitoring device, purchase additional bingo cards to play without the aid of a bingo card monitoring device.

221.23A The type of additional bingo cards which can be sold to players shall be determined by the class of bingo license held by the licensed organization conducting the bingo occasion.

221.23A(1) Class II bingo licensees may sell only disposable paper bingo cards as additional cards to be played without the assistance of a bingo card monitoring device.

221.23A(2) Class I bingo licensees may sell either disposable paper bingo cards, hard cards, or shutter cards as additional cards to be played without the assistance of a bingo card monitoring device.

221.24 Only a bingo worker of the licensed organization shall download electronic facsimiles of bingo cards into a bingo card monitoring device or enter disposable paper bingo card face numbers into any such device. Such downloading or entering shall be done only:

221.24A Upon payment for the cards by the player. The preloading of any cards into a bingo card monitoring device before payment is received from the player utilizing the device at the bingo occasion, is prohibited;

221.24B On the premises of the licensed organization's bingo occasion; and

221.24C During the time of the bingo occasion.

221.25 A licensed organization utilizing bingo card monitoring devices must clearly post a sign in the vicinity of the cashier advising players to (a) verify that the face numbers entered into the device which they are utilizing match the face numbers of the disposable paper which they have purchased, or (b) verify that the number of electronic facsimiles of bingo cards downloaded into the device corresponds to the number of cards they purchased. Such sign shall also advise the players that any errors in the entering or downloading of the bingo cards into a bingo card monitoring device must be corrected by a bingo worker before the calling of the first number of the first bingo game, and that any "bingo" achieved on a face number entered in error shall be deemed invalid.

221.26 A licensed organization utilizing bingo card monitoring devices which require a site system to download electronic facsimiles of bingo cards into bingo card monitoring devices must ensure that the bingo cards downloaded to bingo card monitoring devices are of a different series than any disposable paper bingo cards sold for play with or without the use of bingo card monitoring devices, in order to avoid duplication of faces in play.

221.27 A licensed organization utilizing bingo card monitoring devices which are used in conjunction with disposable paper bingo cards which are NOT printed by a site system must ensure that the disposable paper bingo cards used with such devices are of a unique color, either by screen face or by border, and not sold by the organization for use other than with a bingo card monitoring device. In addition, the licensed organization must:

221.27A Stamp the filler sheet or last page of each disposable paper bingo card packet and each single sheet of disposable paper bingo cards with the date of the bingo occasion at which it is sold; and

221.27B Advise the player that the filler sheet must remain attached to the packet and that any "bingo" obtained on an undated packet or single sheet or packet without the filler sheet attached will not be valid.

221.28 A licensed organization may, at its discretion, require a player to purchase a minimum number of electronic facsimiles of bingo cards or disposable paper bingo cards in order to utilize a bingo card monitoring device; however, the price that a licensed organization may charge a player for bingo cards used in conjunction with a bingo card monitoring device shall be the same as the price charged by the organization for bingo cards played without the use of such a device.

221.28A Both Class I and Class II bingo licensees utilizing bingo card monitoring devices which require a site system to download electronic facsimiles of bingo cards into bingo card monitoring devices shall comply with Nebraska Bingo Regulation 35-209.05 with respect to submitting a bingo card price structure to the Department, and reporting any subsequent changes to that structure.

221.29 A licensed organization may, at its discretion, charge a separate fee to players for the use of a bingo card monitoring device; however, if an organization charges a separate fee for the use of a bingo card monitoring device:

221.29A The fee charged must be a flat fee, regardless of the number of bingo cards purchased or any other factor;

221.29B The fee must be separately stated on the cash register and bingo player's receipt;

221.29C The fee shall be included in determining the bingo gross receipts; and

221.29D The amount of the fee shall be subject to sales tax.

221.30 The sale of all disposable paper bingo cards used in conjunction with a bingo card monitoring device, by either a Class I or Class II bingo licensee, must be receipted through a cash register. Such receipt must be displayed by each player at all times during the bingo occasion, and verified as correct and current by a bingo worker any time a "bingo" is declared by a player.

221.30A Additional disposable paper bingo cards sold by a Class II bingo licensee which will not be used in conjunction with a bingo card monitoring device must be receipted as required by the Nebraska Bingo Act and accompanying regulations and, in addition, the cash register and player's receipt must identify and show the sale of additional disposable paper bingo cards separately from the disposable paper bingo cards which are sold in conjunction with a bingo card monitoring device.

221.31 The numbers appearing on a bingo card identified by a bingo card monitoring device as a winning bingo card must be verified by a bingo worker at the time the winner is determined and prior to prize(s) being awarded in order to insure that the numbers on the bingo card identified in fact have been drawn from the receptacle.

221.31A The verification shall be done by a bingo worker in the immediate presence of at least one neutral player by verbally announcing either:

221.31A(1) The numbers of the winning bingo pattern; or

221.31A(2) The winning bingo card's face number for entry into an electronic bingo verifier.

221.31B The bingo worker shall also verify that:

221.31B(1) The winning bingo card face number appearing on the bingo card monitoring device matches a face number of the disposable paper bingo card(s) purchased by the player to be monitored by the device (when applicable);

221.31B(2) The game number on the bingo card monitoring device which has signaled a winning bingo pattern matches the number of the bingo game which was actually being played;

221.31B(3) The filler sheet or last page is attached if play is on a disposable paper bingo card packet not used in conjunction with a bingo card monitoring device, and the date of the current bingo occasion is stamped on the filler sheet or, in the case of a single sheet, on the winning single sheet;

221.31B(4) The player has marked or daubed the winning pattern on the appropriate winning disposable paper bingo card (when applicable); and

221.31B(5) The serial number of the disposable paper bingo card with the winning bingo pattern matches the serial number of the disposable paper bingo cards sold by the licensed organization at that particular bingo occasion.

221.32 Once the last game of the bingo occasion has been completed, the gaming manager shall print a bingo occasion summary report on the site system detailing the following information:

221.32A The organization’s name;

221.32B The organization’s Nebraska State Identification Number;

221.32C The date and time of report;

221.32D The total number of electronic facsimiles of bingo cards loaded for the bingo occasion;

221.32E The total number and description of packets sold;

221.32F The total number of voided transactions to include the dollar amount;

221.32G The total number of reloaded electronic facsimiles of bingo cards; and

221.32H The gross receipts or total sales for the occasion.

221.33 At the conclusion of each occasion, all bingo transaction data recorded by the site system shall be copied and saved to floppy disk, tape, or other removable medium and stored at a location other than the location of the bingo occasion. Such information shall be retained for a period of not less than three years from the date of the bingo occasion.

(Sections 9-202, 9-207.01, 9-209, 9-224, 9-255.01, 9-255.07, 9-255.09, and 9-255.10, R.R.S. 1997. Sections 9-204, 9-204.01, 9-204.04, 9-213, 9-214.01, 9-226, 9-241.05, 9-241.10, and 9-255.08, R.S.Supp., 2004. September 5, 2005.)

REG-35-222 SPECIAL EVENT BINGO: ELIGIBILITY; CONDUCT; AND RESTRICTIONS

222.01 Special event bingo means the conduct of bingo games in conjunction with a special event at which bingo is not the primary reason or function for the event such as, but not limited to, a town celebration or a school fun night. Qualifying nonprofit organizations conducting bingo pursuant to a special event bingo permit issued by the Department shall be exempt from the licensing, record keeping, reporting, and bingo tax requirements that otherwise apply to bingo conducted by Class I and Class II bingo licensees.

222.02 A Class I or Class II bingo licensee is not eligible to obtain a special event bingo permit. To qualify for a special event bingo permit, an organization must:

222.02A Be a nonprofit organization or a nonprofit corporation which holds a certificate of exemption under section 501 of the Internal Revenue Code, or be an organization whose major activities, exclusive of conducting gaming activities, are conducted for charitable or community betterment purposes; and

222.02B Have been in existence in Nebraska for at least five years prior to submitting the application.

222.03 A qualifying nonprofit organization must apply for a special event bingo permit on a form prescribed by the Department and be issued the permit prior to conducting special event bingo. An application for a special event bingo permit must be submitted to the Department along with the statutorily required permit fee, at least ten (10) days prior to the desired starting date of the special event bingo. The application shall contain, at a minimum, the following information:

222.03A The organization's name, federal and state identification numbers if applicable, complete location address including the county in which the organization is located and, if different from the location address, the organization's complete mailing address;

222.03B The number of years the organization has been in existence in Nebraska;

222.03C An indication of whether or not the organization is exempt under section 501 of the Internal Revenue Code and:

222.03C(1) If the organization is exempt under section 501 of the Internal Revenue Code, a copy of the organization's exemption determination letter or an indication of the group exemption number issued by the Internal Revenue Service; or

222.03C(2) If the organization is not exempt under section 501 of the Internal Revenue Code, a brief explanation of the purpose for which the organization was created, a copy of the organization's Articles of Incorporation or bylaws, and examples of the types of activities conducted by the organization;

222.03D A brief description of the special event at which bingo is to be conducted;

222.03E An indication as to whether individuals under 18 years of age will be permitted to play bingo;

222.03F The location name and complete address where the special event bingo is to be conducted;

222.03G The date(s) and beginning and ending times of the special event bingo;

222.03H The name, complete address, and telephone number of a member of the organization who will be in charge of the special event bingo; and

222.03I The signature, title, and telephone number of an officer of the organization.

222.04 There are no time restrictions on the length of a particular special event bingo session; however, a qualifying nonprofit organization may be issued only two special event bingo permits per calendar year for an aggregate total of not more than fourteen calendar days. A separate permit fee must be submitted for each special event bingo.

222.04A The qualifying nonprofit organization may use all fourteen days for one special event bingo but, in doing so, would not be eligible for a second special event bingo permit within the same calendar year.

222.04B In the event that a special event bingo begins in one calendar year and extends into the next, the beginning date stated on the special event bingo permit shall be the determining factor as to which year the permit and number of days of the special event bingo shall be attributed to.

222.05 Special event bingo is subject to the following restrictions:

222.05A Bingo cannot be the primary function of the special event;

222.05B It must be conducted within the county in which the qualifying nonprofit organization has its principal office;

222.05B(1) For purposes of this regulation, principal office means the place where the principal affairs and business of the qualifying nonprofit organization are transacted, including where the officers and members assemble to discuss and transact the business of the organization, where its meetings are held, and generally where the organization's records are kept.

222.05C The qualifying nonprofit organization must post the special event bingo permit issued by the Department at the location where bingo is to be conducted. The permit must be located so that it can be reasonably seen by participants;

222.05D There are no age restrictions for the playing of special event bingo; however, all individuals assisting with the operation or conduct of bingo must be at least 18 years of age. This would include individuals selling or distributing bingo cards, acting as a floor worker to verify or pay winners, the bingo caller, and any individual supervising the bingo activity. It would not include concession workers who may be working at the special event bingo.

222.05D(1) Special event bingo workers must be volunteers who receive no wage, commission, or salary for working at the special event bingo occasion except that nothing in this regulation shall prohibit a qualifying nonprofit organization from providing special event bingo workers with free concession items such as soft drinks or other food items of a minimal value to be consumed immediately before, during, or after the special event bingo, as a reward for volunteering as workers;

222.05E If individuals under 18 years of age are permitted by the qualifying nonprofit organization to play bingo, no alcoholic beverages shall be served, sold, or consumed in the immediate vicinity of the special event bingo game;

222.05F Only traditional 75-number reusable hard bingo cards, shutter cards, or disposable paper bingo cards can be used to conduct special event bingo;

222.05G Bingo cards cannot be sold, rented, or leased to players for more than twenty-five cents per card. At the qualifying nonprofit organization's discretion, players may be permitted to purchase more than one bingo card per game or per occasion. In addition, at the qualifying nonprofit organization's discretion, the twenty-five cent limitation may be applied as follows:

222.05G(1) Twenty-five cents per card for each individual bingo game; or

222.05G(2) Twenty-five cents per card to play all bingo games of the occasion; and

222.05H No single bingo prize offered or awarded, whether cash or merchandise, shall exceed $25.00 in value. Bingo prizes are also subject to the following:

222.05H(1) Prizes may only be items which can be legally owned and possessed;

222.05H(2) Merchandise awarded as a bingo prize shall be valued at its fair market value and shall not be redeemable or convertible into cash directly or indirectly by the qualifying nonprofit organization. Fair market value means the price that one would normally pay for an item in an arm's length transaction with a retail business; and

222.05H(3) Gift certificates to be awarded as prizes are to be valued at their face value.

222.06 A qualifying nonprofit organization conducting special event bingo may obtain the equipment necessary to conduct bingo, except for disposable paper bingo cards, from any source, including, but not limited to, a licensed manufacturer, a licensed distributor, or a Class I or Class II bingo licensee. Disposable paper bingo cards may be obtained only from a licensed distributor or, upon receiving specific authorization from the Department, from a Class I or Class II bingo licensee. A qualifying nonprofit organization may also conduct special event bingo utilizing a bingo game set obtained from a retail store.

222.06A Within ten (10) days of the conclusion of the special event bingo, the qualifying nonprofit organization shall notify the Department, in writing, regarding the disposition of any unused disposable paper bingo cards.

222.06B If the organization does not intend to conduct a future special event bingo, it may (a) attempt to return any unused disposable paper bingo cards to the licensed distributor from whom they were purchased; (b) obtain permission from the Department to sell or donate the unused disposable paper bingo cards to another special event bingo permittee or to a licensed Class I or Class II bingo licensee, or (c) relinquish possession of the unused disposable paper bingo cards to the Department.

222.07 The gross receipts from the conduct of a special event bingo must be used solely for the awarding of prizes and expenses associated with the special event bingo. Any remaining profit must be used solely for a charitable or community betterment purpose as provided in Nebraska Bingo Regulation 35- 203.

(Sections 9-202, 9-204, 9-209, 9-215.01, 9-217, 9-217.01, 9-224, 9-241.02, 9-241.03, 9-241.06, 9-241.07, 9-241.08, 9-255.01, and 9-255.10, R.R.S. 1997. Sections 9-214.01, 9-226, 9-230.01, 9-241.05, and 9-255.08, R.S.Supp., 2002. November 12, 2002.)

REG-35-223 PRORATION AND REFUND OF LICENSE FEES

223.01 The fees paid pursuant to the Nebraska Bingo Act for any license issued to a manufacturer, distributor, nonprofit organization, volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad, utilization of funds member, gaming manager, or commercial lessor are due in full for the biennial licensing period. A license fee may be prorated or refunded by the Department on an annual basis under the following circumstances:

223.01A If a new application is received by the Department for a license which will become effective on or after October 1 of the second year of the biennial licensing period, the applicable license fee shall be one-half of the biennial fee.

223.01B If a new application is received by the Department for a license which will become effective prior to October 1 of the second year of the biennial licensing period, no proration of the license fee shall be allowed.

223.01C No license fee may be refunded for any portion of the licensing period in which a license was not used unless otherwise authorized by the Department.

223.01D If an application to downgrade a Class II license to a Class I license for the second year of the biennial licensing period is received and approved by the Department prior to October 1 of the second year of the biennial licensing period, such license may be downgraded; however, no portion of the Class II license fee shall be refunded unless otherwise authorized by the Department.

223.01E In the event a license issued pursuant to the Nebraska Bingo Act is suspended, cancelled, or revoked by the Department, no portion of the license fee shall be refunded unless otherwise authorized by the Department.

223.01F In the event a license application is denied and a temporary license was issued to the applicant prior to the effective date of the license application denial, one-half of the biennial license fee paid by the applicant may be refunded, provided the effective date of the license application denial is prior to October 1 of the second year of the biennial licensing period. In the event a license application is denied and a temporary license was not issued or a license application is withdrawn, the license fees paid by the applicant may be refunded.

223.01F(1) In the case of a manufacturer or distributor, the Department may apply the portion of any license fee to be refunded to any amount owed by the licensee or applicant with respect to a background investigation or facility inspection conducted by the Department.

223.01G Upon the death of a person licensed as a utilization of funds member or gaming manager, or in the event any such licensee becomes disabled in such a manner as to render him or her unable to perform or fulfil his or her duties as a utilization of funds member or gaming manager, a licensed organization may submit an application to replace the utilization of funds member or gaming manager with a new individual for the remainder of the licensing period for no additional fee. Any such application shall be accompanied by the original utilization of funds member or gaming manager license and a written statement signed by an officer of the licensed organization explaining the circumstances under which the request for replacement of the licensee is being made.

(Sections 9-202, 9-207, 9-208, 9-209, 9-209.01, 9-212, 9-220, 9-225, 9-225.01, 9-255.07, and 9-255.09, R.R.S. 1997. Sections 9-213, 9-214.01, 9-226, 9-232.01, 9-232.02, 9-233, 9-255.06, R.S.Supp., 2002. November 12, 2002.)

LOTTERY BY PICKLE CARD

REG-35-300 SCOPE AND DEFINITIONS

300.01 Bingo, Lottery, Raffle, and Lottery by Pickle Card Regulations 35-300 through 35-318 are adopted to carry out the provisions of the Nebraska Pickle Card Lottery Act. The following definitions apply as used throughout section 35-300 through 318.

300.02 Definite profit means the gross proceeds or total possible receipts of a pickle card unit less all of the possible prizes from that pickle card unit. For example:

| Gross proceeds (3,600 pickle cards at $1) | $3,600 | | --- | --- | | Less prizes | (2,600) | | Definite profit | $1,000 |

300.03 Department means the Nebraska Department of Revenue.

300.04 Dispensing device means any machine or device into which a person inserts money, a token, or something of value in exchange for one or more pickle cards. The definition of dispensing device does not include any machine or device that awards or dispenses any other type of prize including, but not limited to, free plays or any other item of value.

300.05 Flare card means a card, board, poster, flyer, or paper prepared by the manufacturer of a pickle card unit which is enclosed with each unit. The flare card must identify the serial number for the unit , the state identification stamp , the numbers, letters, symbols, or configurations which, when revealed by opening the tabs on a pickle card, represent the winning combinations, the number of cards in the pickle card unit which contain the winning combinations and their values , the form number of the game, and the name, logo, symbol, design, or trademark of the manufacturer of the pickle card unit.

300.06 Gross profit means the definite profit from a pickle card unit less any commission paid to a pickle card operator for the sale of the unit. For example:

| Gross proceeds (3,600 pickle cards at $1) | $3,600 | | --- | --- | | Less prizes | (2,600) | | Definite profit | $1,000 | | Less pickle card operator's commission (30%) | (300) | | Gross profit | $700 |

300.07 Member means an individual who meets the written membership requirements contained in the organization's articles of incorporation, bylaws, charter, statement of purpose, or other written rules or statement governing membership of the organization.

300.07A A person whose only participation in the activities of the organization involves the conduct of gaming activities is not a member.

300.08 Net profit means the gross profit from a pickle card unit less the unit cost and the allowable expenses incurred by the licensed organization for marketing the unit. For example:

| Gross proceeds (3,600 pickle cards at $1) | $3,600 | | | --- | --- | --- | | Less prizes | | (2,600) | | Definite profit | | $1,000 | | Less pickle card operator's commission (30%)* | | ( 300) | | Gross profit | | $ 700 | | | | | | Less elements of unit cost | | | | Cost of unit | $ 60 | | | Imprinting fee | 7 | | | Pickle card tax (10%)* | 100 | | | Subtotal: | 167 | | | Sales tax ** | 12 | | | Federal tax (.0025 of gross)*** if applicable | 9 | | | | $ 188 | | | Allowable expenses (12%)* | | | | 6% sales agents' commission | $ 60 | | | Other marketing expenses 60 | | | | | $ 120 | | | Total unit cost and allowable expenses | $ 308 | ( 308) | | Net profit | | $392 |

• Calculated on definite profit

** Calculated on total unit cost, including the pickle card tax and the imprinting fee – sales tax may vary, the amount shown is rounded and assumes the maximum local rate

*** Calculated on gross proceeds

300.09 Substantial interest means a connection, interest, or concern, directly or indirectly, with an individual, organization, firm, or corporation as follows:

300.09A Regarding a sole proprietorship, an individual or his or her spouse who owns, operates, manages, or conducts directly or indirectly, a part of the sole proprietorship;

300.09B Regarding a partnership, an individual, his or her spouse, or a partnership, limited liability company (LLC), or corporation who owns, operates, manages, or conducts directly or indirectly a part of the partnership activity, or shares in any of the profits or potential profits of the partnership activities;

300.09C Regarding a LLC, an individual, his or her spouse, or a partnership, LLC, or corporation who owns, operates, manages, or conducts directly or indirectly a part of the LLC activity, or shares in any of the profits or potential profits of the LLC activity;

300.09D Regarding a corporation, an individual, his or her spouse, or a partnership, LLC, or corporation who owns, operates, manages, or conducts directly or indirectly a part of the corporation activity, or who is an officer or director of the corporation or is a holder directly or indirectly of ten percent or more of any class of stock in the corporation;

300.09E Regarding an individual, an individual or his or her spouse who provides ten percent or more of the capital, whether in cash, goods, or services for the operation of a manufacturer, distributor, or pickle card operator during a calendar year; and

300.09F Regarding an organization, association, or business not covered by subdivisions A, B, C, D, or E of this regulation:

300.09F(1) An individual or his or her spouse who is an officer or director of or manages the business affairs of the organization, association, or business; or more of the assets of the organization, association, or business.

300.10 Ultimate use means the final purpose for which a licensed organization uses the proceeds or profits of a lottery by the sale of pickle cards. For expenses incurred by the organization, the ultimate use of pickle card proceeds to pay the expenses means payment directly to the individual, business or corporation with whom the organization incurred that particular expense. In the case of a lawful purpose donation, the ultimate use of pickle card net profits means that those monies are donated or directed by the licensed organization directly to the final recipient for the lawful purpose intended by the organization.

300.11 Unit cost means those costs incurred by a licensed organization connected with the purchase of a pickle card unit. Unit cost consists of the cost of the unit itself, the pickle card tax, any applicable sales or use tax, any federal gaming tax for which a licensed organization may be liable, the imprinting fee charged by a licensed distributor, and any shipping or delivery fee if invoiced from the distributor to the licensed organization.

300.12 Youth Amateur Athletics or Youth Sports means activities sponsored by an organization which organizes, supervises, or administers team or individual activities consisting of an element of enjoyment or recreation involving the practice of individual skill and in which all those participating on the team or in an individual activity are under the age of 19.

(Sections 9-305.01, 9-306, 9-308, 9-308.01, 9-309, 9-314, 9-314.01, 9-321.01, 9-322, 9-326, 9-327, 9-329.01, 9-329.02, 9-329.03, 9-329.04, 9-336, 9-340, 9-344, 9-345.02, 9-345.03, 9-346 and 9-348, R.R.S. 2007 and sections 9-347 and 9-347.01, R.S. Supp., 2009. November 6, 2010.)

35-301 Nonprofit Organizations, Nonprofit Corporations, Volunteer Fire Companies, or Volunteer First-aid, Rescue, Ambulance, or Emergency Squads –Qualification for a License to Conduct a Lottery by the Sale of Pickle Cards

301.01 A nonprofit organization or nonprofit corporation holding a certificate of exemption under Internal Revenue Code (IRC) § 501(c) (3), (4), (5), (7), (8), (10), or (19), a volunteer fire company, or a volunteer first-aid, rescue, ambulance, or emergency squad (eligible organization) may apply for a license to conduct a lottery by the sale of pickle cards.

301.01A Any eligible organization applying for a license to conduct a lottery by the sales of pickle cards must be incorporated or established in this state. An organization incorporated in a foreign state holding a certificate of authority to conduct affairs, or which has domesticated in Nebraska, does not qualify for a license.

301.01B An eligible organization must have been in existence in this state for five years immediately preceding its application for a license and have had an active, bona fide membership engaged in furthering a lawful purpose during that period. This requirement does not apply to a volunteer fire company, a volunteer first-aid, rescue, ambulance, or emergency squad, or a nonprofit corporation whose primary purpose is to support a volunteer fire company, or a volunteer first-aid, rescue, ambulance, or emergency squad.

301.01C When applying for its initial license, a nonprofit organization or nonprofit corporation holding a certificate of exemption under IRC § 501(c) (3), (4), (5), (7), (8), (10), or (19) (organization) is considered exempt under IRC § 501 if it provides a copy of the exemption ruling or exemption determination letter issued by the Internal Revenue Service (IRS). Subsequent applications to renew an existing license to conduct a lottery by the sale of pickle cards are not required to be accompanied by the proof of exemption unless the circumstances under which the exemption was issued, or the nature of the organization have changed substantially so that the exempt status may no longer be applicable. The Department may specifically request the exemption determination documentation on any subsequent application.

301.01C(1) An organization may be exempt under a group exemption letter issued by the IRS. A group exemption letter is a ruling or determination letter issued to a parent organization or parent corporation (parent), recognizing on a group basis, the exemption under IRC § 501(c) of the subordinate entities on whose behalf the parent has applied for recognition of exemption. A parent is an organization or corporation that has one or more subordinates under its general supervision or control. A subordinate is a chapter, local, post, or unit of a parent (for example, the American Legion, Veterans of Foreign Wars, and Fraternal Order of Eagles). Under these circumstances, a subordinate organization or corporation applying for an initial license must provide the Department with a copy of the group exemption letter issued to the parent or indicate the Group Exemption Number.

301.01C(2) An organization defined in Neb. Rev. Stat. § 21-608 which is chartered in Nebraska under a state, grand, supreme, national, or other governing body, may use the charter date of its parent to satisfy the five-year existence requirement.

301.01C(3) This requirement does not apply to a volunteer fire company, or a volunteer first-aid, rescue, ambulance, or emergency squad which is applying for its initial license.

301.02 Additional Documentation. To verify the applicant organization’s five-year existence, the Department may require the organization to provide additional documentation about the organization which includes, but is not limited to, any of the following:

301.02A Dated bylaws of the organization;

301.02B Dated Articles of Incorporation of the organization; 301.02C Dated minutes of the organization’s meetings; 301.02D Dated charter of the organization; or

301.02E Other dated documents of the organization which would provide evidence of the organization’s existence and the purposes for which it was organized.

301.02F This requirement does not apply to a volunteer fire company, or a volunteer first-aid, rescue, ambulance, or emergency squad.

301.03 Charity or Community Betterment Documentation. The Department may also require the organization to produce evidence of charitable or community betterment activities conducted by the organization’s membership during the five-year period preceding the application. Some examples of evidence include, but are not limited to, the following:

301.03A Filings with any governmental agencies regarding charitable activities of the organization;

301.03B Internal documents, including membership lists, dues statements, minutes of meetings of directors of the organization, copies of corporate resolutions of the organization, or correspondence and memoranda relating to nonprofit, charitable activities conducted by the organization or its membership;

301.03C Documents regarding day to day activities of the organization, for example, bank account statements, bills, receipts, leases, documents affecting title to property, ledgers, account books, tax returns, employee lists, or any other documents pertaining to the organization’s administrative activities;

301.03D The names, addresses, and telephone numbers of persons, firms, and organizations the organization has dealt with in conducting its activities; or

301.03E Other documentation showing participation by the organization and its membership in charitable or community betterment activities.

301.03F This requirement does not apply to a volunteer fire company, or a volunteer first-aid, rescue, ambulance, or emergency squad.

301.04 Limitations on Licenses Between Related Eligible Organizations. Each eligible organization wishing to conduct a lottery by the sale of pickle cards must obtain its own license to do so. Related eligible organizations may not use a license to conduct a lottery by the sale of pickle cards obtained by one licensee to conduct a lottery by the sale of pickle cards on behalf of one or more related eligible organizations. This does not preclude a licensed organization from becoming licensed as a pickle card operator to sell pickle cards on behalf of another licensed organization. In this instance, the eligible organization seeking the operator’s license must meet the statutory requirements for obtaining a license as a pickle card operator. Related eligible organizations, each conducting separate lotteries by the sale of pickle cards, must obtain separate licenses to do so. For the purposes of this section, a related eligible organization means:

301.04A An eligible organization affiliated with, and organized in accordance with, the bylaws and regulations formulated by a companion or parent eligible organization; and

301.04B At least 75% of the members of one eligible organization are either: members of a parent or companion eligible organization; spouses of members of its parent or companion eligible organization; or are the parents, children, brothers, sisters, grandparents, or grandchildren of a member of the parent or companion eligible organization.

(Neb. Rev. Stat. §§ 9-321.03, 9-326, and 9-327. July 3, 2013)

REG-35-302 LICENSE REQUIREMENTS FOR CLASS I AND CLASS II LOTTERY BY SALE OF PICKLE CARDS

302.01 A nonprofit organization, volunteer fire company, or volunteer first-aid, rescue, ambulance, or emergency squad shall not conduct a lottery by the sale of pickle cards without first obtaining a license. Such license shall be applied for on a form prescribed by the Department. Eligible organizations seeking a license to conduct a lottery by the sale of pickle cards may apply for either a Class I or Class II license. The class of license which an organization is granted shall be determined by the manner in which the organization intends to market its pickle cards.

302.01A Organizations which intend to sell pickle cards only at their designated premises and/or at their regularly scheduled or limited period bingo occasions, shall apply for a Class I license. Such organizations cannot sell pickle cards through licensed pickle card operators and do not need to license a sales agent. If, during the course of the licensing period the organization wishes to begin marketing pickle card units through licensed pickle card operators, the organization must first apply for and obtain a Class II license.

Such application shall be made on a form prescribed by the Department, and the organization shall pay the difference in license fees between a Class I and Class II license and shall license at least one sales agent.

302.01B Organizations seeking to market pickle card units through licensed pickle card operators shall apply for a Class II license. An organization applying for a Class II license must license at least one sales agent. In addition, a Class II pickle card organization must apply to the Department for authorization for each pickle card operator they intend to have sell pickle cards on their behalf. Such authorization must be applied for on a form prescribed by the Department and signed by the utilization of funds member of the licensed organization and an owner, partner or officer of the pickle card operator.

302.02 A Class II licensee may apply for authorization to market pickle cards through any organization or business which has obtained a pickle card operator's license issued by the Department. A pickle card operator may only market pickle cards on behalf of organizations holding a Class II license to conduct a lottery by the sale of pickle cards.

302.02A Prior to selling any pickle card units to a pickle card operator, the licensed organization must receive a pickle card operator authorization issued by the Department, allowing the pickle card operator to sell pickle cards on behalf of that licensed organization. Such authorizations are to be applied for by the licensed organization and shall, upon approval, be mailed to the licensed organization. The licensed organization shall provide the pickle card operator with the original authorization printed by the Department and shall not substitute a copy of the original. The organization is permitted to make a copy of such authorization for its own file.

302.03 It shall be the responsibility of the utilization of funds member to keep the organization's license application information current. The Department must be informed within thirty (30) days of any changes in the information supplied by the licensed organization in its most recent filing with the Department.

302.03A Changes must be reported in writing and the Department may require the filing of a new application or schedule. Changes must be confirmed by the signature of an officer or a utilization of funds member on the Nebraska Form 50; a utilization of funds member on the Nebraska Form 50, Schedule II; and a utilization of funds member and the sales agent on the Nebraska Form 50E. Any individual signing the most current application shall obligate the licensee to comply with the Nebraska Pickle Card Lottery Act and regulations for that licensing period.

302.04 In addition to all other information requested by the Department, each applicant for a Class I or Class II lottery by the sale of pickle card license and each subsequent renewal thereof may, at the discretion of the Department, be required to provide:

302.04A A copy of the organization's articles of incorporation or bylaws; or, if not a corporation, a copy of any bylaws or other documents which set forth the organization's structure and purpose;

302.04B A copy of the organization's ruling or exemption determination letter issued by the Internal Revenue Service. A blanket or group exemption letter issued by the Internal Revenue Service to a parent organization, which also covers its subordinate units, is acceptable. An organization utilizing the charter date of its parent organization to satisfy the five-year existence requirement may be required to submit additional information as evidence of such parent relationship as provided for in section 21-608 of the Nebraska Revised Statutes, as amended,; and/or

302.04C A current roster of all active members.

302.05 A nonprofit organization, volunteer fire company, volunteer first-aid, rescue, ambulance, or emergency squad, utilization of funds member, sales agent, and pickle card operator shall not be considered licensed until such organization, volunteer fire company, volunteer first-aid, rescue, ambulance, or emergency squad, individual, or business has physical possession of the printed license issued by the Department and shall not conduct any activity under the Nebraska Pickle Card Lottery Act until it has received its license and applicable authorizations.

302.05A A licensed organization must provide to each distributor from whom it purchases pickle card units, a copy of its current license or adequate proof that the organization has a current lottery by the sale of pickle card license. Adequate proof may include confirmation to the distributor by the Department that the organization holds a current license.

302.06 A licensed organization, sales agent, or utilization of funds member, which has had its license lost, stolen, or destroyed must notify the Department as soon as possible. A duplicate license will be issued for no additional fee.

302.06A Any licensed organization, utilization of funds member, or sales agent which no longer desires to be licensed, or any organization which desires to cancel an authorization for a pickle card operator to sell pickle cards on their behalf, shall notify the Department, in writing, of its intentions to cancel the license or authorization.

302.06A(1) Sales agents shall make such intentions known to the Department by completion of a Nebraska Form 50E or by a letter signed by the utilization of funds member;

302.06A(2) A licensed organization or utilization of funds member shall make such intentions known to the Department by completion of a Form 50 or Form 50H respectively or by a letter signed by an officer of the organization; and,

302.06A(3) A licensed organization shall make such intentions known to the Department by completion of a Form 50, Schedule II, signed by the utilization of funds member in the case of a pickle card operator authorization.

302.06B All notifications of cancellation must be accompanied by the original license or authorization issued by the Department.

302.07 In the event that a license to conduct gaming activities under the Nebraska Pickle Card Lottery Act is suspended, canceled, or revoked, the licensee shall surrender physical possession of all of its licenses suspended, canceled, or revoked to the Department immediately upon receipt of the order of suspension, cancellation, or revocation from the Department. In the case of suspension, the Department shall return the licenses to the licensee at the end of the suspension period. In the case of cancellation, the former licensee may reapply for a license when the period of cancellation has expired. In the case of revocation, the former licensee may not reapply for any license at any time in the future under the Nebraska Pickle Card Lottery Act unless otherwise authorized by the Department.

302.07A When a licensee has successfully appealed an order of suspension, revocation, or cancellation, the Department shall return physical possession of the license which had been suspended, revoked, or canceled.

302.08 All licenses issued to organizations to conduct a lottery by the sale of pickle cards and all licenses issued to any utilization of funds member or sales agent for such organizations shall expire and may be renewed on a biennial basis, according to the following schedule:

302.08A A license to conduct a lottery by the sale of pickle cards issued to a nonprofit organization holding a certificate of exemption under section 501(c)(3) or (c)(4) of the Internal Revenue Code and any license issued to a utilization of funds member or sales agent for such nonprofit organization shall expire on September 30 of each odd- numbered year.

302.08B A license to conduct a lottery by the sale of pickle cards issued to a nonprofit organization holding a certificate of exemption under section 501(c)(5), (c)(7), (c)(8), (c)(10) or (c)(19) of the Internal Revenue Code, or to any volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad and any license issued to a utilization of funds member or sales agent for such organizations shall expire on September 30 of each even-numbered year.

302.08C Renewal applications for licensed organizations, utilization of funds members, and sales agents shall be due 45 days prior to the expiration date of the license unless the application, pertains only to special function pickle card sales. Licenses are not transferable.

(Sections 9-327, 9-329.03, 9-330, and 9-340, R.R.S. 1997. Sections 9-321.03, 9-326, 9-328, 9-329, and 9-329.02, R.S.Supp., 2002. November 12, 2002.)

REG-35-303 LAWFUL PURPOSE

303.01 A licensed or previously licensed organization shall spend its pickle card net profit as defined in Regulation 35-300.08 solely for lawful purposes.

303.02 Pickle card net profits may be used internally by a licensed or previously licensed organization or donated outside of the organization, subject to the following:

303.02A Internal use of pickle card net profits. Lawful purpose uses of pickle card net profits internally by a licensed or previously licensed organization include:

303.02A(1) Charitable, benevolent, humane, religious, philanthropic, youth sports, educational, civic, or fraternal activities conducted by the licensed or previously licensed organization for the benefit of its members, such as:

303.02A(1)(a) Religious activities including but not limited to creating, operating, or maintaining a church, church school, and their programs and facilities;

303.02A(1)(b) Educational activities including but not limited to paying the operating expenses of a school or establishing or continuing scholarship funds;

303.02A(1)(c) Charitable or humane activities including but not limited to purchasing food for the needy or to help provide medical care for individuals in need;

303.02A(1)(d) Youth sports activities including but not limited to the support or maintenance of team or individual activities which consist of an element of enjoyment or recreation, involving the practice of individual skill, and in which all of the participants are under 19 years of age. Such donations may include the construction, acquisition, improvement, or maintenance of facilities used in conjunction with youth sports activities; and

303.02A(1)(e) Civic or fraternal activities, including but not limited to those activities which confer a benefit on the membership as a whole, such as paying the reasonable and necessary expenses for officers to travel to regional or national conventions at which organization business is discussed; funding ceremonies commemorating religious or patriotic holidays; paying for the construction, acquisition, improvement, or maintenance of the licensed or previously licensed organization’s facilities; or paying the general operating expenses of the licensed or previously licensed organization such as non-pickle card related payroll expenses, taxes, insurance or utilities.

303.02A(1)(f) A licensed or previously licensed organization shall not use pickle card net profits for purely social or recreational purposes such as stocking a bar with alcoholic beverages, defraying the cost of a dinner or dance, or paying the expenses for a New Year's Eve party.

303.02B Outside donations of pickle card net profits. Donating pickle card net profits outside of the licensed or previously licensed organization is considered a lawful purpose usage of pickle card net profits provided the donation is made to an eligible recipient.

Only the following entities are eligible to receive an outside donation:

303.02B(1) The State of Nebraska or any political subdivision thereof, exclusively for public purposes such as the funding of parks or the creation or maintenance of public facilities or projects;

303.02B(2) A corporation, trust, community chest, fund, or foundation;

303.02B(2)(a) Created or organized under the laws of Nebraska, which has been in existence for five consecutive years immediately preceding the date of the donation, and which has its principal office located in Nebraska. A licensed or previously licensed organization shall not donate its pickle card net profits to foreign corporations, trusts, community chests, funds, or foundations, but may donate to a local chapter of such organizations provided that such local chapter has been created or organized under the laws of Nebraska, has been in existence for five years, and has its principal office located in this state;

303.02B(2)(b) Organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, for the prevention of cruelty to children or animals, or to foster national or international amateur sports competition;

303.02B(2)(c) No part of the net earnings of which inures to the benefit of any private shareholder or individual;

303.02B(2)(d) Which is not disqualified for tax exemption under section 501(c)(3) of the Internal Revenue Code by reason of attempting to influence legislation; and

303.02B(2)(e) Which does not participate in any political campaign on behalf of any candidate for political office.

303.02B(3) A post or organization of war veterans or an auxiliary unit or society of, trust for, or foundation for any such post or organization:

303.02B(3)(a) Organized in the United States or in any territory or possession thereof; and

303.02B(3)(b) No part of the net earnings of which inures to the benefit of any private shareholder or individual; or

303.02B(4) A volunteer fire department or volunteer first-aid, rescue, or emergency squad or volunteer fire company serving any city, village, county, township, or rural or suburban fire protection district.

303.03 No part of the pickle card net profits shall:

303.03A Inure to the benefit of any individual member or shareholder of the licensed or previously licensed organization making the donation except to the extent it is in furtherance of the purposes described in this regulation. A licensed or previously licensed organization may make a direct donation to an individual member of its organization if that organization's activities include (a) making charitable donations to fire, catastrophic illness, or disaster victims and the individual member is a victim thereof, or (b) making charitable donations to other charitable, benevolent, humane, religious, philanthropic, youth sports, educational, civic, or fraternal activity and the individual member is a beneficiary thereof or a participant in the activity; or

303.03B Be used for any activity which attempts to influence any legislation, regulation, or ordinance, or participating in or contributing to any political campaign on behalf of any elected official or individual who is or has been a candidate for public office.

303.04 In the case of scholarship funds, the licensed or previously licensed organization may either donate to its own internal scholarship fund or to an outside scholarship fund or educational institution meeting the guidelines for recipients of outside donations under these regulations.

303.04A A donation to a scholarship fund that does benefit an individual member of the licensed or previously licensed organization or a dependent or immediate family member of such individual member may qualify as a lawful purpose and may be made either through the organization's own scholarship fund or through a donation directly to the educational institution or scholarship fund meeting the requirements of this regulation.

303.05 Upon dissolution of a licensed organization or upon suspension, cancellation, revocation, or expiration of an organization's license, all remaining pickle card net profits shall be utilized for a lawful purpose and shall not be distributed to any private individual or shareholder. The disbursement of such remaining net profits shall be subject to the reporting and disbursement requirements contained in Regulation 35-313.01A.

303.06 A licensed or previously licensed organization may commingle its revenue from its lottery by the sale of pickle cards with its other operating accounts only after initially depositing the pickle card receipts into its pickle card checking account. Pickle card revenues transferred to other accounts of the licensed or previously licensed organization must be done by writing a check from the pickle card checking account or by electronic funds transfer from the pickle card checking account. Pickle card revenues transferred to other accounts must still be used for lawful purposes.

303.06A It shall be the duty of the licensed utilization of funds member to keep and maintain records sufficient to prove that pickle card revenues transferred from the pickle card checking account have been used for lawful purposes.

303.07 All lawful purpose donations must be made by a check written from the licensed or previously licensed organization's pickle card checking account, directly to the donee for the ultimate use of the donation. For example, a lawful purpose donation to an eligible recipient must go directly to the recipient for use in a manner complying with section 9-309 of the Nebraska Pickle Card Lottery Act and this regulation.

303.07A All checks must be signed by a licensed utilization of funds member of the licensed organization. If an electronic funds transfer is utilized in lieu of a check, such transfer must be authorized by a licensed utilization of funds member of the licensed organization.

303.08 No licensed or previously licensed organization, or any representative thereof, shall donate or promise to donate any portion of its pickle card net profit to a recipient outside of the organization in exchange for a payment, gift, or other thing of value from the recipient to any individual, organization, or corporation, including, but not limited to, the licensed or previously licensed organization or any of its members, employees or agents, or to a pickle card operator in exchange for an agreement to sell pickle cards on behalf of the licensed organization. Unlawful outside donations include, but are not limited to:

303.08A A licensed or previously licensed organization donating all or a portion of its pickle card net profits to: (a) a second organization in return for a donation or a transfer of all or a portion of the donation from the second organization to the original organization or any representative thereof, or (b) an organization designated by a pickle card operator as such donation is deemed by the Department to be an illegal inducement for the operator to sell the licensed organization's pickle cards.

(Sections 9-309, 9-314.01, 9-321.03, 9-347, 9-347.01, 9-348, and 9-348.01, R.S.Supp., 2002. November 12, 2002.)

REG-35-304 DISTRIBUTOR OF PICKLE CARD UNITS: LICENSE; REQUIREMENTS; AND DUTIES

304.01 To qualify for a distributor's license, an applicant must be authorized to conduct business in Nebraska and have its principal office located within this state.

304.01A Authorization to do business in Nebraska requires:

304.01A(1) A domestic corporation to file Articles of Incorporation with the Nebraska Secretary of State's office;

304.01A(2) A domestic limited liability company to file Articles of Organization with the Nebraska Secretary of State's office;

304.01A(3) A foreign corporation or foreign limited liability company to obtain a certificate of authority to transact business in Nebraska from the Nebraska Secretary of State's office or to become domesticated by filing the requisite documents with the Nebraska Secretary of State's office and paying any required fees; or

304.01A(4) A domestic partnership, foreign partnership, or limited liability partnership to file any forms that may be required by the Nebraska Secretary of State’s office.

304.01B Applicants seeking a distributor's license who intend to be engaged in business in this state as defined in section 77-2702.06 of the Nebraska Revised Statutes, as amended, shall also submit a Nebraska Tax Application, Form 20, to obtain a Nebraska Sales and Use Tax Permit.

304.02 Any individual or business which intends to sell or otherwise provide pickle card units in this state to a licensed organization must first apply for and obtain a distributor's license from the Department. An individual or business applying for a distributor's license shall do so on a form prescribed by the Department. The applicant shall include with the application form the statutorily required license fee and, at a minimum, the following information:

304.02A The business name and address of the applicant and the name and address of each of the applicant's separate locations warehousing pickle cards or pickle card units;

304.02B The type of ownership of the business and the name, social security number, home address, and date of birth of:

304.02B(1) If a sole proprietorship, the individual owner; 304.02B(2) If a partnership, each partner and spouse;

304.02B(3) If a limited liability company, each member and spouse; or

304.02B(4) If a corporation, each officer and spouse, each director or board member, and each individual or entity holding ten percent or more of the debt or equity of the corporation. If an entity holding ten percent or more of the debt or equity of the applicant corporation is a partnership, limited liability company, or corporation, the information required in Regulation 35-304.02B must be supplied for each partner of the partnership, each member of the limited liability company, or each officer of the corporation and every individual or entity holding ten percent or more of the debt or equity of the partnership or corporation.

304.02C A completed and notarized Personal History Record and Background Disclosure form supplied by the Department for each individual listed pursuant to Regulation 35-304.02B, except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form; and

304.02D Two sets of fingerprints on cards supplied by the Department and the requisite fees established by the Nebraska State Patrol and the Federal Bureau of Investigation for each person listed pursuant to Regulation 35-304.02B, except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form. Fingerprint cards and the required fees must be submitted to the Nebraska State Patrol, Criminal Identification Division.

304.03 The applicant or licensee shall notify the Department within thirty (30) days of any change in the information submitted on or with the application form. Changes must be reported in writing and the Department may require the filing of a new application.

304.03A Changes shall be confirmed by the signature of an owner, partner, member, or officer of the distributor. Any individual signing the most current application shall obligate the distributor to comply with the Nebraska Pickle Card Lottery Act and regulations for that licensing period.

304.04 A distributor's license shall expire on September 30 of every odd-numbered year and may be renewed biennially. An application for license renewal shall be due August 15 of each odd-numbered year. A distributor's license is not transferable.

304.05 A distributor is not considered licensed until it has physical possession of the printed license issued by the Department.

304.05A Any individual or business licensed as a distributor pursuant to section 9-235 of the Nebraska Bingo Act may act as a distributor pursuant to the Nebraska Pickle Card Lottery Act without submitting an additional licensing fee. Such individual or business shall comply in every other respect with the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, and all rules and regulations adopted and promulgated pursuant to such Acts.

304.05B A distributor which no longer desires to be licensed shall notify the Department, in writing, of its intention to cancel its license. Such notification shall be signed by an owner, officer, member, or partner of the distributorship. A notification of cancellation shall be accompanied by the original license issued by the Department.

304.05C A distributor which has had its license lost, stolen or destroyed must notify the Department as soon as possible. The distributor shall send a written statement to the Department signed by an owner, officer, member, or partner confirming the loss, theft or destruction of the license. A duplicate license will be issued for no additional fee under such circumstances.

304.06 A licensed distributor, or any individual or business having a substantial interest therein, is prohibited from holding any other licenses issued pursuant to the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act, except as provided in section 9-235 of the Nebraska Bingo Act, and section 9-632 of the Nebraska County and City Lottery Act.

304.06A A licensed distributor, or employee or spouse of a licensed distributor, shall not have a substantial interest, as defined in Regulation 35-300.09, in any other distributor, manufacturer, licensed organization, pickle card operator, or lottery operator conducting gaming activities under the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act.

304.06B A licensed distributor or employee or spouse of a licensed distributor shall not participate in the operation or conduct of any kind of gaming activity regulated under Chapter 9 of the Nebraska Revised Statutes, as amended, except to the exclusive extent of his or her duties as a licensed distributor or employee thereof.

304.07 A licensed distributor shall purchase or otherwise obtain pickle card units only from a licensed manufacturer. A licensed distributor shall sell or otherwise provide pickle card units only to an organization licensed to conduct a lottery by the sale of pickle cards.

304.07A A distributor shall not sell pickle card units to an organization unless and until such organization can provide a copy of its current license to the distributor, or the distributor has confirmed through the Department that such organization has a current license.

304.07B A distributor shall not sell pickle card units to another licensed distributor without prior approval by the Department.

304.07C A distributor shall not sell any pickle card units to a pickle card operator.

304.07D Only a licensed utilization of funds member, a licensed sales agent, licensed gaming manager, bingo chairperson, or a club manager for a organization which is exempt under section 501(c)(8), (10), or (19) and holding a lottery by the sale of pickle cards license may order pickle card units from a distributor.

304.07E Only a licensed utilization of funds member may pay for the purchase of pickle card units.

304.07F Nothing in this regulation shall be construed to prohibit a licensed distributor from selling or otherwise providing pickle card units to a federally recognized Indian tribe for use in a Class II Indian gaming activity as provided in the Indian Gaming Regulatory Act.

304.08 Only licensed distributors or manufacturers may possess unmarked pickle cards. For purposes of this regulation, an unmarked pickle card is one which has not been imprinted with the name and state identification number of a licensed organization. Only a licensed manufacturer or distributor or agent thereof may imprint individual pickle cards with a licensed organization's name and state identification number. A licensed distributor or manufacturer shall notify the Department in writing of the name and address of any person or business other than the licensed manufacturer or distributor, designated as an agent for imprinting purposes.

304.08A A licensed distributor shall affix a state identification stamp to each flare card of each pickle card unit sold for use in Nebraska. Such stamp must be placed on the face or information side of a flare card, in the lower right-hand corner of the flare card, unless such placement would obscure pertinent game information such as a form number or serial number.

304.08A(1) With respect to punchboards, the stamp may be placed either on the face or reverse side of the board.

304.08B The licensed distributor shall ensure that the proper flare card is provided with each pickle card unit and that the flare card contains the correct and corresponding serial number and unit count to the unit being sold.

304.08C The serial number and unit count of a pickle card unit is required to be listed on the flare card by the licensed manufacturer. However, if the flare card information has not been completed by the manufacturer, or if a request has been received for a replacement flare card, a licensed distributor may fill in the information, provided that the distributor ensures the accuracy of the unit count, and that the flare card is the proper flare card for such game. A licensed distributor shall not be permitted to write a serial number on a punchboard. In addition, a licensed distributor shall notify the Department when the above information has not been completed by the manufacturer.

304.09 A licensed distributor shall deliver pickle card units only to a licensed utilization of funds member, a licensed sales agent, a licensed gaming manager, a bingo chairperson or, in the case of a licensed organization which is exempt under section 501(c) (8), (10), or (19) of the Internal Revenue Code, a club manager.

304.09A A licensed distributor shall immediately report to the Department any pickle card unit which is discovered to be missing from their inventory or which has been lost in shipping or delivery.

304.10 The price charged by a licensed distributor for a pickle card unit shall not be fixed or set by agreement among licensed distributors in any manner, either expressed or implied.

304.10A No distributor shall offer or agree to offer anything of value to any individual or licensee in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use pickle card units sold by such distributor.

304.10B No individual or licensee shall accept or agree to accept anything of value from a distributor in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use pickle card units sold by such distributor.

304.11 A licensed distributor shall not sell or otherwise provide pickle card units to any licensed organization without first having been paid for those units with a check drawn on the pickle card bank account of that organization. Such payment can be made either in advance of or at the time of delivery of the pickle card units. Automatic bank transfers from the pickle card bank account of the licensed organization to the distributor shall be an acceptable form of payment. A licensed organization seeking to purchase pickle card units from a licensed distributor may set up a deposit or secured fund with the distributor upon which the distributor may draw payment for pickle card units ordered by the licensed organization. Such deposit or fund shall be funded by a check with monies from the pickle card bank account of the licensed organization. No distributor shall extend credit in any form to any licensed organization seeking to purchase pickle card units, such as the use of credit or bank cards or any other method which does not require the expenditure of funds by the licensed organization prior to or at the time of purchase.

304.11A A distributor who fails to make a good faith effort to collect payment for an insufficient fund check written by a licensed organization for the purchase of pickle card units shall be deemed in violation of this regulation. In addition, a distributor shall not further sell or otherwise provide pickle card units to a licensed organization who has not remitted sufficient payment, by check, to cover any outstanding debt owed by the organization to the distributor.

304.12 A licensed distributor shall not be prohibited from selling pickle card units to purchasers outside this state. Additionally, licensed distributors shall not be prohibited from selling pickle card units which may not be marketed in Nebraska to out-of-state purchasers. With respect to the sale of pickle card units to out-of-state purchasers, licensed distributors shall maintain the following records:

304.12A The name and complete address of the purchaser; 304.12B The date of the transaction;

304.12C The type of unit and serial number of each unit sold. For the purposes of this section, "type of unit" means the form number and name of a particular type of pickle card unit; and

304.12D The method of shipment, including the name, address, and telephone number of the entity transporting the units.

304.13 A licensed distributor shall pay for all purchases of pickle card units by check or automatic bank transfer within 30 days of delivery. A licensed distributor may by check set up a deposit with a licensed manufacturer upon which the manufacturer can draw payment for pickle card units ordered by the distributor.

304.14 A licensed distributor shall not market or sell any pickle card unit for use in this state:

304.14A Which offers prizes of less than 65 percent or more than 80 percent of the gross proceeds or which contains a prize pay-out structure designed by the manufacturer to vary;

304.14B Which has a card or play count exceeding 6,000;

304.14C Which contains an individual pickle card or punch whose purchase price is greater than $1.00;

304.14D Which contains a single pickle card or punch that awards a prize or prizes that exceeds $1,000.00;

304.14E Which has not been approved and authorized by the Department; or

304.14F Which does not contain the appropriate flare card with a Nebraska state identification stamp as required by Regulation 35-315 affixed to such flare card.

304.15 The Department shall provide each licensed distributor with a listing of approved pickle card units. Such listing shall be updated by the Department on no less than a monthly basis, as required when additional games are approved. A distributor shall not sell any pickle card unit for use in this state unless and until they ensure that the game is a game which appears on the Department's Approved Product Listing.

304.16 A licensed distributor shall issue an invoice to the licensed organization for each purchase, exchange or return of pickle card units by the licensed organization. Every such invoice shall contain the following information:

304.16A The name, address, and state identification number of the licensed organization;

304.16B The individual placing the order or making the purchase, exchange or return on behalf of the licensed organization;

304.16C The date of the transaction;

304.16D A description of each pickle card unit to include the game name, serial number and form number;

304.16E The total number of pickle card units sold, exchanged, or returned;

304.16F The price of each pickle card unit, applicable taxes, and the total amount paid, exchanged, or returned by the licensed organization;

304.16G The manner of delivery or shipment, including the name, address, and telephone number of the entity with whom shipment is made;

304.16H The pickle card tax charged or credited for each unit; and 304.16I The state identification stamp number assigned to each unit.

(Sections 9-302, 9-307, 9-330, 9-340, 9-340.01, 9-342, 9-343, 9-344, 9-351, and 9-632, R.R.S. 1997. Sections 9-1,104, 9-322, 9-331, 9-340.02, 9-346, and 9-347, R.S.Supp., 2004. September 5, 2005.)

REG-35-305 PRIZES

305.01 No pickle card unit shall be sold or marketed for play in the state of Nebraska that pays less than 65 percent or more than 80 percent of the gross proceeds of that unit in prizes, or which has been designed by the manufacturer to have a prize payout structure which may vary.

305.02 A pickle card unit shall award only cash prizes. A pickle card shall not be offered as a pickle card unit prize or be offered as a prize in another game of chance. A participant must pay something of value for a pickle card as a means of participating in the game.

305.02A Nothing in this section shall prohibit an individual from redeeming a winning pickle card for additional pickle cards in lieu of receiving the cash value of the winning pickle card. For example, an individual who has a $5.00 winning pickle card may redeem such in exchange for five additional $1.00 pickle cards.

305.02B Nothing in this regulation shall be construed to prohibit the sale and use of punchboards which contain a "Last Sale" feature, provided the "Last Sale" feature pertains only to the purchase of the last punch on the board. Punchboards which contain multiple "Last Sale" features such as "Last Sale Per Section" are prohibited.

305.03 No person may alter pickle card units, flare cards, or punchboards to award additional or fewer prizes or prizes other than those designated by the manufacturer. No person may change or alter the combinations of numbers, letters, or symbols which represent the winning combinations on the pickle card, flare card, or punchboard or assign or award prizes which differ from those designated by the manufacturer.

(Sections 9-302, 9-313, and 9-340, R.R.S.1997. Sections 9-338, 9-346, and 9-347, R.S.Supp., 2002. November 12, 2002.)

REG-35-306 PICKLE CARDS -- RESTRICTIONS

306.01 No person shall affix to any pickle card, pickle card unit, or any subpart thereof, any statement indicating any endorsement of that particular pickle card or pickle card unit by the State of Nebraska, the Department, or any division thereof. Additionally, no other statement indicating any such endorsement shall be made verbally or in writing.

(Sections 9-302, 9-313, 9-317, 9-332.01, and 9-340, R.R.S. 1997. Sections 9-312, 9-315, and 9-322, R.S.Supp., 2002. November 12, 2002.)

REG-35-307 UTILIZATION OF FUNDS MEMBER; LICENSING REQUIREMENTS AND DUTIES

307.01 Each licensed organization must have at least one of its members licensed as a utilization of funds member. To be eligible for a utilization of funds member license, an individual must have been an active and bona fide member of the organization for at least one year prior to applying for the license.

307.01A If a licensed organization can provide evidence that the one-year membership requirement will impose an undue hardship, the Department may waive the requirement. An officer of the organization must provide a written explanation of the nature of the hardship with the utilization of funds member's license application.

307.01B An individual may act as a utilization of funds member for more than one gaming activity of a licensed organization by paying only one licensing fee per licensing period.

307.01C An individual may be licensed as a utilization of funds member for more than one licensed organization by applying for a separate license for each organization and paying a separate licensing fee for each organization.

307.01D A utilization of funds member may not be licensed as a sales agent for any licensed organization or hold any other type of license issued under the Nebraska Bingo Act, the Nebraska Lottery and Raffle Act, or the Nebraska Pickle Card Lottery Act.

307.02 An individual is not considered to be licensed as a utilization of funds member and shall not conduct any activity for which a license is required until he or she has obtained physical possession of the printed license issued by the Department. The licensed organization must apply for the license on a form supplied by the Department. The application must contain the following information:

307.02A The name and state identification number of the licensed organization on whose behalf the individual is seeking the utilization of funds member license;

307.02B The name, address, social security number, and date of birth of the individual applying for the utilization of funds member license;

307.02C The date the individual became a member of the licensed organization; 307.02D The signature of the individual applying for the license;

307.02E A statement signed by an officer of the licensed organization indicating the organization's approval of the individual to act as the utilization of funds member on behalf of the organization; and

307.02F The statutorily required license fee. The fee may be paid by the licensed organization.

307.03 The information contained in the application must be kept current. An individual licensed as a utilization of funds member must notify the Department within 30 days of any changes to his or her most recent application filing. Changes must be reported in writing and the Department may require the filing of a new application.

307.04 A utilization of funds member license expires and may be renewed as provided in Regulation 35-302.08.

307.05 The licensed organization is not required to post the utilization of funds member's license.

307.06 A utilization of funds member for an organization licensed to conduct a lottery by pickle cards has the following responsibilities:

307.06A Preparing all applications, reports, and documents filed with any governmental agency by the licensed organization in connection with its lottery by the sale of pickle cards. If the utilization of funds member is assisted in the preparation of the applications, reports, and documents by any other individual or business, the utilization of funds member shall ensure that the information contained in those reports is true, accurate, and kept up to date;

307.06B Ensuring that pickle card units purchased by the licensed organization are paid for by a check written from the licensed organization's pickle card checking account either in advance of or upon delivery of the pickle card units;

307.06C Ordering, purchasing, and accepting delivery of pickle card units from licensed distributors on behalf of the licensed organization;

307.06D Approving individuals to act as sales agents for the licensed organization, authorizing pickle card operators to sell pickle cards on behalf of the licensed organization, and signing any release the licensed organization may be obligated to give a former sales agent seeking to be licensed with another organization in the case of a Class II licensee;

307.06E Ensuring that the licensed organization complies with the 30 percent of definite profit limitation on commissions paid to pickle card operators, the 12 percent of definite profit limitation for allowable expenses, and within that 12 percent allowable expense limitation, ensuring that no sales agent of the organization receives more than six percent of definite profit as a commission for marketing pickle card units;

307.06F Ensuring that his or her signature is on each check written from the organization's pickle card checking account. If an electronic funds transfer is utilized in lieu of a check, the transfer must be authorized by a utilization of funds member;

307.06F(1) A licensed organization may require that checks written by the utilization of funds member be co-signed by one or more parties.

307.06G Collecting all revenues received by sales agents from the sale of pickle card units to licensed pickle card operators;

307.06H Ensuring that complete and accurate records of the licensed organization's pickle card activities are kept, including the tracking of pickle card units sold and shipped or delivered to pickle card operators by the organization's sales agents. The records must include a description of the unit, the form number, serial number, and state identification stamp number of each pickle card unit as well as the pickle card operator to whom the unit was delivered, the gross proceeds from the sale of all pickle card units both to pickle card operators and sold internally by the organization at its designated premises, special function pickle card sales events, and bingo occasions, prizes paid, expenses incurred by the organization relating to its lottery by pickle cards, and taxes due and paid;

307.06I Depositing the proceeds from the sale of pickle cards and pickle card units, from the sale, lease, or rental of pickle card dispensing devices into the pickle card checking account of the licensed organization and ensuring that the revenues derived from the lottery by pickle cards are segregated from other income of the licensed organization;

307.06I(1) Ensuring that checks written by a pickle card operator for the purchase of pickle card units or for the sale, lease, or rental of a pickle card dispensing device are deposited within a commercially reasonable time after the pickle card operator issues the check.

307.06I(2) When determining whether checks written by a pickle card operator have been deposited within a commercially reasonable time, the following factors shall be taken into consideration:

307.06I(2)(a) The proximity of the licensed organization to the bank where it has its pickle card checking account;

307.06I(2)(b) The location of the organization's pickle card operators; and

307.06I(2)(c) The ability of the organization's sales agents to deliver the checks from the pickle card operators to the organization.

307.06I(3) When a licensed organization markets pickle cards through pickle card operators located in the same community as the organization and the organization maintains its pickle card checking account in that community, a commercially reasonable time for the depositing of a check received from a local pickle card operator is within three business days after the receipt of the check by the sales agent.

307.06I(4) When a licensed organization markets pickle cards through pickle card operators located in communities some distance from the location of the organization, and it is necessary for the sales agent to forward a check, either in person or by mail, to the organization, a commercially reasonable time for the sales agent to remit the check to the licensed organization is within three business days after the sales agent received the check and, upon receipt of the check, the utilization of funds member has three business days to deposit the check into the organization's pickle card checking account.

307.06I(5) The regular practice of the organization must be to make its deposits within the timeframes set forth in this regulation. Failure to deposit checks within a commercially reasonable time or accepting post-dated checks shall be considered an illegal extension of credit from the organization to the pickle card operator.

307.06J Ensuring that any transfer of pickle card revenues to the licensed organization's general fund account or any other account of the licensed organization is done only by a check written from the pickle card checking account or by an electronic funds transfer from such account, and that pickle card revenues transferred are used only for a lawful purpose as defined in Regulation 35-303;

307.06K Ensuring that the gross proceeds received from the lottery by the sale of pickle cards of the licensed organization are spent only for lawful purposes as defined in Regulation 35-303, the awarding of prizes, payment of unit costs, pickle card operators' commissions and allowable expenses as identified in Regulation 35-314, bingo expenses if the organization is also licensed to conduct bingo, and ensuring that all lawful purpose donations and all expenses with the exception of prizes are paid only by a check written from the organization's pickle card checking account;

307.06K(1) It is the duty of the utilization of funds member to keep and maintain records sufficient to prove that pickle card revenues transferred from the pickle card checking account have been used only for a lawful purpose; and

307.06L Ensuring that upon proper request, all records and documents relating to the licensed organization's sale of pickle cards are made available to the Department or its representatives.

307.07 An individual licensed as a utilization of funds member may not have a substantial interest, as defined in Regulation 35-300.09, in any individual or business licensed as a manufacturer, distributor, or pickle card operator.

(Sections 9-322, 9-327, 9-328, 9-329, 9-331, 9-340.02, 9-342, 9-348, 9-348.01, and 9-349, R.R.S. 2007 and sections 9-347, and 9-347.01, R.S. Supp., 2009. November 6, 2010.)

REG-35-308 SALES AGENT: LICENSING REQUIREMENTS AND DUTIES

308.01 A Class II licensee must have at least one of its members licensed as a sales agent. To be eligible for a sales agent's license, an individual must have been an active and bona fide member of the organization for at least one year prior to applying for the license.

308.01A An individual may be licensed as a sales agent for only one licensed organization at any time. If an individual wishes to apply for a sales agent's license for a different organization, he or she must first obtain a written release signed by the utilization of funds member and at least one officer of the organization that the individual had previously been licensed for as a sales agent, prior to being eligible to apply for a license as a sales agent for another organization. Such release shall only be given to the individual if he or she has satisfied all of his or her legal obligations to the licensed organization with respect to the sale of pickle cards. An organization shall not arbitrarily and without good cause withhold or refuse to issue a release. A copy of the release must be included with any new application for a sales agent's license for another organization.

308.01B An individual licensed as a sales agent cannot hold any other type of license issued pursuant to the Nebraska Bingo Act, the Nebraska Lottery and Raffle Act, or the Nebraska Pickle Card Lottery Act.

308.02 An individual is not considered to be licensed as a sales agent and shall not conduct any activity for which such license is required until he or she has physical possession of the sales agent's license issued by the Department. An individual seeking a sales agent's license shall apply for such license on a form supplied by the Department. Such application shall contain, at a minimum, the following information:

308.02A The name and state identification number of the licensed organization;

308.02B The name, address, social security number, date of birth, and signature of the individual applying for the sales agent's license;

308.02C The date the individual became a member of the organization;

308.02D A statement signed by the licensed organization's utilization of funds member indicating its approval of the individual to act as a sales agent on behalf of the organization; and

308.02E The statutorily required license fee. Such fee may be paid by the licensed organization.

308.03 The information contained in the application shall be kept current. The sales agent shall notify the Department within thirty (30) days of any changes to the application information. Changes must be reported in writing and the Department may require the filing of a new application.

308.04 An individual applying for a sales agent's license is required to be fingerprinted for criminal background investigation purposes. Two sets of fingerprints on cards supplied by the Department must be submitted to the Nebraska State Patrol, Criminal Investigation Division, along with the required fees. Such fees may be paid by the licensed organization.

308.04A If an individual applying for a sales agent's license has been issued a license by the Nebraska Liquor Control Commission, the Department may, at its discretion, waive the fingerprinting requirement.

308.04B An individual renewing his or her sales agent's license shall not be required to submit additional fingerprint cards or pay additional fingerprinting fees unless specifically requested to do so by the Department.

308.05 A sales agent's license shall expire and may be renewed as provided in Regulation 35- 302.08.

308.06 An individual licensed as a sales agent shall have the following responsibilities:

308.06A Ensuring that the licensed organization does not promise or represent to any licensed pickle card operator or potential pickle card operator that the organization he or she represents will pay or allow a pickle card operator or any other individual, firm, corporation, or organization any amount of money or anything else of value as a commission on a pickle card unit in excess of that amount allowed by law to market such units as an inducement for a pickle card operator or potential pickle card operator to sell pickle cards on behalf of the licensed organization;

308.06B Explaining to pickle card operators that the pickle card operator's license and the authorization to sell on behalf of the organization the sales agent represents must be conspicuously posted in order to sell pickle cards, as well as the flare card for each pickle card unit in play at that location;

308.06C Soliciting orders from pickle card operators to sell pickle cards on behalf of the licensed organization he or she is licensed to represent;

308.06D Ordering, picking up, and/or accepting delivery of pickle card units from licensed distributors or the licensed organization which he or she represents and delivering such units to licensed pickle card operators who are authorized to sell pickle cards on behalf of the licensed organization he or she is licensed to represent;

308.06D(1) A sales agent may order, but not purchase, pickle card units on behalf of a licensed organization. Only a licensed utilization of funds member may pay for the purchase of such units.

308.06D(2) A licensed sales agent may arrange delivery of pickle card units to a licensed pickle card operator by mail or common carrier provided the requirements of Regulation 35-308.06E and 35-308.06F are adhered to.

308.06E Collecting the check from a licensed pickle card operator representing the definite profit of each pickle card unit transferred from a licensed organization to a pickle card operator less the operator's commission either in advance of or upon delivery of those units and delivering that check to the utilization of funds member of the licensed organization he or she is licensed to represent; and

308.06F Keeping and maintaining an accurate record of the transactions between the licensed organization and the pickle card operators to whom the sales agent transfers pickle card units. Those records shall include the dates of delivery, the types of units transferred and their serial numbers, the amount of payment from the operator to the licensed organization, and the name of the individual making payment on behalf of the operator. The sales agent shall prepare and issue a standard receipt containing such information as prescribed by Regulation 35-309.07.

308.07 A licensed sales agent shall not hold a license as a pickle card operator. No sales agent shall have a substantial interest as defined in Regulation 35-300.09, in any pickle card operator.

308.07A No individual licensed as a sales agent shall be a director, manager, trustee, or member of any governing committee, board, or body of the licensed organization on whose behalf the sales agent is licensed, if that individual receives any compensation from the organization for his or her work as a sales agent. An ex officio board member who participates in the decision making responsibilities of the licensed organization may not be a compensated sales agent, regardless of the individual's voting capability. For the purposes of this regulation, compensation shall mean any payment, directly or indirectly from the organization to the sales agent in connection with the sales agent's work which relates to the organization's pickle card activity. Compensation shall not include reimbursement for reasonable and necessary expenses actually incurred by the sales agent in connection with the sale of pickle cards.

308.08 A licensed sales agent shall not act or be licensed as a utilization of funds member for any licensed organization.

(Sections 9-320, 9-329.01, and 9-345.02, R.R.S. 1997. Sections 9-1,104, 9-322, 9-329, 9-331, 9-340.02, and 9-347.01, R.S.Supp., 2002. November 12, 2002.)

REG-35-309 PICKLE CARD OPERATOR: LICENSE ELIGIBILITY AND REQUIREMENTS

309.01 Any sole proprietorship, partnership, limited liability company, or corporation seeking to sell pickle cards on behalf of a Class II pickle card licensee must first apply for and obtain a pickle card operator’s license. The license must be applied for on a form prescribed by the Department. The pickle card operator’s license fee must be paid by the applicant and cannot be paid or reimbursed by a licensed organization or any of the organization’s agents or employees. The applicant for a pickle card operator’s license must:

309.01A Hold a retailer’s license for consumption on the premises issued by the Nebraska Liquor Control Commission; or

309.01B Hold a retailer’s license for consumption off the premises issued by the Nebraska Liquor Control Commission.

309.02 Designated Premises. An applicant for a pickle card operator’s license must designate on the application a particular premises where the pickle cards will be sold. The pickle card operator’s license is only valid for the area described. The area cannot be greater than the area covered by the applicant’s liquor license. No pickle cards may be sold by a licensed pickle card operator at any location other than the one designated on the license application filed with the Department. Pickle cards cannot be sold on any area of land surrounding the premises of the licensed pickle card operator even if the licensed pickle card operator’s liquor license extends outside the premises or building. For example, no pickle cards may be sold by a licensed pickle card operator in its “beer garden” located outside of its premises or building.

309.02A A pickle card operator’s license covers all employees at the premises designated on the license application filed with the Department.

309.02B A pickle card operator’s license may not be transferred under any circumstances including a change of ownership. A change of stock ownership in a corporation in which any new owner becomes a holder directly or beneficially of less than 10% of any class of stock in the corporation, is not a change of ownership.

309.02B(1) When a change of ownership of a business licensed as a pickle card operator occurs, the business must stop selling pickle cards as of the date its retail liquor license is cancelled by the Nebraska Liquor Control Commission. The new owner must obtain a Temporary Operating Permit from the Nebraska Liquor Control Commission as well as a temporary pickle card operator’s license and applicable authorizations from the Department to begin or continue selling pickle cards prior to the time its own retail liquor license is issued. The temporary pickle card operator license and authorizations are valid for 90 days or until the Nebraska Liquor Control Commission issues the new owner its own retail liquor license, whichever comes first.

309.02C It is the responsibility of the licensed pickle card operator to keep the information filed on its license application current. The Department must be notified within 30 days of any changes to the application information.

309.02C(1) Changes must be reported in writing and the Department may require the filing of a new application. Changes must be confirmed by the signature of an owner, partner, member, or officer of the licensed pickle card operator. Any individual who signs the most current application filed obligates the licensee to comply with the Nebraska Pickle Card Lottery Act and regulations for that licensing period.

309.03 Pickle Card Operator’s License Expiration and Renewal. A pickle card operator’s license expires on September 30 of every odd-numbered year and may be renewed biennially. Additionally, any authorizations to sell pickle cards on behalf of a licensed organization become invalid when the pickle card operator’s license expires and may also be renewed biennially. The pickle card operator’s application for license renewal is due 60 days prior to the expiration date of the license.

309.04 Authorization to Sell Pickle Cards. A licensed pickle card operator may only sell pickle cards on behalf of organizations that hold current Class II pickle card licenses. A licensed pickle card operator cannot sell individual pickle cards on behalf of a licensed organization until it has physical possession of an authorization issued by the Department to sell pickle cards for that organization. A licensed organization must apply to the Department for the authorization on a form prescribed by the Department. The application form must be signed by the utilization of funds member of the licensed organization and an owner, partner, member, or officer of the licensed pickle card operator.

309.05 Pickle Card Operator’s License and Authorization to be Posted. The pickle card operator’s license and authorization to sell pickle cards for each licensed organization must be posted prominently at the specific location for which it was issued before the licensed pickle card operator may sell pickle cards. The licensed pickle card operator must post its original license and authorizations issued by the Department at the location where the majority of pickle cards are sold. A copy of the license or authorizations cannot be substituted for the original.

309.05A A licensed pickle card operator who has had its license or authorizations lost, stolen, or destroyed must notify the Department as soon as possible. A duplicate license or authorization will be issued for no additional fee.

309.05B A licensed pickle card operator who no longer wants to be licensed must notify the Department, in writing, of its intention to cancel its license. A notification of cancellation must be accompanied by the original license and all authorizations issued by the Department.

309.05C If a pickle card operator’s license is suspended, canceled, or revoked, the pickle card operator must surrender physical possession of its license, authorizations, and all pickle cards and pickle card units to the Department immediately after receiving the order of suspension, cancellation, or revocation.

309.05C(1) Suspensions. The Department will return the license and authorizations, and all pickle cards and pickle card units, to the pickle card operator at the end of the suspension period.

309.05C(2) Cancellations. The former licensee may reapply for a pickle card operator’s license when the period of cancellation expires.

309.05C(3) Revocations. The former licensed pickle card operator may not reapply for any license at any time in the future under the Nebraska Pickle Card Lottery Act unless otherwise authorized by the Department.

309.05D When a licensed pickle card operator successfully appeals an order of suspension, revocation, or cancellation, the Department will return the license and authorizations which were surrendered to the Department.

309.06 Method of Payment. The definite profit, less the licensed pickle card operator’s commission, of each pickle card unit received by a licensed pickle card operator must be paid for by a check made payable to the licensed organization, either in advance of, or upon delivery of, the pickle card unit to the pickle card operator. It is a violation of these regulations for a licensed pickle card operator to receive credit in any form when receiving a pickle card unit from a licensed organization, including but not limited to, post-dating of a check written by the licensed pickle card operator or holding a check written by the licensed pickle card operator by the licensed organization, sales agent, or utilization of funds member.

309.06A To satisfy the payment by check requirement, a pickle card operator must make payment by a check written from the business account of the pickle card operator, or by a personal check written by an owner, officer, member, or partner of the pickle card operator.

309.06B Payment by money order, certified check, credit card, or any other method is prohibited, unless otherwise authorized by the Department.

309.07 Receipt Requirements. With each delivery of pickle card units to a licensed pickle card operator, the licensed sales agent must ensure that a receipt to the operator is included.

309.07A These receipts must be on a form prescribed by the Department and must contain the following information either on the prescribed form or on an attachment to the form which has been approved by the Department:

309.07A(1) The name of the licensed organization;

309.07A(2) The name, address, and Nebraska ID number of the licensed pickle card operator;

309.07A(3) A description of the pickle card units sold, including the name of the game, form number, and serial number;

309.07A(4) The gross proceeds and definite profit of each unit;

309.07A(5) The licensed pickle card operator’s commission from each unit;

309.07A(6) The check number, the date of the check, and amount of the check issued from the licensed pickle card operator to the licensed organization; and

309.07A(7) The signatures of the sales agent of the licensed organization certifying receipt of payment and of the licensed pickle card operator certifying receipt of the pickle card units and the date of sale.

309.07B Both the pickle card units delivered and the receipt or a copy issued by the sales agent must be physically present at the pickle card operator’s premises until the units are fully sold.

309.08 An applicant for a pickle card operator’s license is responsible for and must pay its own license fee. The licensed pickle card operator is also responsible for any other expenses it incurs in connection with the sale of pickle cards on behalf of a licensed organization, including registering pickle card dispensing devices with the Department and obtaining registration decals from the Department.

309.09 Revenue Limitation. No licensed pickle card operator can generate annual revenue from the sale of individual pickle cards which exceeds the annual revenue generated from its other retail sales.

309.09A For the purposes of this regulation, “revenue generated from other retail sales” means the gross income received from the sale of goods and services not including revenues generated from charitable gaming activities and “revenue from the sale of individual pickle cards” means the licensed pickle card operator’s commission from the sale of all pickle cards.

309.09B For example, if a licensed pickle card operator receives $500,000 from the sale of all goods and services except pickle card sales at its place of business prior to the expenses of operating that business, its revenue generated from other retail sales is $500,000. That amount will be compared with its commissions from the sale of pickle cards during the same annual period.

309.10 Prohibition of Multiple Interests. An owner, partner, member, or officer of a licensed pickle card operator cannot act or be licensed as a utilization of funds member or sales agent for any licensed organization conducting a lottery by the sale of pickle cards. This does not exclude an employee of a licensed pickle card operator from acting as a utilization of funds member for a licensed organization to which the employee belongs. No licensed pickle card operator can have a substantial interest, as defined in Reg-35-300.09, in any individual, partnership, firm, corporation, or other party licensed as a distributor or a manufacturer.

309.11 Returning Pickle Card Units. Prior to placing a pickle card unit in play, the licensed pickle card operator may return the unit to the licensed organization or its sales agent and the licensed organization may refund the amount paid by the pickle card operator for that pickle card unit. The refund transaction must be reflected on all copies of the original receipt.

309.11A If the returned pickle card unit is delivered to another licensed pickle card operator by the licensed organization, the expenses incurred by the licensed organization in connection with the re-marketing of that pickle card unit must be applied to the organization’s allowable expense limitation on resale.

309.12 Limitation on Consideration for Selling Pickle Cards. No licensed pickle card operator can receive any additional consideration, in any form, directly or indirectly, over and above the 30% of definite profit pickle card operator’s commission limitation, from any individual or organization; or any member, employee, or agent of any licensed organization, as an inducement to sell pickle cards.

309.13 Suspension of Liquor License. If a licensed pickle card operator has its retail liquor license temporarily suspended, it no longer meets the licensing requirements for a pickle card operator. During the period its liquor license is suspended, it cannot sell pickle cards. When the suspension is lifted, the pickle card operator may resume selling pickle cards.

(Neb. Rev. Stat. §§ 9-316, 9-317.01, 9-322, 9-328, 9-329, 9-329.02, 9-329.03, 9-340.02, 9-345.03, and 53-149. July 3, 2013.)

REG-35-310 CONDUCT OF THE GAME

310.01 No licensed pickle card operator or licensed organization may sell pickle cards without having physical possession of the license to sell pickle cards issued by the Department. In addition, a pickle card operator must have an authorization issued by the Department for each licensed organization on whose behalf they intend to sell pickle cards. No pickle card operator or licensed organization shall sell any pickle card which is not clearly and legibly imprinted by a licensed distributor with the name and state identification number of the licensed organization on whose behalf the pickle cards are sold.

310.02 The corresponding flare card for each pickle card unit in play must be posted prominently at the location where pickle cards are sold individually. If more than one pickle card unit is in play, the flare card for each pickle card unit must be posted by the organization selling the pickle cards or the licensed pickle card operator selling the pickle cards. If one pickle card unit is being played at more than one location within a single premises, or in more than one dispensing device within a single premises, the flare card must be posted at the point where the majority of pickle cards are being sold.

310.03 Units of pickle cards may be commingled in one receptacle, including a coin-, currency-, or token-operated dispensing device, subject to all of the following provisions:

310.03A Two or more units are placed in play at the same time at the start of a commingled game. Units added to the commingled game must be intermixed in the receptacle with the units in play. If the receptacle cannot hold two or more units, the receptacle may be filled with one unit and, as those cards are sold, refilled with cards from the second unit.

310.03B The units are identical as to a particular type, form number, name of game, cost per play, and number of pickle cards.

310.03B(1) Two or more types of pickle cards may be sold from the same coin-, currency-, or token-operated dispensing device designed with multiple columns provided that: different types of pickle cards are not mixed in a single column; and, the player has a choice as to which type of pickle card they can purchase.

310.03C For each unit in play, the flare card displaying the state identification stamp and game serial number which coincides with the pickle cards being sold must be posted in close proximity to the receptacle from which the cards are sold and plainly visible to all players.

310.03D For the purposes of this regulation, receptacle shall mean a container, coin-, currency-, or token-operated dispensing device, or a distinct section thereof, in which pickle cards may be completely separated from other pickle cards in other sections of the container or device.

310.04 The following information shall be indicated by the licensed organization or pickle card operator on each flare card posted at the location at which the particular pickle card unit is sold:

310.04A The name and state identification number of the licensed organization on whose behalf the cards are being sold; and

310.04B The date the unit was placed in play.

310.05 No pickle card unit or punchboard may be put out for play unless the flare card or punchboard has a Nebraska state identification stamp attached which has been previously affixed thereto by a licensed distributor. Once placed on the flare card or punchboard, the state identification stamp may not be tampered with by any person.

310.06 No pickle card unit may be placed out for play in the original packages, boxes, or other containers in which it was received from the distributor or licensed organization.

310.07 No pickle card or punchboard punch may be sold for a price different from the price stated on the pickle card and flare card of the unit or on the punchboard.

310.08 No licensed organization, pickle card operator, or any other person may modify or otherwise change the flare card of a pickle card unit or change or modify a punchboard from its original form as manufactured, or use a flare card or punchboard that arrives in an altered or defaced condition.

310.09 A pickle card operator or licensed organization shall not pay a prize to any player who is attempting to redeem a pickle card that has in any manner been marked, defaced, tampered with, or otherwise placed in a condition which may deceive the pickle card operator or organization.

310.10 When a winning pickle card is presented to claim a prize, the individual redeeming the pickle card shall verify before he or she pays the prize, that the serial number on the pickle card is, in fact, the serial number of a pickle card unit being sold at that particular location.

310.11 To minimize the unfair advantage certain individuals may have with regard to the prize status of a particular pickle card unit in play, otherwise known as "insider information", the following prohibitions shall apply to the purchasing and playing of pickle cards:

310.11A With respect to a bingo occasion: No individual working, managing or assisting with the conduct of the bingo occasion, or selling or redeeming winning pickle cards at the bingo occasion, shall purchase or play pickle cards at that bingo occasion at any time. This regulation does not apply to a concession worker whose duties are not connected to the actual conduct of bingo games or to the selling or redeeming of pickle cards.

310.11B With respect to an organization's designated premises: No individual who sells or redeems individual pickle cards at the designated premises shall purchase or play pickle cards at that designated premises at any time.

310.11C With respect to a pickle card operator: No individual employed by the pickle card operator and no officer, partner or owner of the pickle card operator shall purchase or play pickle cards at that operator's location at any time.

310.11D In addition, the individuals prohibited from purchasing or playing pickle cards as identified in this regulation, shall at no time disclose the prize status of a pickle card unit to any player or potential player thus giving that person an unfair advantage.

Violations of this regulation could result in a fine or the suspension, cancellation or revocation of the license of the party where the violation occurred.

310.12 Upon receipt and verification of a winning pickle card, the pickle card operator or licensed organization shall pay the prize designated by the manufacturer to the winner and shall deface the winning number, letter, symbol, or set of numbers, letters or symbols of each winning pickle card redeemed. Some examples of "defacing" a winning pickle card so that it may not be redeemed a second time are punching, marking, or signing one's name on the winning numbers, letters or symbols on the pickle card when the winner is paid.

310.13 Pickle card operators and licensed organizations shall manage and control the disposal of played and unsold pickle cards from their premises. Played and unsold pickle cards should be burned, shredded or treated in some other manner which would prevent someone from obtaining the used, defaced or unsold pickle cards and attempting to reuse them or any portion thereof.

310.14 No licensed organization or pickle card operator shall freeze a pickle card unit for a particular player(s). For the purposes of this regulation, freezing a unit or game means limiting the play of a particular pickle card unit to a particular player or players.

310.15 A licensed pickle card operator or licensed organization selling individual pickle cards shall not post any copy or facsimile of the flare card for any pickle card unit. If the original flare card becomes lost or damaged beyond use, a replacement flare card must be obtained. The pickle card unit shall be removed from play until the replacement flare card has been obtained. Such replacement flare card must comply with all other flare card requirements including the presence of a state identification stamp affixed to it.

310.15A A pickle card operator must contact the licensed organization or sales agent from whom the game was purchased to request a replacement flare card.

310.15B A licensed organization must contact the distributor from whom the game was purchased to obtain a replacement flare card.

310.16 No pickle card operator or licensed organization shall extend credit to any player for the purchase of pickle cards nor shall such operator or organization accept any mode of payment other than cash or a check from the player for the purchase of a pickle card with the exception of a player who is redeeming a winning pickle card for a pickle card or cards whose face value equals the value of the prize awarded by the winning pickle card redeemed.

310.16A A pickle card operator or licensed organization who fails to make a good faith effort to collect payment for a bad or insufficient fund check used to purchase pickle cards shall be deemed in violation of this regulation.

310.17 Licensed organizations and pickle card operators shall establish a policy regarding when and where individual pickle cards may be opened. A licensed organization or pickle card operator may establish a policy that all pickle cards must be opened and all winning cards must be redeemed at the time and at the location at which they are purchased. Licensed organizations and pickle card operators which have this policy shall clearly post a legible sign at the sales location notifying players that all pickle cards must be opened and redeemed on the premises at the time of sale.

(Sections 9-302, 9-317, 9-336, 9-337, 9-340, and 9-345.02, R.R.S. 1997. Sections 9-312, 9-315, 9-322, 9-328, 9-329.02, 9-345.03, and 9-346, R.S.Supp., 2002. November 12, 2002.)

REG-35-311 TAXES

311.01 A distributor shall pay to the Department, on a monthly basis, the statutory tax rate on the definite profit of each pickle card unit sold in Nebraska. The tax shall be remitted with and reported on a form prescribed by the Department and shall be due within thirty (30) days after the end of each monthly period or by the last day of the month following each monthly period, whichever comes first. When the last filing date for any return or report falls on a Saturday, Sunday, or day considered a holiday by the Tax Commissioner's office, the return or report shall be considered timely filed if mailed postage prepaid or personally delivered to the Department on the next succeeding day which is not a Saturday, Sunday, or a day considered a holiday by the Tax Commissioner's office.

311.01A Such tax shall be due and paid on the basis of the definite profit of the pickle card units sold as of the date the distributor transfers title or possession of the units. For the purposes of this regulation, title shall mean the right to take possession of the units even if the purchasing organization has not yet done so. Possession shall mean actual physical possession of the pickle card units purchased.

311.01A(1) If a licensed distributor is on a cash basis of accounting, the licensed distributor will report the tax at the rate as it exists at the time the distributor receives a cash payment without regard to whether the cash is in satisfaction of an obligation predating a change in the rate of tax.

311.01A(2) A licensed distributor using a pure accrual basis of accounting will report the tax as it exists at the time the distributor records the sale in his or her books.

311.01B The tax as described in this regulation shall not be imposed on pickle card units which are sold by a licensed distributor to a federally recognized Indian tribe for use in a Class II gaming activity authorized by the federal Indian Gaming Regulatory Act.

311.01C Unless otherwise provided by the Nebraska Pickle Card Lottery Act, no occupation tax may be assessed or collected on receipts derived from the conduct of a lottery by the sale of pickle cards, by any county, township, district, city, village or other governmental subdivision or body who has the power to levy, assess or collect such tax.

311.02 A licensed distributor is required to obtain a Nebraska sales tax permit and must collect and remit the sales tax on the selling price of pickle card units except from those organizations deemed exempt from sales and use tax as set forth in the Nebraska Sales and Use Tax Regulations. A licensed distributor who is required to collect the Nebraska sales tax and who fails to do so will be liable for such tax and may be assessed in accordance with the Nebraska Revenue Act of 1967, as amended.

311.03 The Nebraska sales tax is to be computed on the distributor's selling price of each pickle card unit plus any charge for imprinting and/or charges for the transportation of the property to the purchaser, if delivery of the property is made by facilities of the licensed distributor. The distributor's selling price shall include the pickle card tax that each distributor is required to pay to the state.

311.04 Organizations licensed to conduct a lottery by the sale of pickle cards are required to pay the Nebraska sales and use tax on the cost of each pickle card unit purchased from the distributor unless the licensed organization is exempt from Nebraska sales and use tax as set out in the Nebraska Sales and Use Tax Regulations.

311.05 A distributor may accept a properly completed exempt sale certificate, section B of the Nebraska Resale and Exempt Sale Certificate, Form 13, from licensed organizations that have received an exempt sales tax certificate from the Nebraska Department of Revenue. The types of organizations which are exempt from sales and use tax are listed in Sales and Use Tax Regulations.

311.06 Licensed distributors are prohibited from accepting a completed resale certificate, section A of the Nebraska Resale and Exempt Sale Certificate, Form 13, on their sale of pickle card units to licensed organizations in lieu of collecting the sales tax since licensed organizations are the ultimate consumers of the pickle card units.

(Section 77-2704, R.R.S. 1996. Sections 9-343 and 9-344, R.R.S. 1997. Sections 9-322 and 77-2703, R.S.Supp., 2002. November 12, 2002.)

REG-35-312 RECORDS

312.01 Each licensed organization, manufacturer, distributor, and pickle card operator shall maintain complete, accurate and legible accounting records with detailed supporting records sufficient to furnish information regarding all transactions pertaining to its lottery by pickle card activities. Such records shall be retained for a period of not less than three years.

312.01A A licensee may conduct its accounting on a cash basis, accrual basis or any other generally recognized accounting basis which correctly reflects the operation of the business.

312.01B All records required by the Nebraska Pickle Card Lottery Act and the regulations adopted to carry out that Act shall be open to inspection by the Department, as well as any law enforcement officials.

312.02 Each organization licensed to conduct a lottery by the sale of pickle cards shall maintain its pickle card activity records separate from all other records of the organization. The following types of records must be maintained by the licensed organization:

312.02A Invoices for all purchases of pickle card units and punchboards by the organization, including the type of unit or board purchased, the serial number for each unit or punchboard purchased, the name of the distributor from whom the units or boards were purchased, the purchase price of each unit or board, the date of purchase and the check number of the check drawn on the organization's pickle card bank account used to purchase the units or boards;

312.02B The gross proceeds for each pickle card unit or punchboard purchased and the ideal prizes awarded by that unit or board. Gross proceeds shall mean the total number of pickle cards in the unit or total number of punches on a punchboard multiplied by the selling price per pickle card or punch. Ideal prizes shall mean the amount of prizes offered by the unit or board as indicated by the manufacturer on the payout slip and flare card enclosed with the unit or on the face of the punchboard;

312.02C The name and address of each pickle card operator authorized to sell pickle cards or punches from a punchboard for the licensed organization;

312.02D The amount of commission retained by each pickle card operator for selling pickle cards or punches from a punchboard on behalf of the licensed organization and for each unit or board sold at that location, the type of unit or board, serial number, the definite profit, and the net amount paid by the operator to the organization;

312.02E Normal books of account generally maintained by a reasonable prudent business person engaged in a similar business. These records will include, but are not limited to accounts payable journals, accounts receivable journals, sales journals, and purchase journals; and

312.02F A detailed breakdown of all pickle card expenses incurred by the organization. These expenses include, but are not limited to:

312.02F(1) The unit cost of pickle card units and punchboards including, the cost of imprinting individual pickle cards, taxes and delivery charges invoiced by the distributor; pickle card operators' commissions; sales agents' commissions; fees; salaries; rent; equipment; supplies; advertising; promotional expenses; and any other expense incurred with the marketing of pickle cards and punchboards by the licensed organization.

312.02F(2) These records must be maintained for all pickle card and punchboard expenses, even if those expenses are paid from a source other than the pickle card bank account of the licensed organization.

312.03 Each organization licensed to conduct a lottery by the sale of pickle cards shall maintain a separate pickle card checking account from all other bank accounts of the organization. The amount representing the definite profit less any pickle card operator's commission derived from the transfer of all pickle card units and punchboards to pickle card operators shall be deposited into this account.

312.03A An organization must maintain the following records in connection with this bank account:

312.03A(1) All deposits, withdrawals, and transfers;

312.03A(2) All canceled checks;

312.03A(3) All bank statements; and

312.03A(4) Records of all expenditures from any bank account used in connection with a lottery by the sale of pickle cards and a description of the purpose of the expenditure.

312.03B An organization may maintain more than one bank account devoted to pickle card proceeds; provided, at least one account is a checking account from which all lawful purpose donations and expenses relating to the licensed organization's pickle card activities are made. For each such account, the records required by Regulation 35- 312.03A must be maintained.

312.04 Each licensed pickle card operator shall maintain separate records of its pickle card activities for each Class II licensed organization for whom it sells pickle cards or punches from a punchboard. A pickle card operator, shall at a minimum, keep and maintain the following types of records for a period of not less than three years:

312.04A A copy of the receipt issued by the licensed organization or sales agent for all pickle card units and punchboards sold by the licensed organization, including the form number and type of pickle card unit or punchboard sold, serial number, name of the organization from whom the pickle card units or punchboards were purchased, the name of the sales agent who sold the pickle card units or punchboards to the operator, the definite profit of each unit or punchboard, the pickle card operator's commission on each unit or punchboard, and the check number and date of the check used to pay for the pickle card units or punchboards; and

312.04B A record of all money or any other items of value received from a licensed organization as a commission for selling pickle cards or punches from a punchboard on behalf of the organization.

312.05 A licensed distributor located in Nebraska which sells pickle card units or punchboards to purchasers outside of the state of Nebraska must keep the following records of those sales for a period of not less than three years:

312.05A The name, address, city, state, and zip code of the purchaser;

312.05B The type of pickle card units or punchboards sold and the serial number of each;

312.05C The date of sale;

312.05D The manner of shipment, including name, address, and telephone number of the individual, firm, or corporation with whom the pickle card units or punchboards were shipped; and

312.05E The total number of pickle card units or punchboards sold to each purchaser.

312.06 A licensed distributor shall maintain the following records on the sale of pickle card units or punchboards in Nebraska for a period of not less than three years:

312.06A The name, address, city, state, and zip code of all organizations to whom pickle card units or punchboards are sold;

312.06B The total number of units and boards sold to each organization, including the type of pickle card unit or punchboard, serial number, form number, and corresponding state identification stamp number assigned to that pickle card unit or punchboard;

312.06C The gross proceeds from each pickle card unit or punchboard; and 312.06D The ideal prizes offered by each pickle card unit or punchboard.

312.07 A licensed manufacturer shall maintain records containing the following information concerning sales of pickle card units and punchboards to pickle card distributors licensed by Nebraska for a period of not less than three years;

312.07A Each distributor's name, address, city, state, zip code and state identification number to whom pickle card units or punchboards are sold;

312.07B The quantity of each type of unit or board sold to each distributor, including a description of the pickle card unit or punchboard, serial number, and form number assigned to each unit or board;

312.07C The gross proceeds from each pickle card unit or punchboard; and 312.07D The prizes offered by each pickle card unit or punchboard.

(Section 9-341, R.R.S. 1943. Sections 9-302, 9-333, 9-340.01, 9-342, 9-343, 9-347, 9-348, and 9-349, Cum. Supp., 1990. Sections 9-322, 9-329.02, 9-329.03, and 9-340.02, R.S.Supp., 1991. December 5, 1992.)

REG-35-313 REPORTING REQUIREMENTS

313.01 All Class I and Class II pickle card licensees shall prepare an annual report to its membership of its pickle card activities.

313.01A The annual report shall cover the organization's pickle card activities from July 1 to June 30. A copy of the annual report must also be filed with the Department on forms supplied by the Department. Class I and Class II pickle card licensees shall file the annual report with the Department by August 15 of each year.

313.01A(1) An annual report must be filed with the Department by August 15 of each year even if the licensed organization does not intend to renew its pickle card license or does not intend to retain its pickle card license for the second year of the biennial licensing period, its license renewal application has been denied, or its license has been canceled, suspended, or revoked during the reporting period. In addition, a licensed organization which has had its license renewal application denied, or its license canceled, suspended, or revoked, shall also be required to:

313.01A(1)(a) Submit a written disbursement plan with the Department no later than 45 days after the expiration date of its pickle card license or the effective date of the license renewal application denial or license cancellation, suspension, or revocation. Such plan shall identify the specific purpose(s) for which the remaining profits will be utilized, and shall be subject to approval by the Department; and

313.01A(1)(b) Unless otherwise determined by the Department, continue to file a pickle card revenues status report by August 15 of each year, on a form supplied by the Department, listing all disbursements of pickle card revenue until all such revenues have been expended either for allowable expenses or for lawful purposes.

313.01A(2) An annual report must be filed with the Department even if the licensed organization conducted pickle card activity for only a portion of the reporting period. For example, if the licensed organization did not begin its pickle card activities until the second quarter of the reporting period or ceased its pickle card activities before the end of the reporting period, an annual report would still be required.

313.01A(3) An organization's license shall not be renewed unless and until complete and accurate annual reports, for all applicable reporting periods, are filed with the Department.

313.02 The following information regarding an organization's lottery by the sale of pickle cards shall be included in the annual report:

313.02A The gross proceeds realized from the sale of pickle cards and pickle card units sold by the organization, and, in the case of organizations holding a Class II license, the gross proceeds realized through each pickle card operator;

313.02B The total prizes paid by or on behalf of the licensed organization as indicated by the payout slip enclosed by the manufacturer with each pickle card unit;

313.02C The definite profit realized by the organization from the sale of pickle card units. This figure is represented by the gross proceeds less the prizes paid. If the organization has compiled complete and accurate records which indicate a definite profit different from that which would ideally be realized for the pickle card unit minus the prize payout designated by the manufacturer, the organization may use that figure in reporting its definite profit;

313.02D Interest or any other income realized from the organization's activities in the conduct of a lottery by the sale of pickle cards, including interest from the organization's pickle card bank account, any income realized from the sale or rental of pickle card dispensing machines, or any other type of income which would be derived from the organization's lottery by the sale of pickle cards;

313.02E The number of pickle card units sold for the reporting period. The information necessary to compute this figure would consist of the number of pickle card units in inventory on the first day of the reporting period, the number of pickle card units purchased by the organization during the reporting period, and the number of pickle card units on hand at the end of the reporting period;

313.02F Any compensation paid to officers of the organization, employees, or sales agents. This would include the commission or salary of a sales agent or any individual connected with the marketing of the pickle cards, including consultants hired for the purpose of coordinating the organization's lottery by the sale of pickle cards;

313.02G Any commissions retained by pickle card operators. This information must be reported separately for each pickle card operator marketing pickle cards on behalf of the organization. Commission includes any money the organization allows a pickle card operator to retain out of the definite profit from a pickle card unit or any other compensation from the organization to the pickle card operator to market the organization's pickle cards;

313.02H A detailed breakdown of all expenses incurred by the licensed organization in connection with the marketing of pickle cards. This shall include items such as rent, purchase of equipment such as pickle card dispensing machines, repairs and maintenance on any equipment or real property used in connection with the lottery by the sale of pickle cards, and contract services such as secretarial or bookkeeping services incurred in connection with the lottery by the sale of pickle cards. In addition, any license fees paid by the organization must be reported and an itemized list of those license fees must be included. Any other expenses in addition to those previously mentioned that are incurred by the organization in connection with the lottery by the sale of pickle cards must also be listed;

313.02I All disbursements from the organization's pickle card bank account for lawful purpose donations must be reported. Donations made outside the organization must include the recipient's name and address, check number, date, amount, and description of the purpose for which the donation was made. Donations made for the organization's internal use must be summarized as transfers to the organization operating fund, a special reserve fund, or payment of organization's operating expenses;

313.02J A summary of the organization's pickle card bank account, including the balance at the beginning of the reporting period, total deposits made during the reporting period, total interest earned, total disbursements made during the reporting period, and the balance of the account at the end of the reporting period;

313.02K All expenses connected with the organization's lottery by the sale of pickle cards must be reported, regardless of whether they are paid from the organization's pickle card bank account or from some other bank account of the organization; and

313.02L All accounts receivable connected with the organization's lottery by the sale of pickle cards at the end of the reporting period.

313.04 All licensed distributors shall report monthly and pay to the Department the statutory tax on the definite profit for all pickle card units sold within the state as provided in Regulation 35-311. All licensed distributors shall include with the monthly tax return a supplementary report which includes the following information:

313.04A The state identification number and name of each licensed organization purchasing pickle card units;

313.04B A breakdown of purchases, returns or exchanges by each licensed organization to include:

313.04B(1) The name and form number of each pickle card unit;

313.04B(2) The quantity of each type of pickle card unit purchased, returned, or exchanged; and

313.04B(3) The gross proceeds and definite profit for each pickle card unit purchased, returned, or exchanged; and

313.04C The number of pickle card units on hand as of the beginning of the reporting period and the end of the reporting period, the number of pickle card units purchased, exchanged or returned from manufacturers during the reporting period, and the number of pickle card units sold to out-of-state customers during the reporting period.

(Sections 9-302, 9-333, 9-340.01, 9-343, 9-348, and 9-348.01, R.R.S. 1997. Sections 9-322, 9-328, 9-340.02, 9-347.01, and 9-349, R.S.Supp., 2002. November 12, 2002.)

REG-35-314 EXPENSES

314.01 A Class II pickle card licensee may not allow more than 30 percent of the definite profit from each pickle card unit sold as commission to the pickle card operator. The pickle card operator's commission must be deducted from the definite profit of each pickle card unit sold in determining the amount to be paid by the pickle card operator to the licensed organization. That amount must be paid by check by the operator in advance of or at the time of delivery of the pickle card unit from the organization to the operator.

314.02 All licensed organizations conducting a lottery by the sale of pickle cards may not spend more than 12 percent of the definite profit from a pickle card unit to pay the allowable expenses of operating the lottery by the sale of pickle cards. Pickle card operators' commissions and unit cost are not included within the definition of allowable expenses.

The following types of expenses are included within the 12 percent expense limitation:

314.02A All costs associated with the purchasing, printing, or manufacturing of any items to be used or distributed to participants in the lottery by the sale of pickle cards, such as the cost of pickle card dispensing devices and racks if used by the licensed organization and not rented to a pickle card operator for fair market value;

314.02B Shipping or delivery charges incurred by the organization for delivery of pickle card units to licensed pickle card operators or any shipping or delivery costs on pickle card units received from a distributor which were not billed by the distributor as part of the unit cost;

314.02C All office expenses including, but not limited to, the cost of office supplies and bookkeeping materials, sales invoices, receipt books, postage costs, copying expenses, telephone costs, office equipment, and any other related office expenses incurred which are directly related to the operation of the lottery by pickle card activity;

314.02D Promotional expenses such as advertising; any federal gaming license for the organization, any pickle card dispensing device registration fee for the organization, any pickle card dispensing device repairs or maintenance paid by the organization, and any other costs incurred which are directly related to the promotion of the lottery by pickle card activity;

314.02E All salaries paid to persons to operate the lottery by the sale of pickle cards, such as salaries, or wages paid to individuals involved with the operation of the pickle card activity, including bookkeepers and other office staff, utilization of funds members, sales agents, whether commissioned or salaried, officers or managers of the organization who are paid for their participation in the pickle card activity, and any other related salaries or wages;

314.02F Any rental or lease expense for real or personal property used and directly related to the operation of the pickle card activity, such as office or storage space rental, office equipment rental, car rental, and pickle card dispensing device rental; and

314.02G Any fee paid to any person associated with the operation of any lottery by the sale of pickle cards, such as fees to consultants, attorneys, fundraisers, and other professionals for services performed which are directly related to the organization's pickle card activities. This includes payments to an individual, firm, or corporation with whom the licensed organization contracts for services relating to the operation of the lottery by the sale of pickle cards. This also includes any commission or fee paid to a sales agent and any reasonable and necessary expense for which a sales agent is reimbursed.

314.03 License fees paid by the organization to license itself, its utilization of funds member, or its sales agents and any actual fees charged for fingerprinting the organization's sales agents are not included in determining the 12-percent limitation on allowable expenses.

314.03A Pickle card operator license fees, federal wagering taxes, costs of a pickle card dispensing device, pickle card dispensing device registration fees, and other expenses incurred by a pickle card operator in connection with the sale of pickle cards are not considered allowable expenses and may not be paid or reimbursed by the licensed organization or any of its members, employees or agents.

314.04 A licensed organization may not use pickle card monies to pay any fine imposed pursuant to the Nebraska Bingo Act, Nebraska Pickle Card Lottery Act, or Nebraska Lottery and Raffle Act.

314.05 A Class II pickle card licensee may not pay a sales agent more than six percent of the definite profit of a pickle card unit as a commission, salary, or fee for the marketing of the pickle card unit. The six percent sales agent's limitation is included within the 12 percent overall allowable expense limitation.

314.05A For example, if a licensed organization pays its sales agent six percent of the definite profit of a pickle card unit, its remaining allowable expenses may not exceed six percent of the definite profit ( 12% - 6% = 6%). Additionally, if a licensed organization incurs other allowable expenses of seven percent, it cannot pay its sales agent more than five percent of the definite profit of a pickle card unit. Any payments to sales agents in connection with a lottery by the sale of pickle cards must be made by check, from the licensed organization's pickle card bank account and signed by the organization's utilization of funds member.

314.05B A licensed organization may reimburse a sales agent for reasonable and necessary expenses incurred while performing the sales agent's duties. Such reimbursed expenses may not be included in the six percent limitation on a sales agent's commission but may be included in the 12 percent overall allowable expense limitation.

314.06 To determine whether a licensed organization is within the 12 percent of definite profit allowable expense limitation when an expense cannot be directly attributed to a particular pickle card unit, such as a bookkeeper or consultant fee, the total expense should be allocated to all units sold, either based upon previous experience, or a reasonable projection of sales for the annual reporting period. Salaries and other expenses which are not entirely attributable to the pickle card activity may be allocated on the basis of the percentage of time spent on pickle card activities.

314.07 The Nebraska Pickle Card Lottery Act allows a maximum of 12 percent of the definite profit per pickle card unit to pay all allowable expenses. The following formula should be used to calculate the allowable expense limitation:

Definite profit x 12% = Allowable Expense Limitation

EXAMPLE:

| Gross proceeds | $3,600 | | --- | --- | | Less prizes | 2,600 | | Definite profit | $1,000 |

$1,000 (Definite Profit) x .12 = $ 120 (Allowable Expense)

314.08 All allowable expenses paid by a licensed organization in connection with its lottery by the sale of pickle cards must be paid by a check drawn on the organization's pickle card bank account. Checks must be paid directly to the person, firm or corporation with whom the expense was incurred.

(Sections 9-1,104, 9-304, 9-322, 9-340.02, 9-345.03, 9-348 and 9-348.01, R.R.S. 2007 and sections 9-347, and 9-347.01, R.S. Supp., 2009. November 6, 2010.)

REG-35-315 STATE IDENTIFICATION STAMP

315.01 The flare card for each pickle card unit and each punchboard sold for use in this state shall contain a Nebraska state identification stamp, permanently affixed to such flare card or punchboard. No person other than a licensed distributor may obtain state identification stamps from the Department, nor may any person, organization, or business other than a licensed distributor, affix such state identification stamps to any flare card accompanying a unit of pickle cards or to any punchboard. Such identification stamps are not transferable.

315.02 A licensed distributor who ceases business, liquidates, declares bankruptcy, or closes for any other reason, including the nonrenewal of a distributor license or a relinquishment of its license, shall return any and all unused Nebraska state identification stamps in the distributor's possession to the Department within five (5) days after cessation of business unless otherwise authorized by the Department.

315.03 If a licensed organization returns a purchased unit of pickle cards or a punchboard, for whatever reason, the distributor shall void the state identification stamp. The distributor shall keep a record of all voided state identification stamps for a period of not less than three years. The distributor shall be able to provide a list of voided state identification stamp numbers to the Department upon request.

315.03A If the distributor resells or reissues the unit or board, the distributor shall place a new state identification stamp on the flare card of the unit or on the punchboard in close proximity to the voided stamp (for example, alongside) in such a manner as to not obscure the identification number of the voided stamp.

(Section 9-340, Cum. Supp., 1990. Section 9-322, R.S.Supp., 1991. December 5, 1992.)

REG-35-316 PICKLE CARD DISPENSING DEVICES: REGISTRATION; USE; AND RESTRICTIONS

316.01 No coin-operated or currency operated device shall be used for the dispensing of pickle cards unless a registration decal has been obtained from the Department and the decal has been permanently and conspicuously affixed to the device. The mechanical amusement device tax does not apply to coin or currency operated pickle card dispensing devices. For the purposes of this regulation, coin or currency operated pickle card dispensing devices shall include devices activated by the use of tokens or slugs.

316.02 Registration of such devices with the Department shall be made by application on a form prescribed by the Department and each application for a registration decal shall include:

316.02A The name and address of the licensed pickle card operator or licensed organization registering the device;

316.02B The state identification number of the licensed pickle card operator or licensed organization registering the device;

316.02C A detailed description of the physical appearance and operation of the coin- operated or currency operated dispensing device;

316.02D If applicable, a copy of any written lease, rental, or sales agreement between the licensed organization and the licensed pickle card operator;

316.02E The fee as prescribed by Regulation 35-316.04; and

316.02F Such other information which the Department deems necessary.

316.03 Registration decals issued for pickle card devices shall expire on December 31 of each year and may be renewed annually. An application for renewal of the registration of a pickle card dispensing device shall be submitted to the Department on or before November 15 of each year.

316.04 A fee of $50.00 shall be charged for each registration decal issued and such decal shall not be transferable from one machine to another or from one premise to another. The registration decal fee is due in full for any portion of the calendar year and will not be prorated for any portion of the year. Registration decal fees are not refundable, unless otherwise approved by the Department based upon a written request for refund and extenuating circumstances.

316.04A If a pickle card dispensing device breaks down and cannot be repaired, any permanent replacement device that is placed into use must be registered with the Department. For each permanent replacement device, the $50.00 registration decal fee is required.

316.04B If a pickle card dispensing device breaks down and will be temporarily out-of- service, a temporary replacement device may be placed in use for a period of up to 30 days or until such time the original device has been repaired and placed back into use, whichever occurs first. Under this circumstance, the $50.00 registration decal fee will not be required for the temporary replacement device.

316.04B(1) The licensed organization or pickle card operator that is using a replacement device on a temporary basis shall notify the Department in writing of the following:

316.04B(1)(i) The name and address of the licensed organization or pickle card operator using the temporary replacement device;

316.04B(1)(ii) The state identification number of the licensed pickle card operator or licensed organization using the temporary replacement device;

316.04B(1)(iii) A detailed description of the replacement device including serial number, if applicable;

316.04B(1)(iv) The number of the current registration decal on the device that is temporarily out-of-service; and

316.04B(1)(v) The date the temporary replacement device was placed into service.

316.04B(2) Such notification shall be made within five working days of the date the temporary replacement device was placed into service.

316.05 Registration of each pickle card dispensing device shall be the responsibility of the licensed organization when such device is to be used at a licensed organization's designated premises or its own bingo game or the responsibility of the licensed pickle card operator when such device is to be used on the premises of the pickle card operator. For the purposes of this regulation, responsibility shall include filing the application and paying the fee for such registration decal. In the case of a licensed pickle card operator, such operator shall not be reimbursed for such registration decal fees by the licensed organization on whose behalf the operator sells pickle cards or by any licensed manufacturer, distributor or any other person.

316.06 A licensed organization or distributor shall not provide pickle card dispensing devices to pickle card operators free of charge, or for a rate less than fair market value. A licensed organization shall not extend credit to a pickle card operator on the rental, lease, or purchase of such devices. Payment for the purchase of such devices shall either be in advance or upon delivery. The payment terms of any lease or rental agreement regardless of the term of the lease, shall specify that the lease or rental payment be made in advance. Payment in advance shall mean on or before the placement of the device or on or before the first day of the period of the lease, whichever comes first. For example, if the lease terms specify a monthly rental payment, such payment shall be made on or before the first day of each month.

316.06A A licensed organization or distributor shall sell or rent pickle card dispensing devices to licensed pickle card operators at a rate not less than fair market value. The lease or rental of a pickle card dispensing device to a licensed pickle card operator shall be in writing and set forth all terms and conditions of the lease or rental.

316.06A(1) Fair market value, regarding the sale of pickle card dispensing devices, is the amount at which property would change hands in the open market, in competition with other similar devices, between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts.

316.06A(2) Fair market value for leased or rented pickle card dispensing devices shall be determined by taking the cost of the device divided by thirty-six to arrive at a fair market value monthly lease rate.

316.06A(2)(i) A licensed organization or distributor shall not reduce the rental or lease rate of a pickle card dispensing device rented or leased to a licensed pickle card operator within three years of the date the device is first placed in service. The fair market value formula as prescribed in Regulation 316.06A(2) of this regulation shall remain in force.

316.06A(2)(ii) A licensed organization or distributor who leases a device may release such device to a licensed pickle card operator. The amount for which the device is leased or rented to the pickle card operator may be for the same amount of the organization's or distributor's lease, provided such amount is equal to or greater than the fair market value determined using the formula in Regulation 35-316.06A(2).

316.07 Any licensee which utilizes a pickle card dispensing device to sell pickle cards shall, upon request, provide the Department immediate access to any pickle cards contained within such device.

(Sections 9-341, 77-3001, and 77-3002, R.R.S. 1943. Sections 9-302, 9-343, and 9-347.01, Cum. Supp., 1990. Sections 9-322, 9-329.02, 9-340.02, 9-345.03, and 9-350, R.S.Supp., 1991. December 5, 1992.)

REG-35-317 DESIGNATED PREMISES

317.01 Any organization licensed to conduct a lottery by the sale of pickle cards may sell pickle cards at a location specified as its "designated premises" without obtaining a pickle card operator's license for that location. An organization may have only one designated premises. Such premises shall be identified by the licensed organization on its application for a license to conduct a lottery by the sale of pickle cards. To be approved by the Department as a designated premises, a location must meet the following requirements:

317.01A The premises must be the principal office of the licensed organization. For purposes of this regulation, the principal office of an organization is determined by factors such as the location where the principal affairs and business of the organization are transacted, where the organization's records are stored, the location from which the organization receives and issues correspondence, and generally, the main location for which the business of the organization is transacted. In order to determine whether or not a particular location is the principal office of the organization, one must look to the totality of the circumstances surrounding the activities taking place at that location; and

317.01B In the case of organizations holding a certificate of exemption under section 501(c)(3), (c)(4), (c)(5), (c)(7), (c)(8), (c)(10), or (c)(19) of the Internal Revenue Code or a volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad:

317.01B(1) The premises must be used primarily for purposes other than gaming. For the purposes of this regulation, the phrase "primarily for purposes other than gaming" means the major use of the premises by the organization. For example, a premises in which the organization conducts business one hour a week, but at which pickle cards are sold to the public on behalf of the organization 40 hours a week would not be in use primarily for purposes other than gaming; and

317.01C In the case of organizations holding a certificate of exemption under section 501(c)(3), (c)(4), or (c)(5), of the Internal Revenue Code or a volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad, the premises must not be used in connection with any other retail business activity other than an occasional sale as defined in section 77-2702.09 of the Nebraska Revised Statutes, as amended. For example, an organization's designated premises cannot be a retail store, restaurant, or bar which engages in other retail sales at that location.

317.02 A licensed organization shall notify the Department in writing and receive written approval prior to changing its designated premises.

317.03 A licensed organization may use compensated help in selling its pickle cards at its designated premises without obtaining a pickle card operator's license for that premises.

317.04 The sale of pickle cards at a designated premises of a licensed organization shall be limited to the building or a distinct portion of the building used as the organization's designated premises. Pickle cards shall not be sold on any land surrounding the designated premises or any area not included within the designated premises.

(Section 9-317.01, R.R.S. 1997. Sections 9-306.01, 9-321.03, 9-322, 9-328, 9-345.01, and 77-2702.09, R.S.Supp., 2002. November 12, 2002.)

REG-35-318 MANUFACTURER OF PICKLE CARDS: LICENSE; REQUIREMENTS; AND DUTIES

318.01 Any individual or business which manufactures pickle cards and intends to sell or otherwise provide such pickle cards in this state must first obtain a manufacturer's license from the Department. A manufacturer's license shall only be issued to those applicants doing business in Nebraska or authorized to do business in Nebraska.

318.01A Authorization to do business in Nebraska requires:

318.01A(1) A domestic corporation to file Articles of Incorporation with the Nebraska Secretary of State's office;

318.01A(2) A domestic limited liability company to file Articles of Organization with the Nebraska Secretary of State's office;

318.01A(3) A foreign corporation or limited liability company to obtain a certificate of authority to transact business in Nebraska from the Nebraska Secretary of State's office or to become domesticated by filing the required documents with the Nebraska Secretary of State's office and paying any required fees; or

318.01A(4) A domestic partnership, foreign partnership, or limited liability partnership to file any forms that may be required by the Nebraska Secretary of State’s office.

318.01B Applicants seeking a manufacturer's license and who intend to be engaged in business in this state as defined in section 77-2702.06 of the Nebraska Revised Statutes, as amended, shall also submit a Nebraska Tax Application, Form 20, to obtain a Nebraska Sales and Use Tax Permit.

318.01B(1) A licensed manufacturer engaged in business in this state as defined in section 77-2702.06 may accept a properly completed Resale Certificate, Section A, of the Nebraska Resale and Exempt Sale Certificate, Form 13, from a licensed distributor in Nebraska, in lieu of charging and collecting sales tax from the distributor.

318.02 An individual or business shall apply for and obtain a manufacturer's license from the Department prior to supplying any pickle cards or pickle card units in this state, or engaging in any interstate activities relating to such pickle cards or pickle card units. The applicant shall include with the application form prescribed by the Department the statutorily required license fee and, at a minimum, the following information:

318.02A The business name and address of the applicant and the name and address of each of the applicant's separate locations at which manufacturing, warehousing, selling, or promotion of pickle cards occurs;

318.02B The type of ownership of the business and the name, social security number, home address, and date of birth of:

318.02B(1) If a sole proprietorship, the individual owner;

318.02B(2) If a partnership, each partner and spouse;

318.02B(3) If a limited liability company, each member and spouse;

318.02B(4) If a corporation, each officer and spouse, each director or board member, and each individual or entity holding ten percent or more of the debt or equity of the corporation. If an entity holding ten percent or more of the debt or equity of the applicant corporation is a partnership, limited liability company, or corporation, the information required in Regulation 35-318.02B must be supplied for each partner of the partnership, each member of the limited liability company, or each officer of the corporation and every individual or entity holding ten percent or more of the debt or equity of the partnership or corporation.

318.02C If the applicant is not a resident or a corporation, the full name, business address, and home address of an individual who is a resident of and living in this state who is 19 years of age or older, to act as the manufacturer's resident agent for the purpose of receipt and acceptance of service of process and other communications on behalf of the manufacturer;

318.02D Upon request, a current list of all Nebraska-licensed distributors in which the applicant has some financial interest and the details of such interest. For purposes of this regulation, financial interest shall include, among all other interests, any indebtedness from the applicant to another individual or business or from another individual or business to the applicant in excess of $500.00;

318.02E A completed and notarized Personal History Record and Background Disclosure form supplied by the Department for each person listed pursuant to Regulation 35-318.02B, except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form; and

318.02F Two sets of fingerprints on cards supplied by the Department and the requisite fees established by the Nebraska State Patrol and Federal Bureau of Investigation for each person listed pursuant to Regulation 35-318.02B, except for spouses who have completed and had notarized the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure form. Fingerprint cards and the required fees must be submitted to the Nebraska State Patrol, Criminal Investigation Division.

318.03 The applicant or licensee shall notify the Department within thirty (30) days of any changes in the information submitted on or with the application form.

318.03A Changes must be reported in writing, and the Department may require the filing of a new application.

318.03B Changes shall be confirmed by the signatures of an owner, officer, member, or partner of the manufacturer. Any individual signing the most current application shall obligate the licensee to comply with the Nebraska Pickle Card Lottery Act and accompanying regulations for that licensing period.

318.03C A manufacturer's license shall expire on September 30 of every odd-numbered year and may be renewed biennially. An application for license renewal shall be due August 15 of each odd-numbered year. A manufacturer's license is not transferable.

318.03D A manufacturer is not considered licensed until it has physical possession of the printed license issued by the Department.

318.03D(1) A manufacturer which has had its license lost, stolen, or destroyed must notify the Department as soon as possible. The manufacturer shall send a written statement to the Department signed by an owner, officer, member, or partner confirming the loss, theft or destruction of the license. A duplicate license will be issued for no additional fee under such circumstances.

318.03E Any individual or business licensed as a manufacturer pursuant to section 9-255.09 of the Nebraska Bingo Act may act as a manufacturer pursuant to the Nebraska Pickle Card Lottery Act without submitting an additional licensing fee. Such individual or business shall comply in every other respect with the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, and all rules and regulations adopted and promulgated pursuant to such Acts.

318.03F A manufacturer which no longer desires to be licensed shall notify the Department, in writing, of its intention to cancel its license. Such notification shall be signed by an owner, officer, member, or partner of the manufacturer. A notification of cancellation shall be accompanied by the original license issued by the Department.

318.03G A licensed manufacturer, or any person having a substantial interest therein, is prohibited from holding any other licenses issued pursuant to the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act, except as provided in section 9-255.09 of the Nebraska Bingo Act, and section 9-632 of the Nebraska County and City Lottery Act.

318.03G(1) A licensed manufacturer or employee or spouse of a licensed manufacturer shall not have a substantial interest as defined in Regulation 35-309.09 in any other manufacturer, distributor, manufacturer-distributor, licensed organization, or lottery operator conducting gaming activities under the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act.

318.03H A licensed manufacturer or employee or spouse of a licensed manufacturer shall not participate in the operation or conduct of any kind of gaming activity regulated under Chapter 9 of the Nebraska Revised Statutes, except to the exclusive extent of his or her duties as a licensed manufacturer or employee thereof.

318.04 A licensed manufacturer shall not sell or otherwise provide pickle cards or pickle card units to anyone in Nebraska other than a licensed distributor. A licensed manufacturer must sell or provide pickle cards to licensed distributors only in the form of pickle card units.

318.04A A licensed manufacturer shall report immediately to the Department any pickle card unit which has been shipped but reported not received by a licensed distributor.

318.05 The price charged by a licensed manufacturer for pickle card units shall not be fixed or set by agreement among licensed manufacturers in any manner, either expressed or implied.

318.05A No manufacturer shall offer or agree to offer anything of value to any individual or licensee in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use pickle card units from such manufacturer.

318.05B No individual or licensee shall accept or agree to accept anything of value from a manufacturer in exchange for an agreement or commitment by such individual or licensee to exclusively buy, sell, or use pickle card units from that manufacturer.

318.06 No manufacturer or any other person shall affix to any pickle card, pickle card unit, flare card, or any promotional material, any statement indicating any endorsement by the State of Nebraska, the Department, or any division thereof. Additionally, no other statement indicating any such endorsement shall be made verbally or in writing.

318.07 No person other than a licensed manufacturer shall produce by assembling from raw materials or subparts a whole or partial pickle card or pickle card unit. A licensed manufacturer must actually assemble raw materials or parts and may not simply act as an intermediary for another person, organization, firm, or corporation which conducted the actual assembling of the pickle card or pickle card unit.

318.08 Each manufacturer must receive departmental approval for each type of pickle card unit which they intend to market for resale in this state.

318.09 No pickle card unit shall be approved for resale in this state:

318.09A Which offers total prizes of less than 65 percent or more than 80 percent of the gross proceeds, or which is designed to have a prize pay-out structure which may vary;

318.09B Which has a card or play count exceeding 6,000;

318.09C Which contains an individual pickle card with a purchase price greater than $1.00;

318.09D Which contains a single pickle card that awards a prize or prizes exceeding $1,000.00; or

318.09E Which has not been authorized by the Department.

318.09F Manufacturers seeking approval to market a pickle card unit in Nebraska shall submit the following information for each game:

318.09F(1) The flare card;

318.09F(2) The payout slip identifying the game's payout structure;

318.09F(3) No less than ten pickle cards for the game, five of which must be winning pickle cards.

318.09F(4) Relative to punchboards, a complete cover sheet and payout slip for each punchboard. Punchboards which contain play features such as seals, cards, straws, etc., must include these features with the sample submitted.

318.10 All pickle card units marketed to Nebraska distributors by licensed manufacturers, entering this state for transfer or resale to a licensed organization in Nebraska, shall have a unique form number which shall indicate that such units meet the standards imposed on pickle cards marketed in Nebraska set out in this regulation. Such form number shall be printed on each punchboard, each individual pickle card, each flare card for each pickle card unit, and on each accompanying payout slip showing the pickle card unit's fixed payout structure.

318.10A Each pickle card in a pickle card unit and the accompanying flare card for that unit shall contain a game serial number printed on the face or information side of the pickle card and flare card. The serial number for a punchboard must be imprinted or otherwise permanently affixed to the back side of each punchboard. The same game serial number shall not be repeated on the same pickle card or punchboard form number for a minimum of three years.

318.11 No manufacturer shall market, sell, or otherwise furnish any pickle card unit to a distributor to be sold or marketed in this state unless each individual pickle card in that unit or, in the case of a punchboard, each board is conspicuously printed with the manufacturer's name or logo.

318.12 Manufacturing Standards.

318.12A Pickle card units shall be manufactured, assembled, and packaged in such a manner that neither winning nor losing pickle cards, or the location or approximate location of either winning or losing pickle cards can be determined in advance of opening the pickle cards in any manner or by any device including, but not limited to, any pattern in manufacture, assembly, packaging, marking, or by the use of a light.

318.12B Winning pickle cards shall be randomly distributed and mixed among all other pickle cards in a unit. The unit shall be assembled and packaged with special care so as to eliminate any pattern between units or portions of units, from which the location or approximate location of any of the winning pickle cards may be determined.

318.12C When a single pickle card unit is packaged in more than one package, box, or other container, the entire unit shall be mixed in such a manner that no person can determine the position or approximate location of any of the winning pickle cards or determine if any one package, box, or other container contains a larger or smaller percentage of winning pickle cards than the balance of the unit. If the unit is comprised of more than one box, each box shall be numbered as a set, for example, one of two and two of two.

318.12D Pickle cards shall be constructed so that it is impossible to determine the covered or concealed number, letter, symbol, set of symbols, or game protection on the pickle card until such is dispensed to and opened by the player, by any method or device including, but not limited to, the use of a marking, variances in size, variances in paper fiber, or use of a light.

318.12E The back or tab side of a pickle card shall contain perforated openings centered over the symbols or numbers imprinted on the back side of the face sheet or information side of the pickle card, in such a manner as to allow easy opening by the purchaser, while at the same time not permitting the pickle card to be opened prematurely in normal handling. Perforations shall exist on both horizontal lines of the opening and on the vertical or elliptical line where the tab must be grasped for opening after bending the edge of the ticket down.

318.12F Pickle cards shall be glued or sealed on all four edges and between each window. The glue must be of sufficient strength so as to prevent the separation of the laminations of the tickets, so that it is impossible to determine the covered or concealed numbers, symbol, or set of symbols on the pickle card until it has been dispensed to and opened by a player.

318.12G All pickle cards within the same pickle card unit shall be the same size and thickness.

318.12H All pickle cards shall be constructed to ensure that, when offered for sale to the public, the pickle card is opaque and free of security defects so that neither winning nor losing combinations can be determined prior to the opening of the tabs through the use of a high intensity lamp or any other method. Such protection shall be provided by using opaque paper stock or an aluminum foil laminate.

318.12I Each manufacturer shall establish its own game protection for each pickle card game, unit, or series of games. The game protection shall be a method of identifying winning pickle cards, after they have been purchased and opened, from nonwinning, altered, or forged pickle cards. The manufacturer may use special numbers, colors, designs, ink, or any combination to establish the game protection. Upon request, a manufacturer shall submit to the Department a letter explaining the game protection.

This provision shall not apply to pickle cards known as jar tickets or to punchboards.

318.13 In addition to the information required by Regulation 35-318.10 and 35-318.11, the following information shall be printed by the manufacturer on all pickle cards wider than one inch or longer than two and one-half inches marketed in this state:

318.13A The name of the game;

318.13B The price per individual pickle card;

318.13C The number of winners, and respective winning numbers, symbols, or winning combinations and prize amounts.

318.14 Each pickle card unit's package, packages, box, or other container shall be sealed at the manufacturer's factory with a seal including a warning to the distributor that the game may have been tampered with if the package(s), box, or container was received by the purchaser with the seal broken.

318.14A The manufacturer's name or logo and the pickle card unit's form number and serial number shall be clearly and legibly visible on the outside of the game's package(s), box, or other container.

318.14B Each pickle card unit shall contain a flare card which shall be imprinted with the following information:

318.14B(1) The name of the game;

318.14B(2) The form number of the game;

318.14B(3) The price per play;

318.14B(4) The unit count and serial number of the game;

318.14B(5) The prize structure of the game, to include the number of winners by denomination with their respective winning combinations; and

318.14B(6) The manufacturer's name or distinctive logo.

318.15 A manufacturer shall issue an invoice to the licensed distributor for each purchase, exchange, or return of pickle card units by the licensed distributor. Every such invoice shall contain the following information:

318.15A The name and complete address of the licensed distributor;

318.15B The date of the transaction;

318.15C A description of each pickle card unit and the serial number and form number of each pickle card unit;

318.15C(1) The information in this subsection may be provided on a supplemental listing or attachment accompanying the invoice;

318.15D The quantity of each type of pickle card unit;

318.15E The price of the pickle card units, taxes collected (if applicable), and the total amount paid, exchanged, or returned by the distributor; and

318.15F The manner of delivery or shipment, including the name, address, and telephone number of the individual, firm, or corporation with whom shipment is made.

318.16 A licensed manufacturer shall ship or deliver pickle card units only to the licensed distributor's business address. Pickle card units may not be drop shipped in Nebraska directly to any licensed organization, sales agent, pickle card operator, or any other person.

318.16A Nothing in this regulation shall prohibit a manufacturer from: (1) using a common carrier service to ship pickle card units to a licensed distributor, or (2) drop shipping pickle card units billed to a Nebraska licensed distributor and reported on the manufacturer's monthly report to the Department, to a warehouse or location outside of Nebraska, or to a federally recognized Indian reservation.

318.17 Licensed manufacturers shall not be prohibited from selling pickle card units which have not been approved by the Department to licensed distributors. With respect to any transaction involving pickle card units which have not been approved, the following information shall be recorded and maintained by the manufacturer and made available to the Department upon request:

318.17A The name and complete address of the Nebraska distributor;

318.17B The date of the invoice;

318.17C The type of unit and serial number of each unit sold, transferred, or exchanged. For the purposes of this section, "type of unit" shall mean the form number, game name, and unit count of the particular type of pickle card unit; and

318.17D The method of shipment, including the name, address, and telephone number of the person, business, or corporation transporting the units or boards.

318.18 Licensed manufacturers shall collect payment for pickle card units and punchboards sold to Nebraska licensed distributors by check or automatic bank transfer within thirty (30) days of delivery. A licensed distributor may, by check, set up a deposit with a licensed manufacturer upon which the manufacturer can draw payment for pickle card units ordered by the distributor.

318.18A It shall be the responsibility of the licensed manufacturer to notify the Department of any licensed distributor who fails to pay for pickle card units within thirty (30) days from the date of delivery. Such notification shall be in writing.

(Section 77-2702.06, R.R.S., 2003. Sections 9-313, 9-332, 9-332.01, 9-334, 9-335, 9-336, 9-337, 9-340, and 9-341, R.R.S. 1997. Sections 9-1,104, 9-322, 9-331, 9-338, and 9-346, R.S.Supp., 2004. September 5, 2005.)

REG-35-319 PRORATION AND REFUND OF LICENSE FEES

319.01 The fees paid pursuant to the Nebraska Pickle Card Lottery Act for any license issued to a manufacturer, distributor, nonprofit organization, volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad, utilization of funds member, sales agent, or pickle card operator are due in full for the biennial licensing period. A license fee may be prorated or refunded by the Department on an annual basis under the following circumstances:

319.01A If a new application is received by the Department for a license which will become effective on or after October 1 of the second year of the biennial licensing period, the applicable license fee shall be one-half of the biennial fee.

319.01B If a new application is received by the Department for a license which will become effective prior to October 1 of the second year of the biennial licensing period, no proration of the license fee shall be allowed.

319.01C No license fee may be refunded for any portion of the licensing period in which the license was not used unless otherwise authorized by the Department.

319.01D If an application to downgrade a Class II license to a Class I license for the second year of the biennial licensing period is received by the Department prior to October 1 of the second year of the biennial licensing period, such license may be downgraded; however, no portion of the Class II license fee shall be refunded unless otherwise authorized by the Department.

319.01E In the event a license issued pursuant to the Nebraska Pickle Card Lottery Act is suspended, cancelled, or revoked by the Department, no portion of the license fee shall be refunded unless otherwise authorized by the Department.

319.01F In the event a license application is denied and a temporary license was issued to the applicant prior to the effective date of the license application denial, one-half of the biennial license fee paid by the applicant may be refunded, provided the effective date of the license application denial is prior to October 1 of the second year of the biennial licensing period. In the event a license application is denied and a temporary license was not issued or a license application is withdrawn, the license fees paid by the applicant may be refunded.

319.01F(1) In the case of a manufacturer or distributor, the Department may apply the portion of any license fee to be refunded to any amount owed by the licensee or applicant with respect to a background investigation or facility inspection conducted by the Department.

319.01G Upon the death of a person licensed as a utilization of funds member or sales agent, or in the event any such licensee becomes disabled in such a manner as to render him or her unable to perform or fulfil his or her duties as a utilization of funds member or sales agent, a licensed organization may submit an application to replace the utilization of funds member or sales agent with a new individual for the remainder of the licensing period for no additional fee. Any such application shall be accompanied by the original utilization of funds member or sales agent license and a written statement signed by an officer of the licensed organization explaining the circumstances under which the request for replacement of the licensee is being made.

(Sections 9-302, 9-305, 9-306, 9-307, 9-310, 9-313, 9-316, 9-319, 9-320, 9-321, 9-321.02, 9-327, 9-330, and 9-332, R.R.S. 1997. Sections 9-311, 9-321.03, 9-322, 9-328, 9-329, and 9-329.02, R.S.Supp., 2002. November 12, 2002.)

RAFFLES

REG-35-400 SCOPE, ELIGIBILITY, AND LICENSING REQUIREMENTS

400.01 Bingo, Lottery, Raffle, and Lottery by Pickle Card Regulations 35-400 through 35-409 are adopted to carry out the provisions of the Nebraska Lottery and Raffle Act.

400.02 A nonprofit organization, volunteer fire company, or volunteer first-aid, rescue, ambulance, or emergency squad who wishes to conduct any lottery with gross proceeds in excess of $1,000.00 or any raffle with gross proceeds in excess of $5,000.00 must first apply for and obtain a license from the Department. Such license shall be applied for on a form prescribed by the Department and be accompanied by the appropriate fees. Lottery and raffle licenses shall expire and may be renewed on a biennial basis, according to the following schedule:

400.02A A license to conduct a lottery or raffle issued to a nonprofit organization holding a certificate of exemption under section 501 (c)(3) or (c)(4) of the Internal Revenue Code and any license issued to a utilization-of-funds member for such nonprofit organization shall expire on September 30 of each odd-numbered year.

400.02B A license to conduct a lottery or raffle issued to a nonprofit organization holding a certificate of exemption under any other subsection of section 501 of the Internal Revenue Code, or to any volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad and any license issued to a utilization-of-funds member for such nonprofit organization or volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad shall expire on September 30 of each even-numbered year.

400.02C A licensed organization wishing to renew its license must submit its application for renewal at least thirty (30) days prior to the date the organization intends to begin selling lottery or raffle tickets in the new licensing period. Licenses are not transferable.

400.03 The determination as to whether a license will be required shall be based upon the potential gross proceeds desired from the lottery or raffle activity. Potential gross proceeds shall be determined by multiplying the number of tickets to be sold by the selling price of a single ticket. The value of any free tickets shall be included in the determination of potential gross proceeds. For purposes of determining potential gross proceeds, each ticket shall be calculated at its individual selling price before the application of any discount for the purchase of two or more tickets.

400.03A If the selling price of an admission to an event, or the purchase price of a meal, calendar or similar such item includes an opportunity to participate in a lottery or raffle, the gross proceeds of the lottery or raffle shall be based upon the full selling price of the ticket, without a reduction for the cost of the admission or other tangible item connected with the purchase of the lottery or raffle ticket. For example, if a person purchases a ticket to a dinner at the cost of $100.00 and that ticket enters the person in a lottery or raffle drawing, then the gross proceeds of the lottery or raffle activity shall be based upon the full $100.00 selling price of the ticket.

400.03B However, if, for example, the organization sells lottery or raffle tickets separately from the dinner ticket and a person is not required to be present in order to win a prize, then the organization may base the determination of the gross proceeds on the cost of the lottery or raffle ticket alone.

400.04 Organizations that will not exceed the gross proceeds thresholds as described in Regulation 35-400.02 are not required to be licensed and shall adhere to the requirements set forth under the Nebraska Small Lottery and Raffle Act and Regulations 35-500 through 35-504.

400.05 It shall be the responsibility of the licensed organization to keep the information contained on its application current. The Department must be informed within thirty (30) days of any changes in the information supplied by the licensee in its most recent filing with the Department.

400.05A Changes can be reported by filing a new application identifying only the information to be changed. Those changes must be confirmed by the signature of an officer or utilization of funds member. All persons signing the most current application shall obligate the licensee to comply with the Nebraska Lottery and Raffle Act and regulations for that licensing period.

400.06 A nonprofit organization, volunteer fire company, or volunteer first-aid, rescue, ambulance, or emergency squad applying for a lottery and raffle license shall be incorporated in this state as a nonprofit corporation or organized in this state as a religious or nonprofit organization.

400.06A In order for a nonprofit corporation to qualify for a license, it shall be incorporated in Nebraska. A corporation incorporated in a foreign state holding a certificate of authority to conduct affairs in Nebraska is not considered to be incorporated in Nebraska and shall not qualify for a license. A corporation incorporated in a foreign state which has domesticated under sections 21- 1966.01 or 21-1966.03, R.R.S. 1943, shall be considered incorporated in Nebraska and may qualify for a license. In order for a nonprofit organization other than a corporation to qualify for a license, it shall be organized or established in Nebraska.

400.07 Any nonprofit organization holding a certificate of exemption under section 501 of the Internal Revenue Code or any volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad may apply for a license to conduct a lottery or raffle.

400.07A A nonprofit organization is considered exempt under section 501 of the Internal Revenue Code if it can provide a copy of the exemption ruling or exemption determination letter issued by the Internal Revenue Service when making application for an initial license. The proof of exemption is not required to be filed with a subsequent application by the organization to renew an existing license to conduct a lottery or raffle unless the circumstances under which the exemption was issued or the nature of the organization has changed substantially to the extent that the exempt status may no longer be applicable or the Department specifically requests the exemption determination letter.

400.07A(1) An organization may be exempt under a group exemption letter issued by the Internal Revenue Service. A group exemption letter is a ruling or determination letter issued to a parent organization. A group exemption letter recognizes, on a group basis, the exemption under section 501(c) of the subordinate organizations on whose behalf the parent organization has applied for recognition of exemption. A parent organization is an organization that has one or more subordinates under its general supervision or control. A subordinate is a chapter, local, post, or unit of a parent organization. Examples: American Legion, Veterans of Foreign Wars, Fraternal Order of Eagles.

Under these circumstances, a subordinate organization applying for an initial license must provide the Department with a copy of the group exemption letter issued to the parent organization or indicate the Group Exemption Number (GEN).

400.08 In addition to all other information requested by the Department, each applicant for a lottery and raffle license and each subsequent renewal thereof may, at the discretion of the Department, be required to provide:

400.08A A copy of the organization's articles of incorporation or bylaws; or, if not a corporation, a copy of any bylaws or other documents which sets forth the organization's structure and purpose; or

400.08B A current roster of all active members.

400.09 The Department may also require the organization seeking a license to produce evidence of activities other than lotteries and raffles conducted by the organization's membership.

400.10 A nonprofit organization, volunteer fire company, volunteer first-aid, rescue, ambulance, or emergency squad, or individual applying to be a utilization of funds member shall not be considered licensed until such organization or individual has physical possession of the license issued by the Department. An organization may not begin to sell lottery or raffle tickets until it has received its license.

400.10A A licensed organization or utilization of funds member who has had its license lost, stolen, or destroyed must notify the Department as soon as possible. A duplicate license will be issued. No additional fee is required under such circumstances.

400.10B A licensed organization or utilization of funds member who no longer desires to be licensed shall notify the Department in writing of their intentions to cancel their license. Such notification shall be signed by an officer of the organization. A notification of license cancellation shall be accompanied by the original licenses issued by the Department.

400.10C In the event that a license under the Nebraska Lottery and Raffle Act is suspended, canceled, or revoked, the licensee shall surrender physical possession of such license(s) to the Department immediately upon receipt of the order of suspension, cancellation, or revocation from the Department. In the case of suspension, the Department shall return the licenses to the licensee at the end of the suspension period. In the case of cancellation, the former licensee may reapply for a license when the period of cancellation has expired. In the case of revocation, the former licensee may not reapply for any license at any time in the future under the Nebraska Lottery and Raffle Act unless otherwise authorized by the Department.

400.10C(1) When a licensee has successfully appealed an order of suspension, revocation, or cancellation, the Department shall return physical possession of the licenses which have been suspended, revoked, or canceled.

400.11 In addition to the licensing requirements by the Department, no licensed organization may conduct a lottery or raffle in Douglas or Lancaster Counties or the cities of Omaha or Lincoln until specific authorization has been granted by ordinance or resolution. Other counties or incorporated municipalities may by resolution or ordinance regulate, control, or prohibit any lottery or raffle. No county or incorporated municipality may authorize a lottery or raffle which has not been approved and licensed by the Department.

(Sections 9-402, 9-403, 9-405, 9-406, 9-407, 9-409, 9-411, 9-415, 9-416, 9-417, 9-417.01, 9-419, 9-421, 9-422, 9-424, 9-427, 9-429, 9-430, 9-431, and 9-433, R.R.S. 1997. Sections 9-410, 9-417.02, 9-418, 9-423, 9-425, and 9-426, R.S.Supp., 2002. November 12, 2002.)

REG-35-401 LAWFUL PURPOSE

401.01 A licensed or previously licensed organization shall spend its lottery and raffle profit, as defined in section 9-414 of the Nebraska Lottery and Raffle Act, solely for lawful purposes. Expenditure of monies for a lawful purpose shall generally mean charitable or community betterment purposes.

401.01A Charitable or community betterment purposes shall include but not be limited to the following:

401.01A(1) Enhancing the opportunity of individuals for religious advancement, such as offering religious programs, conducting religious activities, and/or operating and maintaining a church, church school, or its facilities.

401.01A(2) Providing for educational advancement, such as donating to the operating fund of a school or establishing or contributing to a scholarship fund.

401.01A(3) Relieving or protecting individuals from disease, suffering, or distress, such as purchasing food or clothing for the needy or helping to provide medical care for individuals in need.

401.01A(4) Contributing to the physical well-being of individuals, such as donations to foster athletic activities. Contributions to promote amateur athletics may be made in the following manners:

401.01A(4)(a) Donations directly to a city, village, or county which sponsors amateur athletics or maintains athletic facilities;

401.01A(4)(b) Donations to organizations or associations founded for the purpose of promoting amateur sports through the sponsorship of leagues or other amateur sports competition; or

401.01A(4)(c) Donations to organizations recognized by the Internal Revenue Service as proper recipients for tax deductible contributions which sponsor athletics, such as Little League Baseball, Inc., or educational institutions which conduct athletic activities.

401.01A(5) Assisting individuals in establishing themselves as worthy and useful citizens by providing educational or business opportunities such as donations to training programs designed to provide individuals with job skills.

401.01A(6) Providing individuals with opportunities to contribute to the betterment of the community, such as sponsoring park clean-up or beautification projects.

401.01A(7) Increasing the comprehension and devotion to the principles upon which this nation was founded, such as sponsoring civic events to make individuals more aware of the history of the United States, the state of Nebraska, or other civic institutions or principles.

401.01A(8) Initiating, performing, or fostering worthy public works or enabling or furthering the erection or maintenance of public structures such as contributing to a county, city, or village building fund or donations to fund parks or recreation areas.

401.01A(9) Lessening the burdens borne by government or voluntarily supporting, augmenting, or supplementing services which government would normally render to the people such as paying for housing, food, or medical services for needy people, contributing to a local police or fire department or contributing to the general fund of a village, city, or county.

401.02 In addition, a licensed or previously licensed organization may spend its profit derived from a lottery or raffle for any activity which benefits and is conducted by the organization. This shall include any charitable, benevolent, humane, religious, philanthropic, recreational, social, educational, civic, or fraternal activities conducted by the organization for the benefit of its members as a whole. The organizations identified above may spend their proceeds in a broader manner than those organizations which do not have this status. For instance, they may spend proceeds derived from a lottery or raffle to provide social activities for the members, to retire a debt of the organization, or to make capital improvements to the organization's meeting hall. Lottery or raffle proceeds spent in this manner must be spent to benefit the membership as a whole and not any one individual member, except that nothing in this section shall prohibit the funding of a scholarship, medical assistance, or disaster relief to individuals in need.

401.02 Proceeds derived from the conduct of a lottery or raffle shall not be used for any political activity such as lobbying, or participating in or contributing to any political campaign on behalf of an elected official or person who is or has been a candidate for public office.

(Sections 9-402, 9-403, 9-408, 9-411, 9-414, 9-415, and 9-427, R.R.S. 1997. Sections 9-410 and 9-418, R.S.Supp., 2002. November 12, 2002.)

REG-35-402 PRIZES

402.01 At least 65 percent of the gross proceeds of any lottery or raffle shall be used for the awarding of prizes, except that if a licensed organization conducts a lottery or raffle under a special permit as provided in Regulation 35-405, less than 65 percent of the gross proceeds may be used for the awarding of prizes.

402.02 The aggregate cost of all prizes to be awarded in a single lottery or raffle shall not exceed the gross proceeds realized from the sale of the tickets except in those circumstances where the prizes to be awarded are donated and received without cost to the licensed organization.

402.03 An organization conducting a lottery or raffle in which real or personal property prizes are to be awarded shall have paid for in full or otherwise become the owner without lien or interest of others of all the real or personal property to be awarded as prizes prior to the date on which winners will be determined.

402.04 Prizes awarded in a raffle must be at least 80 percent merchandise, to be valued at their fair market value. Fair market value means the price one would normally pay for an item in an arm's length transaction with a retail business. A merchandise prize may be any item which can be legally owned or possessed, but which is not directly or indirectly redeemable for cash by the licensed organization or any agent thereof. For purposes of this regulation, real estate and savings bonds are not considered to be merchandise prizes. Merchant gift certificates are to be considered as a merchandise prize and shall be assessed at their face value.

402.04A For purposes of this regulation, to determine if the prizes meet the 80 percent merchandise requirement in order for the activity to qualify as a raffle, the total fair market value of the merchandise prizes compared to the total value of all prizes to be awarded shall be the determining factor, and not simply the number of merchandise prizes.

402.05 Prizes awarded in a lottery may include cash, merchandise, or anything of value which may be legally owned and possessed. If prizes other than cash are offered in a lottery, the fair market value of all merchandise prizes must be less than 80 percent of the total value of all prizes awarded. For purposes of this regulation, real estate and savings bonds are considered to be cash prizes and shall be assessed at their purchase price value.

402.06 Items donated to an organization to be awarded as prizes in a lottery or raffle may be any items which can be legally owned and possessed, and must be valued at their fair market value. The value of the donated prizes must be included in the determination of whether at least 65 percent of the actual gross proceeds are awarded as prizes.

402.07 Pickle cards shall not be awarded as a prize in a lottery or raffle.

(Sections 9-302, 9-312, 9-315, 9-402, 9-403, 9-407, 9-411, 9-413, 9-415, and 9-427, R.R.S. 1997. Sections 9-410, 9-418, and 9-426, R.S.Supp., 2002. November 12, 2002.)

REG-35-403 UTILIZATION OF FUNDS MEMBER--RESPONSIBILITY

403.01 Each licensed organization must designate and license at least one of its members as a utilization of funds member. To be eligible for a utilization of funds member license, an individual must have been an active and bona fide member of the organization for a least one year prior to applying for the license.

403.01A If a licensed organization can provide evidence that the one-year membership requirement will impose an undue hardship, the Department may waive such requirement. An officer of the licensed organization must provide a written explanation of the nature of the hardship with the utilization of funds member's license application.

403.02 The licensed utilization of funds member shall serve as chairperson, supervisor, and coordinator of the lottery or raffle activity and shall be responsible for the conduct and management of the game, including:

403.02A Coordination of the purchase and printing of the tickets;

403.02B Supervising all ticket sellers;

403.02C Maintaining all recordkeeping requirements;

403.02D Timely completing and filing all state tax returns and any other reports that may be required;

403.02E Depositing all monies received into the lottery/raffle bank account;

403.02F Ensuring that all lottery/raffle gross proceeds are utilized only for allowable expenses, prizes, taxes and lawful purposes;

403.02G Ensuring that all laws, rules and regulations regarding the conduct of a lottery and/or raffle are adhered to by all individuals connected with the lottery or raffle; and

403.02H Ensuring that, upon proper request, all records and documents relating to the conduct of licensed lottery and raffle activity by the licensed organization are made available to the Department or its representatives.

403.03 The licensed utilization of funds member shall be responsible for submitting a sample lottery or raffle ticket or a copy of such tickets to the Department. The above shall be submitted with the organization's quarterly tax return for each lottery or raffle conducted by the licensed organization during the reporting period.

403.04 The licensed utilization of funds member shall maintain a list of all paid ticket sellers which shall include:

403.04A The name, complete address, and telephone number of each individual or business who is being paid for selling tickets;

403.04B The compensation paid each seller; and,

403.04C The ticket numbers assigned to each paid seller.

403.05 The licensed utilization of funds member shall be responsible for the collection of all monies received by ticket sellers, for the collection of all of the ticket stubs from the sellers, and for collection of all tickets which are void or were not sold.

403.06 The licensed utilization of funds member must be present when the winner(s) of a lottery or raffle are determined.

403.07 The licensed utilization of funds member shall prepare a winners' register for each lottery or raffle. For each prize awarded, the winners' register shall include the following:

403.07A The date on which the winner(s) are determined, the prize(s) awarded, and date each such prize was awarded to each winner;

403.07B The name, complete address, and telephone number of each winner; and

403.07C The name, complete address, and telephone number of the individual who conducted the physical drawing of winning ticket stub(s) (if applicable).

403.08 If more than one individual is licensed as a utilization of funds member, each licensed utilization of funds member is jointly and severally responsible for the duties imposed by this regulation.

(Sections 9-402, 9-403, 9-404, 9-407, 9-408, 9-411, 9-412, 9-415, 9-417.01, 9-424, 9-427, 9-428, 9-429, and 9-431, R.R.S. 1997. Sections 9-410, 9-418, 9-425, and 9-426, R.S.Supp., 2002. November 12, 2002.)

REG-35-404 CONDUCT OF THE GAME

404.01 Each ticket used in any licensed lottery or raffle activity must be constructed as a two-part ticket, with a detachable stub. The portion of the ticket which is given to the purchaser must contain the following information legibly printed on each ticket:

404.01A The name of the licensed organization as it appears on the lottery or raffle license;

404.01B The Nebraska identification number of the licensed organization (the 35- prefix number which is printed in the upper right hand corner of the license);

404.01C The date the winners will be determined;

404.01D The price per ticket;

404.01E A statement setting forth whether the participant must be present to win; and

404.01F A number, of a set of sequential numbers, which is different from any other number found on a ticket sold for that particular lottery or raffle activity.

404.01G The detachable stub portion of the ticket shall contain a sequential number which corresponds to the number printed on the ticket from which it is detached.

404.01G(1) In addition, when the purchaser is not required to be present when the winner(s) are determined in order to be eligible to win a prize, the stub must contain the name, complete address, and telephone number of the purchaser.

404.01H Tickets shall not contain the word "DONATION" used in connection with the purchase price of the tickets.

404.02 A sample lottery or raffle ticket or a copy of such tickets must be submitted with the organization's quarterly tax return for each lottery or raffle conducted by the licensed organization during the reporting period.

404.03 Each lottery or raffle ticket shall be offered for the same price as every other ticket being sold for that particular lottery or raffle. Nothing shall prohibit an organization from offering a discount for the purchase of two or more tickets, provided that the discount is offered to all persons wishing to participate in the lottery or raffle; however, no person may be required to purchase more than one ticket in order to participate in a lottery or raffle. The sale of lottery or raffle tickets may not be conditioned upon the purchase of the right to play bingo or admission to a bingo game.

404.04 All chances to participate in a lottery or raffle must be paid for in advance by either cash or a check. The extension of credit or use of a credit card is prohibited. Nothing in this section shall prohibit the issuing of free tickets; however, the value of all free tickets shall be included in the gross proceeds derived from the lottery or raffle activity. No person under 18 years of age may purchase a lottery or raffle ticket or receive a free ticket unless such lottery or raffle is being conducted under a special permit as set forth in Regulation 35-405.

404.04A Lottery or raffle tickets which have not been sold or given to a participant shall not be included when determining the winner(s). An organization shall not include unsold tickets when determining the winner(s) nor shall the organization purchase the unsold tickets to be included on behalf of the organization.

404.04B Nothing in this regulation shall be construed to prohibit an organization from allowing free tickets given to participants from being included when determining the winner(s).

404.05 No person under 18 years of age may sell or distribute a lottery or raffle ticket unless such lottery or raffle is being conducted under a special permit pursuant to Regulation 35-405. Each ticket seller shall return all eligible ticket stubs to the licensed utilization of funds member who shall account for all eligible ticket stubs prior to the determination of the winner(s). Any receptacle used for a ticket drawing shall be designed so that each ticket stub has an equal opportunity to be drawn.

404.06 All proceeds derived from a lottery or raffle must be kept separate from any other monies of the organization and deposited into a separate lottery/raffle bank account.

404.07 If a participant's presence is required when the winner(s) are to be determined, statements setting forth this condition must be conspicuously printed on each ticket and all promotional material concerning the lottery or raffle.

404.08 A licensed utilization of funds member must be present to supervise and witness the determination of the winners. In those circumstances where the lottery or raffle participants are not required to be present, the determination of the winner(s) shall be conducted and witnessed by the utilization of funds member and at least one officer of the licensed organization.

404.09 When more than one prize or opportunity to win has been offered in a particular ticket drawing lottery or raffle, and a series of drawings must be made to determine all the winners, once a ticket stub has been drawn it shall not be returned to the receptacle.

404.09A This provision shall not apply to a calendar lottery or raffle.

404.10 Every reasonable effort must be made by the licensed utilization of funds member to contact all winners. Prizes not claimed within ninety (90) days from the date on which winners are determined shall be utilized by the licensed organization for a lawful purpose. Nothing in this regulation shall prohibit the awarding of prizes in a lottery or raffle which is conducted under a special permit after the expiration date of the special permit provided that specific condition is set forth on the tickets and all winners have been determined and announced or posted prior to the expiration date of the special permit.

404.11 Each lottery or raffle must be separate and distinct from any other lottery or raffle. All tickets to be sold must be sold prior to the determination of the winner(s). A lottery or raffle shall conclude on the date winner(s) are determined. No lottery or raffle shall have multiple dates for determining the winner(s). Neither losing nor winning ticket stubs in one lottery or raffle may be included in any other lottery or raffle. All winning lottery and raffle ticket stubs must be retained with the organization's records for a period of not less than six months from the drawing date.

404.12 In the event that not enough tickets are sold to cover the cost of the prizes to be awarded, the licensed organization shall take the following steps:

404.12A Submit a request to the Department in writing at least ten (10) days prior to the date originally set to determine the winner(s), for an extension of the date to determine the winner(s). If an extension is granted by the Department, the licensed organization shall post notification of the extended date at its principal location and all locations where tickets are sold. Every effort shall be made to notify ticket purchasers and the public of this change. The notification shall include an alternative date for the determination of the winner(s). A desired level of profit is not sufficient cause for the granting of an extension.

404.12B Cancellation of the lottery or raffle. Every effort must be made through the procedure described in Regulation 404.12A to generate gross proceeds through ticket sales to cover the cost of the prizes to be awarded. If the extension of the date to determine the winner(s) and the extended time for ticket sales does not generate enough proceeds to cover the cost of prizes to be awarded, the organization, upon approval of the Department, shall cancel the lottery or raffle and refund each participant the total amount to which he or she is entitled for each ticket purchased. A notice of the cancellation shall be posted at the organization's principal office. The notification of cancellation shall include the location or individual's name, complete address and telephone number where participants may receive their refund. Each participant shall present each of their ticket(s) for a refund. The utilization of funds member shall be responsible for the complete refund procedure. Any monies not claimed or refunded after ninety (90) days of the posting of the cancellation and after reasonable efforts to contact the ticket purchasers, shall be utilized by the licensed organization for a lawful purpose. Any prizes paid for and not returnable shall be utilized by the licensed organization for a lawful purpose.

404.12C In the event that the organization is requesting an extension as provided in subsection A of this regulation relative to a lottery or raffle being conducted under a special permit, and the organization is requesting to extend the date to determine the winner(s) beyond the expiration date of the special permit, such extension shall be granted only if the organization agrees to pay out at least 65 percent of its gross receipts in prizes.

404.13 The Nebraska Lottery and Raffle Act does not prohibit the advertising or promoting of a lottery or raffle in any manner. Any county or incorporated municipality may, however, impose restrictions on this activity. The selling or distributing of a lottery or raffle ticket through the United States mail is a federal violation according to Title 18, section 1302 of the United States Code.

(Sections 9-402, 9-403, 9-407, 9-408, 9-411, 9-415, 9-417.01, 9-428, 9-430, 9-431, and 9-433, R.R.S. 1997. Sections 9-410, 9-418, and 9-426, R.S.Supp., 2002. November 12, 2002.)

REG-35-405 SPECIAL PERMIT

405.01 An organization licensed to conduct a lottery and raffle may apply to the Department for a special permit to conduct one lottery and one raffle which exempts the organization from the sixty-five percent of gross proceeds prize payout requirement, the ten percent of gross proceeds allowable expense limitation, and the 18 years of age participation restriction. An applicant may apply for a lottery and raffle license and a special permit at the same time, on the same application form.

405.01A A lottery or raffle conducted under a special permit shall be exempt only from those items described above and shall otherwise be conducted pursuant to all the provisions of the Nebraska Lottery and Raffle Act and corresponding regulations.

405.02 A licensed organization may only receive one special permit per twelve-month period commencing October 1 of each year. The special permit is valid for three consecutive months.

Upon the expiration date of the special permit, all tickets shall have been sold, all winners shall have been determined, and an announcement or posting of all winners shall have been made.

405.02A In the event that a lottery or raffle conducted pursuant to a special permit extends into a new twelve- month period commencing October 1, the beginning date stated on the special permit shall be the determining factor as to which twelve-month period the permit shall be attributed to.

405.02B A special permit allows a licensed organization to conduct one lottery or one raffle or both. If the organization wishes to conduct both a lottery and a raffle, both activities must be conducted and completed between the beginning date and ending date printed on the special permit.

405.02C Nothing shall prohibit an organization from awarding prizes to the winners after the expiration date of the special permit; provided, that each special lottery or raffle ticket and all promotional materials connected with the special lottery or raffle sets forth this feature of the lottery or raffle.

405.03 Once a special permit has been issued to a licensed organization, the lottery or raffle activity must be conducted between the beginning and ending dates stated on the special permit. No extension of time shall be granted within which to operate a lottery or raffle pursuant to any special permit except as provided for in Regulation 35-404.12C.

405.03A A licensed organization may request a change in the dates of a special permit which has been issued provided such request is made to the Department at least ten days prior to the beginning date of the special permit. Such request shall be made in writing and must be accompanied by the original permit issued by the Department. No additional permit fee will be required under these circumstances.

405.04 If the three month time period indicated on the special permit extends beyond the expiration date of the organization's current lottery and raffle license, the licensed organization must file a renewal application and submit the appropriate fees for a lottery and raffle license and utilization of funds member license, in order to continue the special permit activity into the next licensing period; however, the organization will not be required to apply for another special permit or to pay any additional special permit fees to continue the lottery or raffle activity currently being conducted.

(Sections 9-402, 9-403, 9-406, 9-411, 9-413, 9-415, 9-427, and 9-430, R.R.S. 1997. Sections 9-410, 9-418, and 9-426, R.S.Supp., 2002. November 12, 2002.)

REG-35-406 ALLOWABLE EXPENSES

406.01 A licensed organization may spend a portion of the gross proceeds derived from the lottery or raffle activity for allowable expenses. A licensed organization is limited to spending no more than ten percent of the gross proceeds of each lottery or raffle activity for allowable expenses of operating each lottery or raffle; except that no expense limitation is imposed upon a lottery or raffle being conducted under a special permit. Allowable expenses shall mean and include:

406.01A All costs associated with the purchase, printing, or manufacturing of any items to be used or distributed to participants such as the tickets themselves or calendars for a calendar lottery. This shall include any imprinting or delivery charges and any sales tax required to be paid by the licensed organization in connection with the lottery or raffle;

406.01B All costs associated with office expenses. This shall include any salary, wage, or fee paid to any person operating the lottery or raffle or keeping the books and records, postage costs, office supplies such as paper, notebooks, pencils, any utility charges for the office, and any other expense incurred with the operation of the lottery or raffle;

406.01C Any lease or rental expenses for equipment or facilities used in connection with the conduct of the lottery or raffle. This would include for example, the rental of a ticket tumbling cage;

406.01D All promotional expenses including the purchase of signs, flyers, or any other type of advertising expense;

406.01E License and permit fees for the organization and utilization of funds member and the lottery or raffle tax on gross proceeds prescribed in section 9-429 of the Nebraska Revised Statutes, as amended;

406.01F Any fee paid to any person associated with the operation of the lottery or raffle, such as ticket sellers or business outlets paid to sell lottery or raffle tickets; and

406.01G Any fee or tax imposed pursuant to section 9-433 of the Nebraska Revised Statutes, as amended, such as a local lottery or raffle tax or permit fee.

(Sections 9-402, 9-403, 9-404, 9-407, 9-411, 9-415, 9-427, 9-429, and 9-433, R.R.S. 1997. Sections 9-410, 9-418, and 9-426, R.S.Supp., 2002. November 12, 2002.)

REG 35-407 LOTTERY AND RAFFLE TAXES

407.01 A nonprofit organization conducting a lottery with gross proceeds in excess of $1,000.00, or a raffle with gross proceeds in excess of $5,000.00, is required to remit to the Department, a tax of two per cent of the gross proceeds of such lottery or raffle.

407.02 A licensed organization is required to report within thirty (30) days of the end of each calendar quarter, its gross proceeds and tax due on a form prescribed by the Department and to remit any tax due for that quarter, even though the gross proceeds for a particular quarter do not exceed the $1,000.00 or $5,000.00 threshold. If the total gross proceeds derived from the sale of lottery or raffle tickets does not exceed the $1,000.00 or $5,000.00 threshold at the conclusion of the lottery or raffle activity, the taxes paid on the gross proceeds are refundable. The licensed organization should submit an amended return to the Department requesting a refund or credit of the lottery or raffle taxes paid to the Department.

407.02A The lottery and raffle tax is to be reported on the Nebraska Lottery and Raffle Tax Return, Form 51.

407.03 Failure to file a quarterly tax return or remit the tax due by the due date will subject the licensed organization to assessment of a penalty of $25.00 or ten percent of the tax due, whichever is greater. In addition, interest will be imposed at the rate specified in section 45-104.02 of the Nebraska Revised Statutes, as amended, from the due date to the date paid.

407.03(A) Quarterly returns filed after the due date which indicate a zero amount of proceeds and/or a zero balance of tax due, shall not be subject to the penalty as previously described.

407.04 If the due date for filing the quarterly tax return falls on a Saturday, Sunday, or a day considered a holiday by the state, the return will be considered to be timely filed if it is postmarked no later than twelve o'clock midnight of the next working day following the due date. Postmarks not made by the United States post office will not be recognized for purposes of this regulation.

407.05 A licensed organization is not required to charge, collect or remit sales tax on the purchase price of a lottery or raffle ticket unless such ticket is connected in part with the purchase of some other tangible personal property or an admission charge which is subject to such tax. Examples of tangible personal property which may be connected to the purchase of a lottery or raffle ticket are items such as a calendar or a dinner.

407.06 Nebraska withholding tax is required on payments of lottery or raffle winnings which are subject to federal withholding and that are paid from a Nebraska source to a resident or nonresident individual.

407.06A On or before February 15 following the close of each calendar year, a payor of such gambling winnings must furnish to each winner for state purposes two copies of a completed and legible Statement for Recipients of Certain Gambling Winnings, Federal Form W-2G, or a federally approved substitute. One of the copies must be labeled "state copy", to be submitted with the winner's Nebraska income tax return, and one copy must be labeled "winner's copy", for the winner's records.

407.06B On or before March 15 following the close of each calendar year, the payor must file with the Nebraska Department of Revenue a Nebraska Reconciliation of Income Tax Withheld, Form W-3N, in accordance with the instructions contained in Withholding Tax Regulation 21-013. A copy of the Federal Form W-2G furnished to each winner which shows the Nebraska tax withheld from winnings during the prior calendar year must be submitted with the Form W-3N. Those payors of gambling winnings who are also required to withhold state income tax on behalf of employees may file only one Form W-3N to transmit state copies of both Form W-2 and Form W-2G.

(Sections 77-2706, 77-2708, and 77-27,125, R.R.S. 1996. Sections 9-402, 9-403, 9-406, 9-407, 9-411, 9-415, 9-429, and 45-104.02, R.R.S. 1997. Sections 9-410, 9-418, 77-2703, 77-2702.16, 77-2704.12, and 77-2704.15, R.S.Supp., 2002. November 12, 2002.)

REG-35-408 RECORD KEEPING REQUIREMENTS

408.01 Separate records shall be maintained for each individual lottery or raffle conducted. A licensed utilization of funds member shall maintain all records including, but not limited to, the following:

408.01A The total gross proceeds from each lottery or raffle, the number of tickets sold, the price per ticket, the number of free tickets given away, and the value of any free tickets given away;

408.01B Receipts for the purchase of prizes to be awarded or the fair market value of prizes donated;

408.01C A detailed breakdown of all expenses associated with the conduct of the lottery or raffle;

408.01D A record of all persons paid to sell tickets including the person's name, address, telephone number, basis for payment, amount of payment, and date of payment;

408.01E Complete and accurate bank account information including all deposits, withdrawals, or transfers of money from the lottery/raffle bank account; and

408.01F A detailed breakdown of the disbursement of profits remaining after all allowable expenses, prizes, and taxes have been paid. This shall include the amount of the disbursement, the recipient's name, and the intended use or purpose for the disbursement.

408.01G Unless otherwise provided in these regulations, all records required by the Nebraska Lottery and Raffle Act or its corresponding regulations shall be maintained by the organization for a period of not less than three years.

(Sections 9-402, 9-403, 9-404, 9-407, 9-414, 9-417.01, 9-422, and 9-428, R.R.S. 1997. Section 9-418, R.S.Supp., 2002. November 12, 2002.)

REG-35-409 REPORTING REQUIREMENTS

409.01 A nonprofit organization conducting a lottery or raffle pursuant to the Nebraska Lottery and Raffle Act shall report annually to the Department on a form prescribed by the Department, information regarding its lottery and/or raffle activity. The annual report shall cover the organization's lottery and raffle activity for the period July 1 through June 30 of each year and shall be filed by August 15 of each year. A copy of the annual report shall also be made available to the membership of the licensed organization.

409.02 The annual report shall contain, but not be limited to, the following information for each lottery with gross proceeds in excess of $1,000.00, and each raffle with gross proceeds in excess of $5,000.00:

409.02A The name, complete address, state identification number, federal identification number, and Nebraska lottery and raffle license number of the organization;

409.02B The date on which the winner(s) were determined and whether the activity was a lottery or a raffle;

409.02C The gross proceeds of each lottery or raffle activity;

409.02D The total cash prizes awarded for each lottery or raffle activity;

409.02E The total fair market value of all merchandise prizes awarded for each lottery or raffle activity regardless of whether the merchandise prizes were bought by the organization or donated to the organization;

409.02F The total cost actually incurred by the licensed organization for the purchase of merchandise prizes for each lottery or raffle activity;

409.02G The total of all other expenses incurred by the organization for each lottery or raffle activity;

409.02H The total profit realized by the organization for each lottery or raffle activity;

409.02I A summary of the lawful purpose donations compiled from the detailed breakdown of the organization's lawful purpose donations from the lottery and raffle proceeds. The detailed breakdown shall include the name of recipient, date the donation was made, amount of donation, a description of the use of the proceeds, and the individual accepting the donation;

409.02J Information regarding the lottery and raffle bank account to include the name and address of the financial institution, the account number, the balance at the beginning of the reporting period, total of all deposits, total of any interest earned, total disbursements, and the balance at the end of the reporting period; and

409.02K Any other information which the Department deems necessary.

409.03 The annual report shall be declared to be accurate and correct by the signatures of an officer of the organization and a licensed utilization of funds member of the organization.

(Sections 9-402, 9-403, 9-404, 9-406, 9-407, 9-408, 9-411, 9-414, 9-415, 9-424, 9-427, and 9-428, R.R.S. 1997. Section 9-418, R.S.Supp., 2002. November 12, 2002.)

REG-35-410 PRORATION AND REFUND OF LICENSE FEES

410.01 The fees paid pursuant to the Nebraska Lottery and Raffle Act for any license issued to a nonprofit organization, volunteer fire company or volunteer first-aid, rescue, ambulance, or emergency squad, or utilization of funds member are due in full for the biennial licensing period. A license fee may be prorated or refunded by the Department on an annual basis under the following circumstances:

410.01A If a new application is received by the Department for a license which will become effective on or after October 1 of the second year of the biennial licensing period, the applicable license fee shall be one-half of the biennial fee.

410.01B If a new application is received by the Department for a license which will become effective prior to October 1 of the second year of the biennial licensing period, no proration of the license fee shall be allowed.

410.01C No license fee may be refunded for any portion of the licensing period in which a license was not used unless otherwise authorized by the Department.

410.01D In the event a license issued pursuant to the Nebraska Lottery and Raffle Act is suspended, cancelled, or revoked by the Department, no portion of the license fee shall be refunded unless otherwise authorized by the Department.

410.01E In the event a license application is denied and a temporary license was issued to the applicant prior to the effective date of the license application denial, one-half of the biennial license fee paid by the applicant may be refunded, provided the effective date of the license application denial is prior to October 1 of the second year of the biennial licensing period. In the event a license application is denied and a temporary license was not issued or a license application is withdrawn, the license fees paid by the applicant may be refunded.

410.01F Upon the death of a person licensed as a utilization of funds member, or in the event any such licensee becomes disabled in such a manner as to render him or her unable to perform or fulfil his or her duties as a utilization of funds member, a licensed organization may submit an application to replace the utilization of funds member with a new individual for the remainder of the licensing period for no additional fee. Any such application shall be accompanied by the original utilization of funds member license and a written statement signed by an officer of the licensed organization explaining the circumstances under which the request for replacement of the licensee is being made.

(Sections 9-402, 9-403, 9-405, 9-406, 9-409, 9-416, 9-417, 9-417.01, and 9-424, R.R.S. 1997. Sections 9-410, 9-417.02, 9-418, 9-418.01, and 9-425, R.S.Supp., 2002. November 12, 2002.)

SMALL LOTTERIES AND RAFFLES

REG-35-500 Scope and Eligibility

500.01 Bingo, Lottery, Raffle, and Lottery by Pickle Card Regulations 35-500 through 35-504 are adopted to carry out the provisions of the Nebraska Small Lottery and Raffle Act.

500.02 Any nonprofit organization incorporated in this state as a nonprofit corporation or organized in this state as a religious or nonprofit organization which is exempt under section 501 of the Internal Revenue Code, or any nonprofit organization located within this state whose major activities in this state are conducted for charitable or community betterment purposes is eligible to conduct one lottery per calendar month, the gross proceeds of which are not to exceed $1,000.00, and/or any number of raffles per calendar month, if the total gross proceeds of all such raffles do not exceed $5,000.00 in that calendar month. Qualifying nonprofit organizations conducting lottery and raffle activities not exceeding the gross proceeds limitations set forth in this regulation are not required to obtain a license, or pay any state lottery and raffle tax.

500.02A If a qualifying nonprofit organization conducting a small lottery or raffle exceeds the gross proceeds limitations set forth in this regulation, such organization may be required to pay the license fees for a lottery and raffle license, and shall be required to pay the lottery and raffle tax required by the Nebraska Lottery and Raffle Act and file any reports required by the Nebraska Lottery and Raffle Act and regulations.

(Sections 9-402, 9-429, 9-502, 9-503, 9-506, 9-508, 9-510, 9-511, and 9-512, R.R.S. 1997. Sections 9-1,101, 9-507, 9-509, and 77-369, R.S.Supp., 2002. November 12, 2002.)

REG-35-501 Expenses

501.01 A qualifying nonprofit organization shall spend the gross proceeds from its lottery and/or raffle activity solely for charitable or community betterment purposes, awarding of prizes, and expenses. Expenses shall include, but not be limited to:

501.01A All costs associated with the purchase, printing, or manufacturing of any items to be used or distributed to participants, such as tickets. This shall also include any imprinting or delivery charge and any sales tax required to be paid by the qualifying nonprofit organization;

501.01B All costs associated with office or clerical expenses, such as any salary, wage, or fee paid to any per­son operating the lottery or raffle or keeping the books and records; postage costs; office supplies such as paper, notebooks, pencils; any utility charges for the office; and any other expense incurred with the operation of the lottery or raffle;

501.01C Any lease or rental expense for equipment or facilities connected with the lottery or raffle;

501.01D Any promotional expense, such as advertising;

501.01E Any salary, wage, fee, or commission paid to any person or organization to operate, conduct, or supervise a lottery or raffle; and

501.01F Any fee paid to any person associated with the sale of lottery or raffle tickets, such as ticket sellers or business outlets paid to sell tickets.

(Sections 9-503, 9-504, 9-505, 9-506, 9-508, 9-510, and 9-511, R.R.S. 1997. Section 9-1,101, 9-507, 9-509, and 77-369, R.S.Supp., 2002. November 12, 2002.)

REG-35-502 Charitable or Community Betterment Purposes

502.01 A qualifying nonprofit organization conducting a lottery with gross proceeds not exceeding $1,000 or a raffle with gross proceeds not exceeding $5,000, shall spend the profits derived from the lottery or raffle activity solely for charitable or community betterment purposes.

502.01A Charitable or community betterment purposes shall include, but not be limited to the following:

502.01A(1) Enhancing the opportunity of individuals for religious advancement, such as offering religious programs, conducting religious activities, and/or operating and maintaining a church, church school, or its facilities;

502.01A(2) Providing for educational advancement such as donating to the operating fund of a school or establishing or contributing to a scholarship fund;

502.01A(3) Relieving or protecting individuals from disease, suffering, or distress, such as purchasing food or clothing for the needy or helping to provide medical care for individuals in need;

502.01A(4) Contributing to the physical well-being of individuals, such as donations to foster athletic activities;

502.01A(5) Assisting individuals in establishing themselves as worthy and useful citizens by providing educational or business opportunities, such as donations to training programs designed to provide individuals with job skills;

502.01A(6) Providing individuals with opportunities to contribute to the betterment of the community, such as sponsoring park clean-up or beautification projects;

502.01A(7) Increasing the comprehension of and devotion to the principles upon which this nation was founded, such as sponsoring civic events to make individuals more aware of the history of the United States, the State of Nebraska, or other civic institutions or principles;

502.01A(8) Initiating, performing, or fostering worthy public works or enabling or furthering the erection or maintenance of public structures such as contributing to a county, city, or village building fund or donations to fund parks or recreation areas; and

502.01A(9) Lessening the burdens borne by government or voluntarily supporting, augmenting, or supplementing services which government would normally render to the people such as paying for housing, food, or medical services for needy people, contributing to a local police or fire department, or contributing to the general fund of a village, city, or county.

502.02 In addition to those purposes identified in Regulation 502.01, a qualifying nonprofit organization may also spend its proceeds derived from a small lottery or raffle for any charitable, benevolent, humane, religious, philanthropic, educational, fraternal, recreational, social, or civic activities conducted by the organization for the benefit of its members, such as the use of proceeds to provide a social activity for the members, to retire a debt of the organization, or to make capital improvements to the organization’s meeting hall. Proceeds spent in a manner described above must be spent to benefit the membership as a whole and not any one individual member. Nothing in this section shall prohibit the funding of a scholarship, medical assistance, or disaster relief to an individual in need.

502.03 Proceeds derived from the conduct of a small lottery or raffle shall not be used for any political activities such as lobbying or participating in or contributing to any political campaign on behalf of any elected official or person who is or has been a candidate for public office.

(Sections 9-502, 9-503, 9-504, 9-508, 9-510, and 9-511, R.R.S. 1997. Section 9-1,101, 9-507, 9-509, and 77-369, R.S.Supp., 2002. November 12, 2002.)

REG-35-503 Conduct of the Game

503.01 A qualifying nonprofit organization must accept something of value from a participant for an opportunity to participate in the lottery or raffle.

503.02 A qualifying nonprofit organization conducting a small lottery or raffle shall sell tickets which are sequentially numbered as a chance to participate in the lottery or raffle. No other form or method of participation is permitted.

503.02A Ticket sales shall not exceed the gross proceeds limitations set forth in Regulation 35-500.02.

503.03 Winners shall be determined by either (a) a random drawing of the tickets or ticket stubs; or (b) by a race of inanimate buoyant objects as provided in section 9-511.01 of the Nebraska Small Lottery and Raffle Act. No other form or method of determining a winner is permitted.

503.04 All tickets or ticket stubs for a ticket drawing shall be placed into a receptacle designed so that each ticket or ticket stub shall have an equal opportunity of being drawn.

503.05 If a participant’s presence is required in order to win a prize, participants must be made aware of this condition upon purchasing a ticket.

503.06 A qualifying nonprofit organization conducting a small lottery or raffle in which real or personal property prizes are to be awarded shall have paid for in full or otherwise become the owner without lien or interest of others of all the real or personal property awarded as prizes prior to the date on which the winner(s) will be determined.

503.06A Prizes awarded in a small raffle must be at least 80 percent merchandise prizes, to be valued at their fair market value which means the price that one would normally pay for an item in an arm’s length transaction with a retail business. A merchandise prize may be any item which can be legally owned or possessed which is not directly or indirectly redeemable for cash by the qualifying nonprofit organization or any agent thereof. For purposes of this regulation, real estate and savings bonds are not considered to be merchandise prizes. Merchant gift certificates are to be considered as a merchandise prize and shall be assessed at their face value.

503.06A(1) For purposes of this regulation, to determine if the prizes meet the 80 percent merchandise requirement in order for the activity to qualify as a raffle, the total fair market value of the merchandise prizes compared to the total value of all prizes to be awarded shall be the determining factor, and not simply by the number of merchandise prizes.

503.06B Prizes awarded in a small lottery may include cash, merchandise, or anything of value which may be legally owned and possessed. If prizes other than cash are offered in a small lottery, the fair market value of all merchandise prizes must be less than 80 percent of the total value of all prizes awarded. For purposes of this regulation, real estate and savings bonds shall be considered cash prizes and shall be assessed at their purchase price value.

503.06C Pickle cards shall not be awarded as a small lottery or raffle prize.

(Sections 9-302, 9-502, 9-503, 9-508, 9-510, and 9-511, R.R.S. 1997. Sections 9-1,101, 9-312, 9-315, 9-507, 9-509, 9-511.01, and 77-369, R.S.Supp., 2002. November 12, 2002.)

REG-35-504 Record Keeping Requirements

504.01 A qualifying nonprofit organization conducting a lottery or raffle pursuant to the Nebraska Small Lottery and Raffle Act and regulations thereof shall be required to maintain, on a monthly basis, the following written information:

504.01A The beginning and ending date for each lottery and/or raffle; and

504.01B The total gross proceeds derived from each lottery and/or raffle activity.

504.02 For purposes of this regulation, merchandise prizes shall be valued at their fair market value which means the price that one would normally pay for an item in an arm’s length transaction with a retail busi­ness. The qualifying nonprofit organization shall compile this information to ensure that the gross proceeds limitations for a small lottery or small raffles are not exceeded in any given calendar month. The qualifying nonprofit organization shall retain this information for a period of not less than three years.

504.03 Proceeds derived from the conduct of a small lottery or raffle shall be kept separate from accounts statutorily required for bingo, a lottery by the sale of pickle cards, or a licensed lottery or raffle. Proceeds from a small lottery or raffle may be deposited or commingled in any account of the qualifying nonprofit organization other than those specifically prohibited in this regulation.

(Sections 9-255.03, 9-348, 9-428, 9-502, 9-503, 9-506, 9-508, 9-510, 9-511, and 9-512, R.R.S. 1997. Section 9-1,101, and 77-369, R.S.Supp., 2002. November 12, 2002.)

COUNTY/CITY LOTTERY (KENO)

REG-35-600 Definitions, Scope, and Establishment by Counties, Cities, and Villages

600.01 General Authorization. Bingo, Lottery, Raffle, and Lottery by Pickle Card Regulations 35-600 through 35-623 are adopted to carry out the provisions of the Nebraska County and City Lottery Act.

600.02 Definitions. The definitions found in Neb. Rev. Stat. §§ 9-603.02 to 9-618 apply to these regulations. The following definitions also apply for purposes of Regulations 35-600 through 35-623:

600.02A Agent means a person authorized by the applicant or licensee to act for or in place of an applicant or licensee as a business representative to modify, affect, accept performance of, or transact business.

600.02B Business day means any day except Saturday, Sunday, or a legal holiday.

600.02C Cash means United States currency and does not mean checks, personal or otherwise, debit cards, or credit cards.

600.02D Compliance procedures for keno mean the analysis required by Reg-35-616 to determine whether the regulations are being followed during the operation of the keno game.

600.02E Conditioning, as it applies to keno, means a restatement of how many numbers or combinations of numbers are being selected by the players, the way in which they are wagered, and the corresponding dollar amounts wagered.

600.02F Debt holder of a corporation, partnership, or limited liability company means a person that holds any mortgages, notes, bonds, convertible debentures, or other obligations, whether written or oral, issued by the corporation, partnership, or limited liability company.

600.02G Department means the Nebraska Department of Revenue.

600.02H Digital-on-premises ticket means a digital ticket purchased in person on the operator’s approved mobile application or other approved mobile wagering device verified to be present at the location of the lottery operator or an authorized sales outlet location.

600.02I Draw ticket means the ticket prepared by a licensed lottery worker to record the winning numbers of each keno game if winning number selection is by manual ball draw method.

600.02J Electronic tablet ticket generation device means any electronic device which is exclusively provided by the operator on site that is capable of building a wager to be processed by the tablet or by a keno writer. Any reference in these regulations to “tablet” or “operator’s tablet” means this definition, unless otherwise stated.

600.02K Electronic transfer of funds, also known as an electronic funds transfer (EFT) means the movement of value or funds between financial institutions through the Federal Reserve’s Automated Clearing House (ACH) system or any other authorized system.

600.02L Equity holder of a corporation, partnership, or limited liability company means an individual or person that holds any capital stock, whether common or preferred, or any ownership interest or share issued by the corporation, partnership, or limited liability company.

600.02M Free play keno coupon means a certificate which entitles the holder to wager an amount corresponding to the face value of the coupon without charge. This coupon may be issued and redeemed through the lottery operator’s digital-on-premises purchasing application.

600.02N Governing board means, in the case of a city, the city council; in the case of a village, the village board; or, in the case of a county, the county board.

600.02O Independent game location means a location where keno wagers are placed and winning number selection is performed. An independent game location is not electronically linked to another location for purposes of transmitting or receiving winning number selection.

600.02P Inside ticket means keno paper with 80 preprinted numbers on which the player marks numbers to be wagered on and the type of wager. Inside ticket also includes electronic bet slips prepared by the player on or through the digital-on-premises purchasing application or the operator’s tablet.

600.02Q Keno manager means the shift manager, supervisor, or individual in charge of the daily operation of a keno game at a location, an individual licensed as a sales outlet officer or owner, or an individual licensed as a lottery operator, officer, or owner.

600.02R Keno system means an integrated system of computer hardware and software that generates outside tickets, records game outcomes, verifies winning tickets, produces management reports, and performs other functions and internal audit controls for the keno operation.

600.02S Keno writer means an individual whose primary responsibilities include accepting inside tickets or other requests for wagers and payments of wagers from players, issuing outside tickets, voiding tickets, redeeming tickets, and assisting with keno application issues. A keno writer does not include a keno manager, a lottery operator, or any person who is directly in charge of the manual selection of winning numbers.

600.02T Licensed racetrack enclosure has the same meaning as in Neb. Rev. Stat. § 9-1103(10).

600.02U Licensee means a person holding a license issued by the Department pursuant to the Nebraska County and City Lottery Act.

600.02V Lottery equipment means: (a) all proprietary devices, machines, and parts used in and which are an integral part of conducting the lottery; and (b) equipment used in maintaining the equipment described in (a).

600.02V(1) Lottery equipment is equipment that directly affects the outcome of the lottery or monitors the operation of the lottery and includes, but is not limited to: keno balls; keno ball selection devices, including electrically-operated blower machines, automated ball draw systems, and other electronic selection devices; random number generators; and keno systems.

600.02V(2) Any equipment that does not directly affect the outcome of the lottery or is not an integral part of any system that monitors the operation of the lottery is not considered lottery equipment. For example, lottery equipment does not include video or digital recording equipment required for ball draw games, security cameras and systems, display devices, recording media, or other supply items used with the lottery equipment that do not directly affect the outcome of the game.

600.02W Lottery operator means any individual, sole proprietorship, partnership, limited liability company, or corporation which is licensed by the Department and responsible for conducting a lottery on behalf of a county, city, or village as provided by a written contract between the county, city, or village and the lottery operator. This contract may include responsibility and liability for all operational aspects of the lottery, including: daily gaming operations; purchase, repair, replacement, and maintenance of lottery equipment; purchase and maintenance of lottery supplies; compensation, staffing, and training of all employees and agents; processing and handling of lottery gross proceeds; preparing all reports required of a county, city, village, or lottery operator; advertising; developing official rules and procedures for play; collecting prizes and progressive game prizes; overseeing the lottery operation; record keeping; and all other lottery functions. Any reference in these regulations to “operator” means this definition, unless otherwise stated.

600.02X Lottery operator location means the main location of the lottery operator where keno wagers are placed.

600.02Y Lottery supplies means all tickets, cards, boards, sheets, or other supplies which are used in and are an integral part of conducting any lottery activity.

600.02Y(1) Lottery supplies do not include any item that does not directly affect the outcome of the lottery.

600.02Y(2) For example, lottery supplies do not include keno paper, crayons and markers, and other supplies that do not directly affect the outcome of the game.

600.02Z Main location means a location where keno wagers may be placed, and winning numbers are selected and electronically transmitted to satellite locations.

600.02AA Multirace ticket means a single ticket which allows a player to make the same keno wager on consecutive games. A player must wait until the last game wagered on has been called to collect any accumulated winnings, unless approval has been obtained from the keno manager or from the keno writer on duty and all voided wagers are properly documented in the transaction log.

600.02BB Non-segregated bank account means a bank account which holds funds related to the operation of the keno lottery as well as funds from other sources.

600.02CC Outside ticket means either the official paper ticket generated by the keno system or a ticket electronically generated by the digital-on-premises purchasing application or the operator’s tablet that shows the player's wager.

600.02DD Owner means a person with a right to share in the profits, losses, or liabilities of a license applicant or licensee. The term includes loan guarantors who make actual debt payments for, or contribute capital to, a license applicant or licensee with a contingent right to share in the profits, losses, or liabilities of the operation. The term ownership interest has the same meaning as owner.

600.02EE Person means any individual or organization, including any sole proprietorship, partnership, limited liability company, or corporation.

600.02FF Play in a keno lottery means placing a wager, cashing a winning ticket, or collecting any winnings.

600.02GG Premises means any building, or any distinct portion of a building, where the lottery is conducted or played. Premises may include the main location, an independent game location, a sales outlet location, or a satellite location. Premises does not include any areas outside the building.

600.02HH Quick Pick ticket means a keno ticket for which the player selects numbers by requesting that the keno system generate them at random on an outside ticket.

600.02II Random number generator means hardware, software, or a combination hardware and software device for generating number values that exhibit characteristics of randomness.

600.02JJ Regrade means to manually recalculate the prize payout of a winning keno ticket according to the printed pay schedule.

600.02KK Replay means playing the identical keno wager as a prior wager with no change to selected numbers, conditioning, or amount of wager.

600.02LL ROM (read only memory) means the electronic component used for storing nonvolatile information in lottery equipment that provides instructions needed by the computer to begin its operations each time it is turned on. This includes programmable ROM (PROM) and erasable programmable ROM (EPROM).

600.02MM Sales outlet location means a location other than the lottery operator location where keno wagers are placed.

600.02NN Satellite location means a location where keno wagers are placed and where the winning numbers are electronically received from the main location. Winning number selection cannot be performed at a satellite location.

600.02OO Segregated bank account means a bank account which holds only funds related to the operation of the keno lottery.

600.02PP Substantial interest or connected with, interested in, or otherwise concerned directly or indirectly means having a significant responsibility for, or otherwise benefitting or having rights from, a license issued by the Department.

600.02PP(1) For a sole proprietorship, this includes, but is not limited to, an individual or his or her spouse owning, operating, managing, or conducting, directly or indirectly, a part of the sole proprietorship.

600.02PP(2) For a partnership, this includes, but is not limited to, an individual, his or her spouse, or a partnership, limited liability company, or corporation owning, operating, managing, or conducting, directly or indirectly, a part of the partnership activity, or sharing in any of the profits or potential profits of the partnership activity.

600.02PP(3) For a limited liability company, this includes, but is not limited to, the involvement of an individual, his or her spouse, or a partnership, limited liability company, or corporation, owning, operating, managing, or conducting, directly or indirectly, a part of the limited liability company activity or sharing in any of the profits or potential profits of the limited liability company activity.

600.02PP(4) For a corporation, this includes, but is not limited to, an individual, his or her spouse, or a partnership, limited liability company, or corporation owning, operating, managing, or conducting, directly or indirectly, a part of the corporation activity, or being an officer or director of the corporation, or being a holder, directly or indirectly, of 10% or more of any class of stock in the corporation or debt representing 10% or more of the total assets of the corporation.

600.02PP(5) For a nonprofit corporation or nonprofit organization, this includes, but is not limited to, an individual or his or her spouse being an officer, director, or managing the business affairs of the nonprofit corporation or nonprofit organization.

600.02QQ Technology partner means any corporation or business entity which is not otherwise licensed under the Act or these regulations, that contractually agrees to develop some or all of a lottery operator’s digital-on-premises ticket system or operator’s tablet.

600.02RR Transaction log means a record of all transactions entered on the keno system. The transaction log includes, but is not limited to, all outside ticket information, ticket processing, voided tickets, game closing time, game results, payout, and all other information required by these regulations to be entered on the transaction log.

600.02SS Way ticket means a single outside ticket which allows a player to wager on a combination of groups of numbers in various ways.

600.03 Election Required. Any county or city, or any village as defined in Neb. Rev. Stat. §§ 17-201, et seq., desiring to establish and conduct a lottery must hold an election, and a majority of the registered voters of the county, city, or village casting ballots on the issue must approve the establishment of the lottery. The term county also includes a municipal county as provided in Neb. Rev. Stat. §§ 13-2801, et seq.

600.03A The issue may be decided at a regular election or at a special election called by the governing board of the county, city, or village for the purpose of voting on establishing a lottery.

600.03B If an initiative petition signed by at least 20% of the number of individuals voting in the city or village in the last preceding general election is submitted to the governing board of the city or village, the question of whether a lottery will be approved must be submitted to the voters as provided in Neb. Rev. Stat. §§ 18-2501, et seq.

600.04 License Required. After voter approval, the county, city, or village must obtain a license from the Department to conduct a lottery.

600.04A An applicant for a license must submit a Nebraska Application for County/City Lottery, Form 50G, to the Department. Each application must include:

600.04A(1) The name and address of the applicant;

600.04A(2) A certified copy of the election results showing that the lottery was approved by a majority of the registered voters of the county, city, or village that cast ballots in the election;

600.04A(3) The approval by ordinance or resolution adopted by the governing board of a county, city, or village authorizing the conduct of a lottery;

600.04A(4) The names, addresses, and dates of birth of each individual employed by the county, city, or village to conduct the lottery;

600.04A(5) The name and address of the authorized representatives designated by the county, city, or village or by a joint entity created by the county, city, or village by entering into an agreement pursuant to the Interlocal Cooperation Act, to examine, sign, and approve a lottery worker license application for submission to the Department;

600.04A(6) The name and address of at least one individual employed by the county, city, or village who represents the county, city, or village in all matters with the Department regarding the conduct of the lottery;

600.04A(7) A written statement describing the type of lottery to be conducted by the county, city, or village;

600.04A(8) If the county, city, or village has entered into a written agreement with a lottery operator;

600.04A(8)(a) A copy of the proposal submitted to the county, city, or village by the individual, sole proprietorship, partnership, or corporation selected to operate the lottery; and

600.04A(8)(b) A copy of the proposed contract or written agreement between the county, city, or village and the selected lottery operator.

600.04A(9) The biennial license fee for the county, city, or village of $100;

600.04A(10) The method of winning number selection to be used in the keno lottery activity and, if both a ball draw and a random number generator are used, a separate schedule showing the days and times each will be used; and

600.04A(11) Any other information which the Department deems necessary.

600.04B A county, city, or village must notify the Department within 30 days of any changes in the information originally submitted in its application. Changes can be reported by filing an amended application and identifying only the information to be changed. All requests for change must be signed by a member of the governing board, a governing official, or other individual authorized by a Power of Attorney filed with the Department.

600.04C A county, city, or village is not considered licensed until it has physical possession of the printed license issued by the Department.

600.04D A copy of the signed and dated final contract or written agreement between the county, city, or village and the selected lottery operator must be provided to the Department prior to starting the lottery.

600.04E A license obtained by a county, city, or village to conduct a lottery must be renewed with the Department biennially if the county, city, or village intends to continue its lottery activity. The biennial license expires May 31 of every even-numbered year.

600.04E(1) License fees are due with the renewal application.

600.04E(2) Applications for renewal of a county, city, or village license must be submitted to the Department on a Nebraska Application for County/City Lottery, Form 50G, at least 60 days prior to the expiration date of the current license.

600.04F A county, city, or village electing to conduct a lottery may only conduct one type of lottery at any one time. If a county, city, or village conducting a lottery wishes to change the type of lottery that it conducts, it must notify the Department in writing of the change at least 30 days before the change takes effect.

600.05 Sales Outlet Qualifications. Prior to a county, city, village, or lottery operator conducting a lottery at a sales outlet location, the county, city, or village must establish sales outlet location qualification standards by ordinance or resolution.

600.05A The established qualification standards must be met by any person seeking to have its location qualify as an authorized sales outlet location.

600.05B The qualification standards are the sole basis on which the county, city, or village approves or disapproves each person that desires to conduct the lottery at its location.

600.05C The county, city, or village must file a copy of the ordinance or resolution establishing the qualification standards with the Department within 30 days after its adoption.

600.05D The county, city, or village must notify the Department of all approved sales outlet locations within 30 days of approval.

600.06 Participation Restrictions. Participation restrictions for playing or working with the county/city lottery include:

600.06A No individual under the age of 19 can play or participate in any way in any lottery.

600.06B No owner or officer of a lottery operator with whom the county, city, or village contracts to conduct its lottery can play any lottery conducted by the county, city, or village at any time.

600.06C No employee or agent of a county, city, village, lottery operator, or sales outlet location can play the lottery of the county, city, or village for which he or she performs work during the time he or she is actually working at the lottery or while on duty with the lottery. This also prohibits an individual from purchasing a multirace ticket for which some or all of the games will be called while the individual is on duty with the lottery.

600.06D A county, city, or village which authorizes the conduct of a lottery must establish by ordinance or resolution, the additional limitations, if any, on the playing of any lottery conducted by that county, city, or village by any member of the governing board, a governing official, or the immediate family of the member or official.

600.06D(1) For purposes of this regulation, immediate family means spouse, children, grandchildren, siblings, or parents, including those individuals with the same relationship to the spouse, residing in the same household under the control and support of the head of such household.

600.06E Nothing in this regulation prevents a county, city, village, lottery operator, or sales outlet location from adopting more restrictive player participation rules.

600.06E(1) The county, city, or village may adopt any restrictions by ordinance or resolution or by virtue of contractual agreements reached between the county, city, or village and the lottery operator.

600.06E(2) The lottery operator or sales outlet location may adopt any restrictions by internal policies formulated by either party.

600.07 Physical Limits of a Lottery. A county, city, or village electing to conduct a lottery may only do so within the boundaries of the county, city, or village, or within a licensed racetrack enclosure which abuts the corporate limits of a city or village, or which is within the zoning jurisdiction of a city.

600.07A A county, city, or village electing to conduct a lottery may enter an agreement pursuant to the Interlocal Cooperation Act to conduct a joint lottery with another county, city, or village if each county, city, or village that is included within the agreement has authorized a lottery in accordance with the Nebraska County and City Lottery Act.

600.07B All parties to an agreement under the Interlocal Cooperation Act must hold a valid license to conduct a lottery issued by the Department if currently conducting a county/city lottery.

600.07C A joint lottery may only be conducted within the boundaries of the counties, cities, or villages, or within a licensed racetrack enclosure which abuts the corporate limits of, or which is within the zoning jurisdiction of, the cities or villages which are conducting the joint lottery.

600.08 Expiration. A lottery to be conducted by a county, city, or village which was authorized by an election held on or after October 1, 1989, and which is inactive for more than any 10 consecutive years, is no longer authorized.

600.09 Right to Vote on Continuation. The registered voters of any county, city, or village have the right to vote on the question of whether or not an existing lottery should be continued.

600.09A If an initiative petition on continuing an existing lottery, signed by at least 20% of the number of individuals voting in the county, city, or village at the last preceding general election, is presented to the governing board of the county, city, or village conducting the lottery, the question of whether or not the lottery will continue must be submitted to the voters.

600.09B If the governing board of a county, city, or village decides to submit the issue to the registered voters of the county, city, or village at a regular or special election, the question of whether or not the lottery will continue must be submitted to the voters.

600.09C If a majority of the voters voting on the issue vote to discontinue the lottery, the county, city, or village must discontinue the lottery within 60 days after the certification of the election results.

600.09D If the voters decide to discontinue the lottery, the county, city, or village must notify the Department within 30 days of the certification of the election results. The notification consists of a copy of a certification of the results of the election prepared by the county, city, or village election commissioner or other official with the authority to certify the results of an election.

600.09E An election authorized under Reg-35-600.09B cannot be held within two years after the election authorizing the lottery, and not more than once every two years.

600.09F If an election results in discontinuing a lottery, a subsequent election to authorize another lottery cannot be held within two years after the election resulting in discontinuing the previously-authorized lottery.

600.09G Any contract entered into by a county, city, or village relating to conducting a lottery must include a provision permitting the county, city, or village to terminate the contract by giving 30 days' notice to the other party if the lottery has been discontinued by an election authorized under Neb. Rev. Stat. §§ 9-626 or 9-627.

600.10 Local Restrictions. Any county, city, or village may tax, regulate, control, or prohibit any lottery conducted pursuant to the Nebraska County and City Lottery Act within the boundaries of the county, city, or village by resolution or ordinance, except that no county may impose a tax or otherwise regulate, control, or prohibit any lottery within the corporate limits of a city or village.

600.10A If a city or village which has exercised its authority to prohibit lotteries of a county within its boundaries annexes any area in which a lottery is being lawfully conducted by a county, the county may continue the lottery for a period not to exceed the shorter of: (1) the remainder of the term of the county's agreement with the lottery operator; or (2) two years.

600.11 Municipal Counties. If any county, city, or village is conducting a lottery at the time it is consolidated into a municipal county, the municipal county is subject to the same rights and obligations with respect to the lottery as the county, city, or village which was abolished.

600.11A Any rights or obligations under existing lottery contracts of counties, cities, and villages which were abolished continue in effect.

600.11B The lottery will continue to be subject to all other provisions of the Nebraska County and City Lottery Act, except that it cannot be expanded to any new location in any area of the municipal county where the lottery was not previously authorized before the consolidation, unless the expansion has been approved by a majority of the registered voters of the municipal county voting at a regular election or special election called by the governing board of the municipal county for this purpose.

REG-35-601 Community Betterment Purposes

601.01 Any county, city, or village conducting a lottery pursuant to the Nebraska County and City Lottery Act shall spend the gross proceeds of the lottery only for community betterment purposes, awarding of prizes, taxes, and expenses.

601.02 Community betterment purposes shall mean the use of proceeds by a county, city, or village from the conduct of a lottery in the following manner:

601.02A Enhancing a person’s opportunity for educational advancement, such as contributing to the operation of a school or establishing or contributing to a scholarship fund;

601.02B Relieving or protecting individuals from disease, suffering, or distress, such as purchasing food or clothing for the needy or helping to provide medical care for individuals in need;

601.02C Contributing to the physical well being of individuals, such as donations to foster athletic activities. A county, city, or village may use its proceeds from the conduct of a lottery to build, improve, or maintain parks or recreation facilities or to sponsor amateur athletic leagues or programs;

601.02D Assisting individuals in establishing themselves as worthy and useful citizens by providing educational or business opportunities, such as contributions to training programs designed to provide individuals with job skills or to aid handicapped people in making contributions to the community;

601.02E Providing individuals with opportunities to contribute to the betterment of the community, such as initiating cleanup or beautification projects;

601.02F Increasing the comprehension and devotion to the principles upon which this nation was founded, such as sponsoring civic events to make individuals more aware of the history of the United States, State of Nebraska, or other civic institutions or principles;

601.02G Initiating, performing, or fostering worthy public works or enabling or furthering the erection or maintenance of public structures, such as contributing to a county, city, or village building fund or donations to fund parks or recreation areas;

601.02H Lessening the burdens borne by government or voluntarily supporting, augmenting, or supplementing services which government would normally render to the people, such as paying for housing, food, or medical services for needy people or aiding the elderly or contributing to the general fund of a county, city, or village; and

601.02I Providing tax relief for the community, such as using funds raised from county, city, or village lottery to fund any programs or needs which would normally be paid for by taxes imposed upon the community.

601.03 Proceeds derived from the conduct of a lottery conducted by a county, city, or village shall not be used for any political activity, such as lobbying, or participating in or contributing to any political campaign on behalf of any elected official or person who is or has been a candidate for public office.

REG-35-602 Expenses

602.01 Expenses incurred in the conduct of a lottery conducted by a county, city, or village shall not exceed 14 percent of the gross proceeds of such lottery. The expense limitation is imposed upon the county, city, or village and does not apply to expenses incurred by a lottery operator in the conduct of a lottery on behalf of a county, city, or village. Lottery expenses shall include:

602.01A All costs incurred by the county, city, or village associated with the purchasing, leasing, printing, or manufacturing of any items to be used or distributed in the lottery, such as tickets or chances to be sold or the printing of signs or flyers promoting the lottery or any lottery equipment or supplies;

602.01A(1) Expenses incurred by the county, city, or village in the lease or purchase of lottery equipment, lottery supplies, and other equipment, supplies and items used in the conduct of the lottery.

602.01A(1)(a) The purchase price of lottery equipment and other capital equipment expenditures related to the conduct of the lottery by a county, city, or village shall be amortized over the useful life of the equipment as determined in accordance with regulations of the United States Internal Revenue Service for depreciation purposes. The portion of the cost of the equipment that can be allocated to one year shall be applied to that year’s allowable expense limitation.

602.01A(1)(b) As an example, if a county, city, or village purchases keno equipment for $10,000.00 which has a useful life of ten years, the expense for that equipment for allowable expense purposes shall be $1,000.00 per year;

602.01B All office or clerical expenses incurred by the county, city, or village in connection with the lottery, including but not limited to, the cost of any office equipment, office supplies and bookkeeping materials, copying and printing expenses, telephone costs, and postage costs;

602.01C All promotional expenses incurred by the county, city, or village including, but not limited to, the value of free play keno coupons and gift certificates awarded as promotional items, and the cost of radio, television, or newspaper advertising;

602.01D All salaries and related payroll expenses of individuals employed by the county, city, or village to operate, conduct, or supervise the lottery;

602.01E Any rental or lease expense incurred by the county, city, or village for real or personal property used and directly related to the operation of the lottery including, but not limited to, office or storage space rental, office equipment rental, car rental;

602.01F Any fee or commission paid to any person associated with the lottery including, but not limited to, a commission paid to a lottery operator who contracts with the county, city, or village to conduct the lottery on behalf of the county, city, or village, or in the case of a ticket drawing, any fees or commissions paid to ticket sellers or ticket outlets;

602.01G Federal excise taxes or occupational taxes paid by the county, city, or village relating to the conduct of a lottery;

602.01H Any premium paid by a county, city, or village to insure any prize; and

602.01I Any other expenses or costs incurred by a county, city, or village in the conduct of its lottery.

602.02 License fees paid by the county, city, or village to the Department shall not be included within the expense limitation.

602.02A Audit and legal expenses incurred by the county, city, or village shall be included within the expense limitation only to the extent such expenses exceed 1 percent of gross proceeds or $5,000.00, whichever is greater, during the annual period from July 1 to June 30 of each year.

602.02A(1) For purposes of this section, audit and legal expenses shall include all expenses relating to:

602.02A(1)(a) The governmental organization of the lottery including, but not limited to, expenses for publication costs related to the drafting and adoption of ordinances or resolutions required under the Nebraska County and City Lottery Act, expenses incurred in the issuance of requests for proposals related to the operation of the lottery, legal fees incurred in the negotiation, drafting, and execution of a lottery operator agreement, and legal fees incurred in the negotiation, drafting, and execution of an interlocal cooperation agreement to conduct a joint lottery pursuant to the Interlocal Cooperation Act, Neb. Rev. Stat. § 13-801, et al.;

602.02A(1)(b) Government maintenance, monitoring, and examination of lottery records including, but not limited to, expenses for storing lottery records and videotapes, expenses incurred in recording and compiling lottery information, expenses incurred in the audit and examination of lottery records; and

602.02A(1)(c) Enforcement, regulatory, administrative, investigative, and litigation functions undertaken by government including, but not limited to, expenses for background investigations or criminal history checks on sales outlet location license applicants and lottery worker license applicants, and fees incurred in prosecuting or defending legal actions related to the lottery.

602.02A(2) Audit and legal expenses shall not include any expenses related to the actual conduct of the game. These include, but are not limited to, staffing, advertising, purchase, lease, or rental of lottery equipment, purchase, lease, or rental of lottery supplies, and printing costs.

602.02A(3) For the purpose of determining compliance with the limitation on audit and legal expenses when a joint lottery is conducted pursuant to an interlocal cooperation agreement, gross proceeds shall mean the combined gross proceeds of the joint lottery.

602.02A(3)(a) Example, communities A, B, and C enter into an interlocal cooperation agreement and generate annual gross proceeds of $300,000.00, $400,000.00, and $1,000,000.00, respectively. The combined gross proceeds of the joint lottery are $1,700,000.00. One percent of the combined gross proceeds, $17,000.00, is greater than $5,000.00. Audit and legal expenses incurred by the joint lottery will be applied against the 14 percent expense limitation only to the extent such expenses exceed $17,000.00.

602.03 The term expenses does not include prizes awarded to participants or the county, city or village lottery tax remitted to the Department.

602.04 Where an expense incurred by a county, city, or village can be partially attributed to the conduct of a lottery, that portion of the expense attributable to the lottery shall be included within the 14 percent limitation regardless of the funding source used to pay the expense. For example, a bookkeeper who works on lottery activities as well as other county, city, or village matters, would have that portion of his or her salary representing the time the bookkeeper spent on lottery activities attributed to audit and legal expenses.

Example:

Bookkeeper’s salary - $15,000 per year

Time spent on lottery activity - 50 percent

$15,000.00 x .50 = $7,500.00

Amount allocated to lottery expenses: $7,500.00

602.05 A county, city, or village initially establishing a lottery may finance start-up costs relating to the operation of the lottery with money from the general fund of the county, city, or village during the first year of operation. General fund money used to finance such start-up costs must be repaid from funds received from the lottery. With the exception of license fees paid to the Department and audit and legal expenses relating directly to the conduct of the lottery, such start-up costs must be accounted for in the 14 percent limitation on expenses.

602.06 Compliance with the 14 percent expense limitation shall be based on the lottery expenses incurred by a county, city, or village during an annual period corresponding to the fiscal year of the county, city, or village. If the lottery has not been operational for the entire fiscal year, the lottery expenses shall be annualized to determine compliance with the expense limitation.

602.06A A county, city, or village may not offset any lottery expenses incurred in a fiscal year which exceed the 14 percent expense limitation against lottery expenses incurred in any prior fiscal year where such expenses were less than 14 percent.

602.06B A county, city, or village may not offset any lottery expenses incurred in a fiscal year which exceed the 14 percent expense limitation against future lottery expenses.

REG-35-603 County and City Lottery Taxes

603.01 Counties, cities, or villages conducting a lottery are required to report the gross proceeds of each lottery on a form approved and provided by the Department and remit to the Department, with the report, a tax of 2 percent of the gross proceeds of each such lottery within 30 days of the end of each calendar quarter.

603.02 The tax return signed by a governing official or his or her authorized representative and accompanied by remittance will be considered timely filed if actually received by the Department or mailed, postage prepaid, on or before the 30th day of the month following the close of the quarter. If the due date for filing the tax return falls on a Saturday, Sunday, or a legal holiday, the return shall be considered timely filed if actually received by the Department or mailed, postage prepaid, on the next succeeding day which is not a Saturday, Sunday, or a legal holiday.

603.02A A United States Postal Service postmark shall be considered conclusive evidence of the date of mailing for the purpose of timely filing a return. When there is a private postage meter mark and there is no United State Postal Service postmark, the return is considered filed on the date received by the Department.

603.03 Failure to file a tax return or remit the tax due by the due date shall be cause for a penalty equal to 10 percent of the amount of tax not paid by the required due date or $25.00, whichever is greater. Interest will accrue on any tax which is not timely remitted at the rate specified in section 45-104.02, R.R.S. 1943, as such rate may from time to time be adjusted by the Legislature, from the 30th day of the month following the quarterly period for which the amount should have been paid until the date of payment.

603.03A For purpose of this regulation, date of payment shall be considered the date such payment was received by the Department or, if mailed, the date of the United States Postal Service postmark. When there is a private postage meter mark and there is no United State Postal Service postmark, the date of payment is considered the date received by the Department.

603.04 A tax return filed after the due date which indicates a zero amount of gross proceeds and/or zero balance of tax due shall not be subject to the $25.00 penalty as previously described.

603.05 Remittance must accompany the tax return and be in the form of check, draft, money order, or other payment method approved by the Tax Commissioner made payable to the Nebraska Department of Revenue.

REG-35-604 Record Keeping and Reporting Requirements - Traditional Ticket Drawing Lottery

604.01 All records required under the Nebraska County and City Lottery Act and this regulation shall be kept and maintained for a period of not less than three years.

604.02 In the case of a ticket drawing lottery, the following records shall be maintained by the county, city, or village conducting the lottery:

604.02A The gross proceeds from the sale of tickets plus any interest earned on such proceeds;

604.02B The value of prizes actually awarded;

604.02C The value of prizes not claimed;

604.02D The locations at which tickets are sold, if applicable, and for each location the gross proceeds from the sale of tickets at that location;

604.02E An itemization of the expenses incurred by the county, city, or village in operating the lottery, including, but not limited to:

604.02E(1) Printing costs;

604.02E(2) Advertising costs;

604.02E(3) Wages paid to individuals selling tickets;

604.02E(4) Commissions paid to lottery operators and sales outlet locations, if applicable;

604.02E(5) Any other expenses connected with the lottery; and

604.02F The remaining gross proceeds plus any interest earned on such proceeds to be used for community betterment purposes and the actual or intended use of such proceeds.

604.02G Each county, city, or village shall report on a quarterly basis the above-described information to the Department. The report shall be prepared on a form prescribed by the Department, and accompany the quarterly tax return prescribed in Neb. Rev. Stat. § 9-648 of the Nebraska County and City Lottery Act.

REG-35-605 Lottery Operators

605.01 Any person that agrees to be responsible for conducting a lottery on behalf of a county, city, or village must apply for and obtain a lottery operator license from the Department prior to conducting any lottery. A separate lottery operator license is required for each county, city, or village on whose behalf a lottery will be conducted. A nonprofit organization or nonprofit corporation is not eligible to obtain a lottery operator license.

605.01A If a lottery is conducted jointly with one or more other counties, cities, or villages pursuant to the Interlocal Cooperation Act, Neb. Rev. Stat. § 13-801, et seq., a separate lottery operator license is required for each county, city, or village included in the lottery activity.

605.02 For the purpose of this regulation, when a lottery operator utilizes individual locations within the county, city, or village as satellite or sales outlet locations where keno is played, these locations are not considered lottery operators. If a county, city, or village utilizes individual locations within the county, city, or village as outlets where lottery tickets are sold and retains complete operational control of the lottery activity, these locations are not considered lottery operators.

605.02A If a lottery operator leases a portion of a business location to operate keno as a main location, a satellite location, or an independent location, the business location must obtain a sales outlet location license. Notwithstanding the provisions of this regulation, any individual, sole proprietorship, partnership, limited liability company, corporation, nonprofit organization, or nonprofit corporation which leases space to a lottery operator to allow a lottery to be conducted at their location on behalf of a county, city, or village whose only business involvement at the location is a landlord and tenant relationship with the lottery operator is not required to apply for and obtain a sales outlet location license from the Department.

605.03 Unless the contract between a county, city, or village and the lottery operator specifies otherwise, a lottery operator has overall responsibility for the daily operation of the lottery including, but not limited to, responsibility and liability for all operational aspects of the lottery which may include daily gaming operations; purchase, repair, replacement, and maintenance of lottery equipment; purchase and maintenance of lottery supplies; compensation, staffing, and training of all employees and agents; processing and handling of lottery gross proceeds; preparation of all reports required of a county, city, or village, or a lottery operator by the Department or any governmental entity or agency; advertising; development of official rules and procedures for play and collection of prizes and progressive game prizes; oversight of the lottery operation; and all other record keeping. A lottery operator is selected by a county, city, or village to conduct the lottery on behalf of the county, city, or village. A written contract may be executed which sets forth the obligations and responsibilities of both parties.

605.04 A lottery operator’s license shall not be issued except to those applicants who are:

605.04A Residents of Nebraska if a sole proprietorship;

605.04B Organized under the laws of Nebraska if a partnership; or

605.04C Formed under the Limited Liability Company Act as provided in Neb. Rev. Stat. § 21-2601, et seq., if a limited liability company.

605.04D Incorporated under the Business Corporation Act as provided in Neb. Rev. Stat. § 21-2001, et seq., if a corporation. For the purpose of this regulation, a domesticated foreign corporation is not considered incorporated in Nebraska and, therefore, would not be eligible to obtain a license as a lottery operator.

605.05 No individual, sole proprietorship, partnership, limited liability company, or corporation shall conduct a lottery on behalf of a county, city, or village without having first obtained a lottery operator’s license from the Department. Such license shall be applied for using the Nebraska Schedule I – County/City Lottery Operator Application, Form 50G. In addition to the information required on the application form, each applicant shall provide or perform the following:

605.05A A completed and notarized Personal History Record and Background Disclosure Form and two fingerprint cards for each individual who has an ownership interest, either directly or indirectly, in the applicant. If a sole proprietorship, by the individual owner and his or her spouse. If a partnership, by each partner, each partner’s spouse, and any officer or director of the partnership. If a limited liability company, by each member and spouse. If a corporation, by each officer and his or her spouse and each individual who owns 10 percent or more of the debt or equity of the corporation.

605.05A(1) Completion of the Personal History Record and Background Disclosure Form and the submission of fingerprint cards by a spouse may be waived if such individual has no proprietary interest, directly or indirectly, in the operation or profit derived from the activities of his or her spouse as a corporate stockholder, corporate debt holder, corporate officer, corporate director, limited liability company member, or partner of a lottery operator. An Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure Form must be completed, notarized, and submitted for each such individual.

605.05A(2) The fingerprinting requirement for an applicant may be waived if the Nebraska Liquor Control Commission has received fingerprint reports on the applicant within the past two years of the filing date of the Schedule I or if the license issued by the Nebraska Liquor Control Commission has been continuously maintained since documented fingerprints were filed to obtain such license.

605.05A(3) The fingerprinting requirement shall be waived for any debt holder of the applicant which is a financial institution organized or chartered under the laws of Nebraska, any other state, or the United States relating to banks, savings institutions, trust companies, savings and loan associations, credit unions, and installment loan licensees, or similar associations organized under the laws of this state which are subject to supervision by the Department of Banking and Finance.

605.05B In addition to filing the Personal History Record and Background Disclosure Form and fingerprint cards, each applicant may be subject to a background investigation, an inspection of the applicant’s facilities, or both. The applicant may be required to pay the actual costs incurred by the Department, in advance under appropriate circumstances, in conducting the investigation or inspection. If payment in advance is not requested, the Department will inform the applicant of the maximum amount the Department anticipates spending and the Department will not seek more than that amount from the applicant without first seeking the applicant’s permission to continue the investigation. If payment in advance is requested and the applicant does comply, the Department will refund the amount the applicant’s advance exceeds the actual costs or will collect any underpayment for costs not covered by the advance after completion of the investigation or inspection. If payment in advance is requested and the applicant does not wish to comply for whatever reason, it may withdraw its application and its license fee will be refunded.

605.05B(1) The background investigation shall be waived for any debt holder of the applicant which is a financial institution organized or chartered under the laws of Nebraska, any other state, or the United States relating to banks, savings institutions, trust companies, savings and loan associations, credit unions, and installment loan licensees, or similar associations organized under the laws of this state which are subject to supervision by the Department of Banking and Finance.

605.05C Two sets of fingerprints on cards supplied by the Department and the required processing fees must be submitted to the Nebraska State Patrol.

605.06 The Department must be informed within 30 days after the licensee learns of any inaccuracies or makes any changes in the information supplied by the licensee in its most recent filing with the Department. Changes that will not require a new license to be issued can be reported by filing an amended application and identifying only the information to be changed. All requests for changes must be signed by an owner, partner, limited liability company member, corporate officer, or individual authorized by Power of Attorney on file with the Department and by a representative of the county, city, or village. No additional license fee shall be due under these circumstances.

605.06A The following are changes to a lottery operator license that are to be reported by the county, city, or village, or the lottery operator:

605.06A(1) For a sole proprietorship, the death, marriage, or divorce of the owner.

605.06A(2) For a partnership, the death, marriage, or divorce of one or more of the partners or when one partner sells part or all of his or her interest in the business to another existing partner.

605.06A(3) For a limited liability company, the death, marriage, or divorce of one or more of the members or when one member sells part or all of his or her interest in the business to another existing member.

605.06A(4) For a corporation, the resignation, death, marriage, or divorce of an existing officer or director, or a change of positions or titles among existing officers or directors, or the transfer of the outstanding and issued stock to shareholders in the corporation which results in no change to those previously reported as owning, directly or indirectly, 10 percent or more of the debt or equity of the corporation.

605.06B The following attachments are to be provided with the amended lottery operator application to report the above changes:

605.06B(1) In the case of death, if applicable, a copy of the court appointment of a Personal Representative, executor, administrator, or trustee.

605.06B(1)(a) The Personal Representative, executor, administrator, or trustee appointment will be valid for a lottery operator license for a period not to exceed the shorter of (1) the expiration of the existing lottery operator license, (2) the expiration of the existing lottery operator contract, or (3) one year.

605.06B(1)(b) A revised expiration date may be requested in writing with adequate documentation to indicate why the ownership of the licensed business could not change hands within the specified period. The prior written approval of such revision by the Department is required.

605.06B(2) In the case of marriage, the spouse’s name, social security number, address, and date of birth are to be provided with the applicable Personal History Record and Background Disclosure Form or the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure Form. If fingerprints are required, the fingerprint cards and the required processing fees must be submitted to the Nebraska State Patrol.

605.06B(3) In the case of divorce, a copy of the decree and property settlement agreement or other documentation showing the deletion of the spouse’s name from the license information.

605.06B(4) In the case of changes in corporate officers, a copy of the election results and the letter of resignation, if applicable.

605.06B(5) In the case of ownership changes within the existing owners, the new percentages of ownership for the remaining partners, members, shareholders, equity holders, or owners.

605.07 A lottery operator is not considered licensed until such time it has physical possession of the printed license issued by the Department.

605.07A If the lottery is conducted at the lottery operator’s location, the current original lottery operator’s license(s) issued by the Department must be posted prominently at the licensed location. A reproduced copy of the license(s) shall not be substituted for the original(s).

605.07A(1) If there is no lottery operator’s location where the lottery is conducted, the current original license is to be retained with the lottery operator’s records.

605.07B A lottery operator who has had his or her license(s) lost, stolen, or destroyed must notify the Department as soon as possible. The lottery operator shall send a written statement to the Department signed by an owner, officer, member, or partner confirming the loss, theft, or destruction of the license. A duplicate license(s) for the lottery operator will be issued. No additional fee shall be due under these circumstances.

605.07C A lottery operator who is no longer under contract with the county, city, or village for which he or she is licensed or who no longer desires to be licensed shall notify the Department, in writing, of their intention to cancel the license. Such notification must be accompanied by the original license. In the event that a lottery operator’s license is suspended, canceled, or revoked, the lottery operator shall surrender physical possession of its license immediately upon receipt of the order of suspension, cancellation, or revocation. In the case of suspension, the Department shall return the license to the county, city, or village at the end of the suspension period. In the case of cancellation, the former licensee may reapply for a license when the period of cancellation has expired. In the case of revocation, the former licensee may not reapply for any license at any time in the future under the Nebraska County and City Lottery Act.

605.07C(1) If a licensee has successfully appealed an order of suspension, revocation, or cancellation, the Department shall return the license which had been surrendered to the Department.

605.08 All lottery operator licenses shall expire on May 31 of every even-numbered year and may be renewed biennially.

605.08A License fees are due with the application.

605.08B Applications for renewal of a lottery operator license shall be submitted to the Department on the prescribed form at least 60 days prior to the expiration date of the license.

605.09 A lottery operator’s license may not be transferred under any circumstance, including change of ownership. A change of ownership is to be reported by filing an amended application with appropriate attachments. If a business entity licensed as a lottery operator will cease to exist when the ownership change is completed, a new lottery operator’s license must be applied for including the payment of any applicable license fees and a copy of the county, city, or village’s approval of the new ownership of the lottery operator.

605.09A A change of ownership occurs:

605.09A(1) For a sole proprietorship, whenever the sole owner changes.

605.09A(2) For a partnership, whenever a new partner is added to the partnership. If the same partnership continues in existence, an amended application is to be filed, but no license fee is required. Otherwise, a new application and license fee are to be submitted.

605.09A(3) For a limited liability company, whenever a new member is added to the limited liability company. If the same limited liability company continues in existence, an amended application is to be filed, but no license fee is required. Otherwise, a new application and license fee are to be submitted.

605.09A(4) For a corporation, whenever a change of ownership of shareholders or equity holders in the corporation results in any person becoming a holder directly or indirectly of 10 percent or more of any class of debt or equity interest in the corporation who did not hold such interest prior to the change in ownership and the same corporation continues in existence, an amended application is to be filed, but no license fee is required. Otherwise, a new application and license fee are to be submitted.

605.09B When a change of ownership of a business licensed as a lottery operator is anticipated, the current owner of the lottery operator may designate as his or her agent the party purchasing the business. In order to be designated as an agent, the following criteria must be satisfied:

605.09B(1) A Nebraska Schedule I – County/City Lottery Operator Application, Form 50G, must be on file with the Department;

605.09B(2) A Temporary Agency Agreement on a form prescribed by the Department must be filed with the Nebraska Schedule I;

605.09B(2)(a) The Temporary Agency Agreement must be approved by the Department and a copy returned to the lottery operator for posting with the current lottery operator license.

605.09B(2)(b) A Temporary Agency Agreement is not effective without the Department’s approval.

605.09B(3) Throughout the duration of the Temporary Agency Agreement, the designated agent may operate the lottery using the current lottery operator’s license with the licensed lottery operator fully responsible to the county, city, or village and to the state for the proper operation of the lottery until such time as the new lottery operator is licensed;

605.09B(4) Temporary agency agreements will be valid for a lottery operator license for a period not to exceed the shorter of (1) the expiration of the existing lottery operator license or (2) 180 days unless otherwise extended in writing by the Department prior to the expiration of the 180 days.

605.10 No sole proprietor, partner in a partnership, member in a limited liability company, officer or director of a corporation, or individual with a substantial debt or equity interest in the person which is applying for or holds a lottery operator license shall have a substantial interest in any person licensed as a manufacturer or distributor of bingo equipment and supplies, as a manufacturer or distributor of pickle card units and punchboards, or as a manufacturer-distributor of lottery equipment and supplies.

605.11 No member of the governing board or any governing official of the county, city, or village shall have a substantial interest in any lottery operator with whom the county, city, or village contracts to conduct its lottery.

605.12 A business licensed as a lottery operator may apply for and obtain licenses to conduct other activities pursuant to the Nebraska Bingo Act and the Nebraska Pickle Card Lottery Act subject to the statutory limitations and eligibility criteria of those Acts. However, a business licensed as a lottery operator may not hold a license as a manufacturer or distributor pursuant to the Nebraska Bingo Act or the Nebraska Pickle Card Lottery Act, or as a manufacturer-distributor pursuant to the Nebraska County and City Lottery Act.

605.13 No owner or officer of a lottery operator with whom the county, city, or village contracts to conduct its lottery shall play any lottery conducted by such county, city, or village at any time.

605.14 Except as noted below, all purchases, leases, or rentals of lottery equipment and supplies by a lottery operator shall only be made from a licensed manufacturer-distributor of lottery equipment and supplies. It is the responsibility of the lottery operator to verify in all instances the license status of a business marketing or selling lottery equipment and supplies in Nebraska.

605.14A A licensed county, city, village, or lottery operator may sell or donate their used lottery equipment to another licensed county, city, village, or lottery operator.

605.14B A previously licensed county, city, village, or lottery operator may sell or donate their used lottery equipment which was acquired while licensed to a currently licensed county, city, village, or lottery operator.

605.14C The transfer or sale of such used lottery equipment must have prior written approval by the Department.

605.15 All purchases, leases, or rentals of lottery equipment and supplies in Nebraska are subject to the Nebraska sales or use tax. Any manufacturer-distributor who leases or rents lottery equipment and supplies to a lottery operator in Nebraska is required to collect the applicable state and local sales tax on such leases or rentals. A lottery operator who purchases lottery equipment and supplies from a manufacturer-distributor who is not required to collect the Nebraska sales or use tax must report and pay a use tax to the Department on all such purchases.

605.15A A lottery operator may not use the sales tax-exempt status of a county, city, or village to avoid the payment of any applicable sales or use tax on the purchase, lease, or rental of lottery equipment and supplies.

REG-35-606 Manufacturer – Distributors

606.01 Any person that manufactures or distributes lottery equipment or supplies and intends to sell, rent, lease, or otherwise provide such equipment for use in Nebraska by a licensed county, city, village, or lottery operator must first apply for and obtain a manufacturer-distributor license from the Department. A manufacturer-distributor’s license shall not be required of:

606.01A A person that manufactures or intends to sell only video recording equipment required for ball draw games, security cameras and systems, display devices, magnetic storage media, or other supply items used with lottery equipment that do not directly affect the outcome of the game.

606.01B A person that manufactures or intends to sell only keno paper, crayons and markers, and other supplies that do not directly affect the outcome of the game.

606.02 To qualify for a manufacturer-distributor’s license, the applicant must be authorized to conduct business in Nebraska. Authorization to conduct business in Nebraska requires:

606.02A A domestic limited liability partnership and a domestic limited partnership to register with the Nebraska Secretary of State’s office;

606.02B A domestic limited liability company to file Articles of Organization with the Nebraska Secretary of State’s office;

606.02C A domestic corporation to file Articles of Incorporation with the Nebraska Secretary of State’s office;

606.02D A foreign limited liability partnership and a foreign limited partnership to register with the Nebraska Secretary of State’s office;

606.02E A foreign limited liability company or foreign corporation to obtain a certificate of authority to transact business in Nebraska from the Nebraska Secretary of State’s office or to become domesticated by filing the required documents with the Nebraska Secretary of State’s office and paying any required fees.

606.03 Applicants seeking a manufacturer-distributor’s license who intend to be engaged in business in this state as defined in section 77-2702.06 of the Nebraska Revised Statutes, as amended, shall also submit a Nebraska Tax Application, Form 20, to obtain a Nebraska Sales and Use Tax Permit.

606.03A Manufacturers-distributors who are engaged in business in Nebraska are required to obtain a Nebraska sales tax permit and must collect and remit Nebraska sales tax on the gross receipts derived from the sale, rental, or lease of all county/city lottery equipment and supplies in Nebraska, except those sold, rented, or leased to an entity which is exempt as set forth in Sales and Use Tax Regulation 1-012 and which has presented a properly completed Nebraska Resale or Exempt Sale Certificate, Form 13.

606.04 No person shall manufacture, sell, lease, rent, print, distribute, or otherwise provide lottery equipment or supplies for use or play in Nebraska without having first obtained a license from the Department. The applicant shall include with the completed application form prescribed by the Department the statutorily required license fee and, at the minimum, the following information:

606.04A The business name and address of the applicant and the name and address of each of the applicant’s separate locations at which manufacturing, warehousing, selling, leasing, distributing, or promotion of lottery equipment and supplies occurs;

606.04B The type of ownership of the business and the name, social security number, home address, and date of birth of:

606.04B(1) If a sole proprietorship, the individual owner and his or her spouse.

606.04B(2) If a partnership, each partner and his or her spouse.

606.04B(3) If a limited liability company, each member and his or her spouse.

606.04B(4) If a corporation, each officer and his or her spouse, each director or board member, and each individual who owns 10 percent or more of the debt or equity of the corporation. If an entity holding 10 percent or more of the debt or equity of the applicant corporation is a partnership, limited liability company, or corporation, the information required in Reg-35-606.04B must be supplied for each partner of the partnership, each member of the limited liability company, or each officer of the corporation and every individual or entity holding 10 percent or more of the debt or equity of the partnership or corporation.

606.04C If the applicant is not a resident or a corporation, the full name, business address, and home address of an individual who is 19 years of age or older and a resident of this state to act as the manufacturer-distributor’s agent for the purpose of receipt and acceptance of service of process and other communications on behalf of the manufacturer-distributor;

606.04D A completed and notarized Personal History Record and Background Disclosure Form supplied by the Department for each individual listed pursuant to Reg-35-606.04B;

606.04D(1) Completion of the Personal History Record and Background Disclosure Form by a spouse may be waived if such individual has no proprietary interest, directly or indirectly, in the operation or profit derived from the activities of his or her spouse as a corporate stockholder, corporate debt holder, corporate officer, corporate director, limited liability company member, or partner of a manufacturer-distributor. An Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure Form must be completed, notarized, and submitted for each such individual.

606.04E Two sets of fingerprints for each individual listed pursuant to Reg-35-606.04B on cards supplied by the Department and the required processing fees submitted to the Nebraska State Patrol;

606.04E(1) Completion of fingerprinting by a spouse may be waived if such individual has no proprietary interest, directly or indirectly, in the operation or profit derived from the activities of his or her spouse as a corporate stockholder, corporate debt holder, corporate officer, corporate director, limited liability company member, or partner of a manufacturer-distributor. An Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record and Background Disclosure Form must be completed, notarized, and submitted for each such individual.

606.04F In addition to these requirements, each applicant is subject to a background investigation, an inspection of the applicant’s facilities, or both. The applicant is required to pay the actual costs incurred by the Department in conducting the investigation or inspection. An advance deposit may be required in an amount estimated to cover the cost of the investigation or inspection. If the applicant does not wish to undergo a background investigation or facility inspection, the application may be withdrawn and any license fee remitted with the application will be refunded. If the applicant agrees to undergo a background investigation or facility inspection, the Department will refund any overpayment of costs or will collect any underpayment of costs after completion of the investigation or inspection.

606.04G The fingerprinting requirement and the background investigation and facility inspection shall be waived for any debt holder of the applicant which is a financial institution organized or chartered under the laws of Nebraska, any other state, or the United States relating to banks, savings institutions, trust companies, savings and loan associations, credit unions, and installment loan licensees, or similar associations organized under the laws of this state which are subject to supervision by the Department of Banking and Finance.

606.04H If the applicant is a partnership, a copy of the partnership agreement must be provided. If the applicant is a limited liability company, a copy of the Articles of Organization must be provided. If the applicant is a corporation, a copy of the Articles of Incorporation and all amendments thereto must be provided.

606.05 An applicant or licensee shall notify the Department within 30 days after the applicant or licensee learns of any inaccuracies or makes any changes in the information supplied in its most recent filing with the Department. Changes that will not require a new license to be issued can be reported by filing an amended application and identifying only the information to be changed. All requests for changes must be signed by an owner, partner, limited liability company member, corporate officer, or individual authorized by Power of Attorney on file with the Department. Any individual signing the most current application shall obligate the licensee to comply with the Nebraska County and City Lottery Act and accompanying regulations for that licensing period. No additional license fee shall be due under these circumstances.

606.06 A manufacturer-distributor is not considered licensed until such time it has physical possession of the printed license issued by the Department.

606.06A A licensed manufacturer-distributor who has had its license lost, stolen, or destroyed must notify the Department as soon as possible of the loss, theft, or destruction. The licensed manufacturer-distributor shall send a written statement to the Department signed by an owner, partner, limited liability company member, or corporate officer confirming the loss, theft, or destruction of the license. A duplicate license will be issued. No additional fee is required under such circumstances.

606.06B A manufacturer-distributor who no longer desires to be licensed shall notify the Department, in writing, of its intention to cancel its license. Such notification shall be signed by an owner, partner, limited liability company member, or corporate officer of the manufacturer-distributor. A notification of cancellation shall be accompanied by the original license issued by the Department.

606.07 All manufacturer-distributor licenses shall expire on September 30 of every odd-numbered year and may be renewed biennially. Applications for renewal of a manufacturer-distributor license shall be submitted to the Department on the prescribed form at least 45 days prior to the expiration date of the license. License fees are due with the application. A manufacturer-distributor’s license may not be transferred under any circumstance including change of ownership.

606.08 A licensed manufacturer-distributor, or any person having a substantial interest therein, is prohibited from holding any other licenses issued pursuant to the Nebraska Bingo Act, the Nebraska Pickle Card Lottery Act, the Nebraska Lottery and Raffle Act, or the Nebraska County and City Lottery Act, except as a manufacturer or distributor of bingo equipment and supplies or as a manufacturer or distributor of pickle card units and punchboards.

606.09 No individual, partner in a partnership, limited liability company member, or officer, director, 10 percent or more stockholder or equity holder of a corporation licensed as a manufacturer-distributor, or any employee or agent or spouse thereof shall play in any lottery conducted by any county, city, or village. No individual, partner in a partnership, limited liability company member, or officer, director, 10 percent or more stockholder or equity holder of a corporation licensed as a manufacturer-distributor, or any employee or agent or spouse thereof shall participate in the conduct or operation of any lottery conducted by any county, city, or village, or any other kind of authorized gambling activity regulated under Chapter 9 of the Nebraska Reissue Revised Statutes, except to the exclusive extent of his or her statutory duties as a licensed manufacturer-distributor of lottery equipment and supplies, as a licensed manufacturer or distributor of bingo equipment and supplies, or as a licensed manufacturer or distributor of pickle card units and punchboards.

606.09A Notwithstanding the limitations of Reg-35-606.09, a licensed manufacturer-distributor may sell, lease, or otherwise provide lottery equipment to a county, city, village, or lottery operator where any financial agreement associated therewith is based upon a percentage of the gross proceeds or amount wagered. Such agreement is not considered participation in the conduct or operation of the lottery.

606.10 Any person licensed as a manufacturer or distributor of bingo equipment and supplies and any person licensed as a manufacturer or distributor of pickle card units and punchboards may apply for a license as a manufacturer-distributor of lottery equipment and supplies by filing the application form and paying the license fee.

606.11 No member of the governing board or governing official of a county, city, or village which is operating a lottery pursuant to the Nebraska County and City Lottery Act shall have a substantial interest in any person licensed as a manufacturer-distributor.

606.12 No individual, partner in a partnership, member in a limited liability company, officer or director of a corporation, or any individual with a substantial interest in a sole proprietorship, partnership, limited liability company, or corporation which is applying for or holding a lottery operator license shall be connected with or interested in, directly or indirectly, any person, partnership, firm, corporation, or other party licensed as a manufacturer-distributor of lottery equipment and supplies, as a manufacturer or distributor of bingo equipment and supplies, or as a manufacturer or distributor of pickle card units and punchboards.

606.13 A licensed manufacturer-distributor shall not sell, lease, or otherwise provide lottery equipment or supplies to anyone in Nebraska other than a county, city, or village licensed to conduct a lottery, a licensed lottery operator, or another licensed manufacturer-distributor of lottery equipment and supplies. Prior to selling, leasing, or otherwise providing lottery equipment and supplies to any authorized person, a licensed manufacturer-distributor shall obtain proof of licensing from the party seeking to obtain the equipment or supplies or verify that such person has a valid license by contacting the Department.

606.14 No licensed manufacturer-distributor shall purchase, lease, or otherwise obtain lottery equipment and supplies for use in this state from anyone other than another licensed manufacturer-distributor of lottery equipment and supplies in Nebraska.

606.15 A licensed manufacturer-distributor shall issue an invoice for each purchase, return, or exchange of lottery equipment and supplies by a county, city, or village licensed to conduct a lottery, a licensed lottery operator, or another licensed manufacturer-distributor. Every such invoice shall contain at a minimum the following information:

606.15A The name and complete address of the purchaser;

606.15B The individual placing the order or making the purchase on behalf of the county, city, or village, the lottery operator, or the manufacturer-distributor;

606.15C The date of the transaction;

606.15D A description of the lottery equipment and/or supplies sold, returned, or exchanged including when applicable the brand name, model number, and serial number of each item;

606.15E The total quantity of each type of lottery equipment and/or supplies sold, returned, or exchanged;

606.15F The price of each type of lottery equipment and/or supplies sold, returned, or exchanged and the extended total price based upon the total quantity of each item; and

606.15G The manner of delivery or shipment, including the name, address, and telephone number of the individual or business shipping the lottery equipment and supplies.

606.16 A manufacturer-distributor leasing or otherwise providing lottery equipment and supplies to a county, city, or village licensed to conduct a lottery, a licensed lottery operator, or another licensed manufacturer-distributor shall provide the party obtaining the equipment or supplies with a written agreement setting forth all of the terms and conditions of the lease or other arrangement. Such written agreement shall identify the following:

606.16A The name and complete address of the lessee;

606.16B The term of the lease or other arrangement;

606.16C A description of the lottery equipment and supplies included in the lease or other arrangement, including when applicable the brand name, model number, and serial number of each item;

606.16D The total quantity of each type of lottery equipment and supplies provided by the lease or other arrangement; and

606.16E The total dollar amount of the lease or other arrangement and corresponding payment or other terms.

REG-35-607 Construction Standards for Traditional Drawing Lottery Tickets

607.01 All tickets shall be constructed of the same material and be of the same size, shape, weight, and thickness.

607.02 Each ticket shall bear a unique number from a set of sequential numbers, which does not repeat within the complete pool of tickets.

607.03 Each ticket shall be constructed with:

607.03A A detachable stub which shall bear the same sequential number as its accompanying ticket; and

607.03B Blank spaces to be filled in with the purchaser’s name, complete address, and telephone number.

607.04 Each ticket shall be imprinted with the following information:

607.04A The name of each city, county or village conducting or jointly conducting the lottery;

607.04B The cost per ticket;

607.04C The major prize(s) to be awarded;

607.04D The intended date of the drawing to determine the winner(s); and

607.04E If applicable, whether the purchaser is required to be present at the drawing in order to win a prize.

607.05 A sample of the proposed ticket shall be submitted to the Department, by the county, city, village, or licensed lottery operator for approval prior to any sale of such tickets.

REG-35-608 Conduct of the Game – Traditional Ticket Drawing Lottery

608.01 A county, city, or village which authorizes the conduct of a traditional ticket drawing lottery shall establish the limitations, if any, on the playing of the lottery conducted by that county, city, or village by:

608.01A Any member of the governing board, a governing official, or the immediate family of such member or official;

608.01B Any lottery operator or his or her immediate family; and

608.01C Any person(s) having ownership interest in the authorized lottery location(s) or any employee thereof.

608.01D For purposes of this regulation, immediate family shall mean spouse, children, grandchildren, brother, sister, parents, father-in-law or mother-in-law.

608.02 Tickets meeting the minimum standards as set forth in Regulation 35-607 are not required to be purchased through a licensed lottery manufacturer-distributor and may, for example, be supplied through a local printer; however, such tickets are subject to approval by the Department.

608.03 The drawing date to determine the winner(s) may not exceed the expiration date of the county, city or village’s lottery license issued by the Department.

608.03A If the drawing to determine the winner(s) is to be held after the expiration date of its current license, the county, city, or village must renew their license each consecutive licensing period up to and including the date of the drawing.

608.04 Each ticket stub shall be completed with the name, complete address and telephone number of the purchaser.

608.05 Tickets which have not been sold to participants are not eligible for the drawing to determine the winner:

608.05A All unsold tickets and stubs of eligible tickets shall be returned to the county, city, or village and accounted for prior to the drawing to determine the winner(s).

608.05B A county, city or village may not include any unsold stubs in the drawing.

608.05C Any unsold tickets returned to the county, city, or village shall be securely stored until destroyed. Prior to their destruction, a record shall be made of the sequential numbers of the tickets to be destroyed.

608.06 Winners shall be determined by a random drawing of all the ticket stubs sold which the ticket seller(s) have retained and returned to the county, city, or village as eligible for the drawing.

608.07 The drawing shall be physically conducted by an individual at least 19 years of age and witnessed by at least two governing officials or board members.

REG-35-609 REPEALED .

REG-35-610 REPEALED .

REG-35-611 REPEALED .

REG-35-612 REPEALED .

REG-35-613 Conduct of the Game – Keno

613.01 Age Restrictions. Individuals under the age of 19 cannot play or participate in any way in the game of keno.

613.01A Any ticket purchased by an individual under the age of 19 or by the agent of the individual is void.

613.01B A winning ticket presented by an individual under the age of 19 or by the agent of the individual will not be paid.

613.02 Equipment and Wagering Restrictions. Only computerized keno games may be conducted. Brush or non-computerized games are prohibited. The following restrictions also apply.

613.02A A player cannot close a keno game or initiate the selection of winning numbers.

613.02B No person or licensee, or any employee or agent of a licensee, who accepts keno wagers may extend credit from the keno gross proceeds to players to purchase keno tickets.

613.02C Except as provided below, no person is allowed to purchase any outside ticket or place any wager pursuant to the Nebraska County and City Lottery Act (Act) unless he or she pays for the ticket or wager with cash, a debit card, the cash balance of a payment application, a transfer from a deposit account at a financial institution, or an account established in the name of the player with the lottery operator. A credit card shall not be accepted as payment for any wager on keno.

613.02C(1) A lottery operator or sales outlet location may cash a check for a player from the lottery operator’s or sales outlet location’s personal account (for example, the bar account or business account). The player must receive an equivalent amount of cash, less any applicable check cashing fees, from non-keno funds, and cash must be given to the keno writer at the time the wager is made. It is not permissible to hold a check and await the outcome of the game.

613.02C(2) A lottery operator, sales outlet location, or county, city, or village cannot cash a check from the keno account, the keno cash drawer, or other keno funds unless the check was issued to the player by the lottery operator, sales outlet location, or county, city, or village for keno winnings.

613.02C(3) Players may use gift certificates redeemable for keno play, free play keno coupons, or similar promotional items if the dollar amount of keno wagers represented by the promotional items is included in the gross proceeds of the lottery.

613.02C(3)(a) The retail value of free keno play is considered a promotional expense of operating the lottery and is subject to the 14% limitation on expenses if reimbursed by the county, city, or village.

613.02C(3)(b) A gift certificate must identify the name of the county, city, village, lottery operator, or sales outlet location issuing the certificate; and indicate that it is redeemable only for keno play. The issuer of the gift certificate is responsible for including cash in the keno bank account deposit for the day it is redeemed equivalent to the face value of the certificate.

613.02C(4) A participant is prohibited from using a debit card to purchase more than $200 in keno wagers from a lottery operator, or to deposit more than $200 into an account established in the name of the player, in a calendar day.

613.03 Placing and Accepting Wagers.

613.03A Permissible and Impermissible Wagers. Players may place a wager by marking a paper keno ticket constructed with 80 blocks containing the printed numbers 1 through 80, with their number selections. The marked ticket is known as an inside ticket, and must be presented to a keno writer. Players are permitted to place a wager through the operator’s digital-on-premises purchasing application or the operator’s tablet, where permitted by regulation.

613.03A(1) The inside ticket must contain an area known as the “bet block” which indicates the dollar amount of the wager. Inside tickets may also contain advertising if approved by the sponsoring county, city, or village. Inside tickets are not required to identify the name of the sponsoring county, city, or village.

613.03A(2) A player may also present an outside ticket for replay, place an oral wager, or place a wager by some other medium in order to accommodate the player and comply with the Americans with Disabilities Act of 1990.

613.03A(3) Quick pick wagers, where numbers are randomly selected by the keno computer system for the player, are permissible if the player has the option to reject the computer number selection.

613.03A(4) Wagers from a player not present at a licensed location of the keno lottery are not allowed.

613.03A(5) Wagers by telephone or any other means of electronic transmission are not allowed unless specifically authorized by the Act or these regulations.

613.03B Documenting the Wager. The keno writer must enter each number selected by the player along with the amount wagered, the number of games to be played, and any other ticket conditioning aspects of the wager. A wager is also documented properly when it is submitted and accepted before game close through the operator’s digital-on-premises purchasing application or the operator’s tablet, where permitted by regulation.

613.03B(1) If an inside ticket is used to place a wager, it must be retained by the keno writer at the writer station for as long as the county, city, village, or lottery operator requires.

613.03B(2) After a player has placed a wager, an outside ticket must be generated by the keno system and presented to the player. The information on the ticket required by Reg-35-613.03L must be recorded on the keno system transaction log.

613.03B(3) Preprogrammed keno tickets, default wager amounts, and using optical character

613.03C Advisory Statement. A statement advising players to check their tickets for accuracy, and stating the consequence of a ticket being generated in error and not corrected before the start of a game, must be legibly posted at each location where keno is played, printed on the outside ticket, or printed on the schedule of prize payouts. If an operator is using a digital-on-premises purchasing application or operator’s tablet, the same notice must be available on the application and tablet. The statement must include the requirement that all winnings are computed and paid according to the outside ticket, including a timeline for payment if winnings will not be paid out immediately.

613.03D Void Tickets. If an outside ticket is voided, the information pertaining to the voided wager must be entered by the keno writer into the keno system, and the system must log the transaction or a record of the void must be attached to the outside ticket to document the transaction. If an operator is using a digital-on-premises purchasing application or operator’s tablet, the application must inform the player of the process for voiding a ticket. If the application or operator’s tablet will void a ticket without a keno writer, all information outlined in Reg-35-613.03D must be documented. All voids must be initiated on premises.

613.03D(1) Void tickets which have not been issued and recorded by the keno system (manual voids) are not permissible, unless written procedures have been established by the county, city, village, or lottery operator regarding the circumstances under which a manual void ticket is permitted.

613.03D(2) The required record keeping for manual void tickets includes:

613.03D(2)(a) The outside ticket, if available, must have the word “VOID” written on it;

613.03D(2)(b) The keno writer’s signature;

613.03D(2)(c) Documentation of the refund of any wager; and

613.03D(2)(d) Documentation of the circumstances which required a manual void.

613.03E Unexpected Game Delays. If any of the lottery equipment breaks down prior to selecting the winning numbers and completion of the game will be delayed until the next business day, players will be refunded the amount wagered on any games not completed at the time they present their outside tickets. Operators using a digital-on-premises purchasing application or operator’s tablet must provide, through the application or operator’s tablet, a means to request a refund in this situation.

613.03F Closing the Game. Once the required time interval has elapsed, the game can be closed. A “close game” command must be entered on the keno system and the corresponding message displayed on all keno display boards, writer stations, and video display monitors. No outside tickets may be written or voided after a game has been closed and the winning number selection process has begun, except for tickets voided in accordance with Reg-35-613.03D. Outside tickets may be written or voided for future games after the current game has been closed.

613.03F(1) Controls must exist to prevent writing or voiding outside tickets for a game which has been closed. These controls must be identical for all satellite locations.

613.03F(2) Keno display boards or video display monitors used at satellite locations must have a countdown timer to warn players of the amount of time remaining before a game is closed.

613.03G Five-Minute Rule. At least five minutes must elapse between the random selection of winning numbers for each keno game. The five-minute interval is measured from game closing to game closing as recorded on the transaction log.

613.03H Prize Schedule. The potential payout for each different type of wager must be made known to the players prior to selecting numbers. This may be done by posting the potential payouts in a manner clearly visible to the players or through a printed schedule that is available at each location where keno is played. The requirements for progressive keno games are provided in Reg-35-613.09.

613.03I Wagering Limits. No outside ticket, including a way-ticket, may be purchased representing a wager of over $100. A multirace ticket, however, may be purchased for an amount over $100 if the wager for each game included in the ticket does not exceed $100.

613.03J Time Limit for Redemption. A statement indicating any time restriction for redeeming a winning outside ticket must be visibly posted at each location where keno is played or printed on the outside ticket or on the schedule of prize payouts.

613.03K Invalid Wins. Any outside ticket identified as a winning ticket by the keno system, which is subsequently determined by the county, city, village, or lottery operator to be a losing ticket or a winning ticket of a lesser amount, is not a valid claim in the original amount against the county, city, village, or lottery operator. If the outside ticket is actually a losing ticket, the claim is invalid. If the outside ticket is a win of a lesser amount than originally identified, the claim for the larger win is not valid, but the claim is valid for the verified winning amount. All these instances must be reported to the Department by the end of the next business day following the date of the determination.

613.03L Information Required on Each Ticket. Each outside ticket must contain the following information:

613.03L(1) The name of the sponsoring county, city, or village;

613.03L(2) The current day’s date and time;

613.03L(3) The numbers chosen by the player;

613.03L(4) The ticket serial number;

613.03L(5) The dollar amount and conditioning of the wager;

613.03L(6) When a location has multiple stations, the station number where the outside ticket was generated; or the operator’s digital-on-premises purchasing application or operator’s tablet used to purchase the ticket;

613.03L(7) A reference to the applicable pay tables where multiple pay tables are offered;

613.03L(8) For a quick pick ticket, a designation that it is a quick pick ticket, for example, QP;

613.03L(9) The game number. For a multirace ticket, the first game number and last game number; and

613.03L(10) For a replay ticket, the serial number of the ticket replayed.

613.03L(11) An outside ticket may contain additional information regarding game rules or instructions which a county, city, or village and the lottery operator have agreed upon. This information cannot contradict any provision of the Act or any regulation adopted pursuant to the Act.

613.03M Draw Ticket. If the number selection is made by a manual ball draw method using an electrically-operated blower device, a draw ticket must be prepared for each game by a licensed lottery worker who is not the licensed lottery worker calling the game numbers. Regardless of the method of selecting the winning numbers, the keno system must be capable of printing a draw ticket.

613.03N Winnings of $1,500 or More. Any ticket, whether a single race or a multirace ticket, with net winnings of $1,500 or more must be paid by check and not in cash. Wins of less than $1,500 or wins of any amount from a digital-on-premises ticket may be paid electronically.

613.03N(1) If multiple players are involved on the same winning ticket and the net winnings are $1,500 or more, net winnings must be issued to a single payee by check and not in cash.

613.03N(2) If the player requests, a portion not exceeding 10% of the winnings may be paid in cash.

613.04 Manual Ball Draw Procedures. When numbers are selected by a manual ball draw method using an electrically-operated blower device, selecting and verifying the winning numbers must:

613.04A The keno balls must be randomly selected by a licensed lottery worker, designated as the “caller,” who operates the keno ball blower and rabbit ears. The caller, or another licensed lottery worker, must enter the numbers of the keno balls randomly selected into the keno system which simultaneously displays the corresponding numbers on the keno display boards and video display monitors and, if applicable, through the digital-on-premises purchasing application or operator’s tablet as the game results. The keno system must document and record the following on the transaction log: the date; the game number; the time the game was opened and closed; the numbers which were drawn in chronological sequence; and the method of selecting the winning numbers.

613.04B In addition to the licensed lottery worker who calls the keno ball numbers, a different licensed lottery worker designated as the “marker” must manually record the keno ball numbers, as they are drawn, on a draw ticket.

613.04B(1) The number of the game being drawn must be recorded on the draw ticket and given to the keno manager. The keno manager must compare the winning numbers selected by the electrically-operated blower device with the numbers entered into the keno system and initial or sign the draw ticket as evidence of his or her review.

613.04B(2) After the keno manager confirms that the winning numbers were entered correctly into the keno system, the keno manager must enter the appropriate command into the system to confirm the validity of the winning numbers selected and compute the game results.

613.04B(2)(a) Game results must then be displayed as “official” or “results” on all keno display boards and video display monitors, as well as through the digital-on-premises purchasing application or operator’s tablet, if applicable.

613.04B(2)(b) If the keno manager determines an error occurred in entering the winning numbers into the keno system after the game results have been displayed as “official” or “results,” the keno manager must edit the ball draw as described below:

613.04B(2)(b)(i) Each winning number entered in error must be crossed out on the keno display boards or video display monitors and, if applicable, through the digital-on-premises purchasing application or operator’s tablet;

613.04B(2)(b)(ii) The corrected winning numbers must then be highlighted on the keno display boards or video display monitors and, if applicable, through the digital-on-premises purchasing application or operator’s tablet; and

613.04B(2)(b)(iii) All edited ball draws must be recorded on an exception log of the keno system, identifying the keno manager who edited the ball draw and made the corresponding changes.

613.04B(3) A minimum of three licensed lottery workers, one of whom is the keno manager, are required to perform the manual ball draw procedures.

613.04B(4) The Department may authorize alternative procedures for verifying a manual ball draw provided that a minimum of three licensed lottery workers perform the procedures. A county, city, village, or lottery operator desiring to deviate from the prescribed procedures must submit a written request to the Department seeking authorization to deviate from the prescribed procedures. The request must include a description of the alternative procedures proposed. The Department will review the request and issue its written determination to the county, city, village, or lottery operator.

613.04B(5) Each lottery operator is required to establish a written policy regarding the procedures to be followed when a keno ball breaks or cracks during the ball draw, or when a keno ball is inadvertently left in the throat or rabbit ears from the previous game.

613.04B(5)(a) The policy must be approved by the sponsoring county, city, or village and be posted conspicuously for the players or printed on the schedule of prize payouts.

613.04B(5)(b) The policy must include a requirement that when a ball draw irregularity is detected, it must be verbally announced at the main location and refunds must be offered to any player for amounts wagered on the game.

613.04B(5)(c) A copy of the approved policy must be filed with the Department prior to its use.

613.04C Video Recording Requirements. A camera must be used to videotape or digitally record (recording) all of the following prior to, during, and subsequent to the calling of a game, respectively:

613.04C(1) Empty rabbit ears or receptacle;

613.04C(2) Date, time, and game number;

613.04C(3) Throat of the rabbit ears and receptacle; and

613.04C(4) Full rabbit ears or receptacle holding the keno balls selected with the date, time, and game number. The picture of the rabbit ears or receptacle on the recording must provide a legible identification of the numbers on the keno balls drawn. If a split image screen is used in order to accomplish the required views, each track must be capable of being independently played in a full-screen format.

613.04D The game number referred to in Reg-35-613.04(C)(2) is not required to be recorded if it can be determined by comparing the date and time display on the recording to the date and time of the game recorded on the keno system transaction log.

613.04E Recordings must be retained for three months or until the time the keno compliance procedure relating to the review of the recordings is completed, whichever is later. Recording media may be reused once the keno compliance procedure has been completed.

613.04F The keno manager is required to inspect new and used keno balls prior to use at the beginning of each day. The keno balls must be cleaned regularly to insure proper operation of the ball draw equipment.

613.04F(1) Back-up keno ball inventories must be maintained in a locked storage cabinet to prevent unauthorized access.

613.04F(2) A county, city, village, or lottery operator must establish written procedures for changing keno ball sets and replacing damaged keno balls to ensure that all 80 numbered keno balls are in the receptacle and available for random selection. If games are conducted with less than the required 80 numbered keno balls or with duplicate keno balls in the receptacle, players must be offered a refund of the amount wagered for each affected game played upon presentation of the outside ticket.

613.05 Random Number Generator Selection Device Procedures. All random number generators must reside on a PROM or EPROM secured in the logic board of the computer, or otherwise digitally stored in a verifiable manner in the keno system. The numbers selected by the random number generator for each game must be stored in the keno system’s memory and be capable of being printed on a draw ticket with no manual input of the numbers required.

613.05A The use of a “black box” random number generator as a peripheral device to the keno system is permissible. A black box random number generator is subject to all regulatory requirements for a random number generator which resides in the keno system.

613.05B A camera system is not required if a random number generator approved by the Department is used for selecting winning numbers.

613.06 Verifying Winning Tickets. Winning outside tickets must be verified prior to the payout and paid in the following manner:

613.06A Procedures must be established to preclude paying outside tickets previously paid, unclaimed winning tickets after a specified period of time, voided tickets, and tickets which have not been issued.

613.06B The serial number, or a number indexed to the serial number, of an outside ticket presented for payment must be entered into the keno system by the keno writer and the payment amount generated by the system given to the player. Using an electronic bar code scanner to scan a bar code printed on an outside ticket which includes the serial number of the ticket is a permissible method of entering the ticket serial number into the keno system. The serial number of a digital-on-premises ticket may be automatically verified by the system without keno writer intervention and paid electronically provided all other requirements of this section are met, unless otherwise agreed to by the Department.

613.06C All payments must be supported by the outside ticket and a pay ticket generated by the keno system or an electronic record of the same, unless the Department has authorized the county, city, village, or sales outlet location to eliminate pay tickets.

613.06C(1) The Department may authorize the payment of winnings without an outside ticket when circumstances exist to warrant payment. A request for payment without an outside ticket must be submitted by the keno lottery operator in writing to the Department for approval. No payment will be authorized without the approval of the sponsoring county, city, or village.

613.06D Unless the Department has authorized the county, city, village, lottery operator, or sales outlet location to eliminate pay tickets, a manual report or exception log must be maintained to document any winnings paid on outside tickets which were not authorized by the keno system and are not supported by a pay ticket generated by the system.

613.06E Winning outside tickets of $1,500 to $2,999.99 require the approval of the lottery operator or keno manager. Evidence of this approval includes the keno manager’s signature on the pay ticket, or an alternative method approved by the Department. Nothing in this regulation precludes a county, city, village, lottery operator, or sales outlet location from requiring lottery operator or keno manager approval of winning tickets of less than $1,500.

613.06F Net winnings of $1,500 or more on a single keno game require that the player provide proper identification. Identification from a player account registration is considered proper identification for winnings on a digital-on-premises ticket and additional identity verification is not required if all information required to issue the player a Federal Form W-2G was collected at the time of registration.

613.06G Winning tickets of $3,000 or more require the approval of the lottery operator or a keno manager. This approval may be evidenced by the keno manager’s signature on the pay ticket or in another manner approved by the Department to document that:

613.06G(1) In the case of a manual ball draw method of selecting winning numbers, a review of the recording of rabbit ears or receptacle to verify the legitimacy of the draw and the accuracy of the draw ticket was performed;

613.06G(2) The winning outside ticket was compared to the transaction log or proof of win generated by the keno system; and

613.06G(3) The outside ticket was regraded using the payout schedule and draw information.

613.06H Winning tickets of $10,000 or more are subject to all of the requirements found in Reg-35-613.06G and notification of the win to a county, city, or village official or county, city, or village employee serving as the governing official designee. The notification must be made no later than the next business day following the day the outside ticket was verified as a winner by the keno system.

613.06I A county, city, village, or lottery operator cannot deviate from the winning ticket verification procedures prescribed in this regulation unless otherwise approved in writing by the Department.

613.07 Security Standards and Controls. Access to the area where the keno lottery equipment operates must be restricted to the lottery operator, its employees or agents, sales outlet location employees or agents, authorized equipment service personnel, and employees or agents of the sponsoring county, city, or village. Law enforcement officers or agents or representatives of the Department must be allowed access to any restricted keno areas upon showing official identification.

13.07A Access to the keno system must be adequately restricted.

613.07B The keno system processor and “black box” random number generator must be secured and accessible only to authorized personnel. Keno ball sets must be stored in a secure area. Any keys needed to access this area must be maintained only by management personnel of the lottery operator or sales outlet.

613.07C Keno number display boards and video display monitors and, if applicable, the digital-on-premises purchasing application or operator’s tablet must be inspected periodically throughout the day by keno personnel to ensure that game information is being displayed correctly.

613.07D The lottery operator or sales outlet location must:

613.07D(1) Assign the keno manager, authorized licensed lottery workers, and the manufacturer-distributor personnel computer system access codes or passwords which allow them to approve and perform specific functions on the keno system; and

613.07D(2) Assign each keno writer a personal identification number (PIN), to be used only by that keno writer to perform his or her duties.

613.07E Access to the pay tables and system configuration options is limited to keno managers, representatives of the lottery operator, or representatives of the manufacturer-distributor. An exception log must be produced by the keno system to document all access to the pay tables and system configuration options, as well as all occurrences of unauthorized attempts to access restricted functions on the system.

613.07E(1) Access codes or passwords must be changed periodically to prevent unauthorized personnel from performing restricted functions.

613.07E(2) Any revisions or modifications of the keno system software must be performed by an authorized representative of the licensed manufacturer-distributor. Changes to prize pay tables can only be made in the manner prescribed in Reg-35-614.05.

613.07E(3) All ticket processing, game results, pay information, or any other information required by these regulations to be entered on the transaction log may be kept on paper or on digital, electronic, magnetic, optical, or any other recording medium approved by the county, city, or village and the Department, so long as the transaction log remains capable of review and printing.

613.07E(3)(a) A procedure for making the transaction log available for keno compliance procedures must be submitted by the lottery operator, in writing, to the Department. The transaction log must be retained for a minimum of three years and be secured in an area other than the area where the keno game is conducted.

613.07E(3)(b) A copy of the transaction log must be forwarded to management personnel of the lottery operator and the sponsoring county, city, or village for use in the keno compliance procedures.

613.07E(4) A keno system which allows for copying game information to a medium other than paper must be designed so that copying is a required system function when running end-of-day reports. The system must notify the user if the copying function is not completed satisfactorily and require the user to continue performing the copy function until it is completed properly.

613.07F The power to access an operator’s digital-on-premises purchasing application or operator tablet’s internal administrative settings and controls must be limited to representatives of the lottery operator or representatives of the manufacturer-distributor.

613.08 Keno Tournaments and Leagues Prohibited. Keno tournaments, where multiple players pay an entry fee to play multiple keno games and where cash prizes are awarded from the pool of entry fees based on the player’s total score are prohibited. Keno leagues played in a similar fashion as keno tournaments are also prohibited.

613.09 Progressive Keno Games. Progressive keno games are keno games with a jackpot prize that increases if the jackpot has not been won in the previous game. The jackpot may increase by a predetermined percentage or amount as each game is played, each wager is made, or otherwise, in a manner approved by the Department. Progressive keno games are permitted if the information describing how the game will be conducted and any jackpot limitations have been previously filed by the lottery operator with, and approved in writing by, the Department.

613.09A Unless otherwise authorized in writing by the Department, the jackpot prize at the beginning of the day, any prize limits, and the amount the progressive jackpot is advanced must be visibly posted and made known to the players prior to the start of each game, including through any digital-on-premises purchasing application or operator’s tablet.

613.09B If two or more outside tickets are verified as jackpot winners, the full jackpot prize amount will be divided equally among the winning outside tickets.

613.09C The jackpot amount must be available to winning players by the end of the business day following the date that the winning transaction is verified. Verification must be completed no later than the third business day following the day the outside ticket is declared as a winner by the keno system.

613.09D The jackpot in a progressive keno game cannot be paid by annuity or any installment method. The jackpot may be insured by a county, city, village, or lottery operator if the Department has previously approved the arrangement in writing. Any premium expense incurred by the county, city, village, or lottery operator in insuring the jackpot is considered an expense of operating the lottery and is subject to the 14% expense limitation if paid for by the county, city, or village.

613.09E The progressive jackpot cannot be reduced to a lesser amount unless:

613.09E(1) A player wins the posted amount;

613.09E(2) An adjustment is necessary to prevent the posted amount from exceeding the published maximum amount of the progressive jackpot;

613.09E(3) There was a system malfunction. When this occurs, an explanation must be entered as part of the system record; or

613.09E(4) There is a player dispute as governed in Reg-35-613.09H.

613.09F Once a progressive jackpot amount is posted, that amount may not be decreased except as allowed by Reg-35-613.09E, and must remain until won or discontinued as provided in Reg-35-613.09G. The progressive jackpot amount is the responsibility of the county, city, or village if the operation of the progressive keno game ceases for any reason, including a change of lottery operator.

613.09G The Department may authorize a county, city, or village to discontinue a progressive keno game upon written request from the county, city, or village subject to the following requirements:

613.09G(1) The county, city, or village must conduct a public hearing on discontinuing its progressive keno game and discuss its intentions for using any accumulated progressive jackpot funds. If it is a joint lottery conducted pursuant to an interlocal cooperation agreement, the joint entity created pursuant to the agreement may conduct the public hearing in lieu of each county, city, or village which is a party to the agreement;

613.09G(1)(a) A copy of the public hearing notice must be posted in a visible location at each keno site; and

613.09G(1)(b) Once the public hearing has been held and the governing board of the county, city, village, or joint entity has reached a decision, a copy of the resolution that was adopted must be filed with the Department.

613.09G(2) The procedures specified in Reg-35-613.09G(1) do not apply to discontinuing a progressive jackpot which is not paid from a specific set-aside of lottery funds, and instead is paid from the overall prize fund.

613.09H If there is a player dispute over paying a progressive jackpot, the county, city, village, lottery operator, or sales outlet location (whoever is conducting the game) must:

613.09H(1) Reduce the progressive jackpot to its base amount and continue operating the game; and

613.09H(2) Deposit the disputed progressive jackpot amount into an escrow account until an investigation into the dispute by the Department has been completed and a decision is issued by the Department.

613.09I If a player dispute is resolved by the Department in favor of the county, city, village, lottery operator, or sales outlet location, the progressive jackpot must be returned to the accumulated amount at the time of the dispute, less the base figure amount.

613.10 Standards for Conduct at a Satellite Location. When keno is conducted at a satellite location, the following requirements apply:

613.10A A keno writer at a satellite location must enter each number selected by the player, the amount wagered, and the total numbers played into the writer station of the keno system, unless this process is completed through the operator’s digital-on-premises purchasing application or operator’s tablet. An outside ticket must be generated by the system and given back to the player, except in the case of a digital-on-premises ticket. Evidence of a valid digital-on-premises ticket that identifies the ticket’s unique serial number must be provided to the player through the operator’s digital-on-premises purchasing application or operator’s tablet.

613.10B Any inside ticket presented by the player must be kept by the keno writer at the satellite location for the period of time required by the county, city, village, or lottery operator, unless the operator can substitute similar digital records maintained for the same period of time.

613.10C When the game at the main location is closed, the game at the satellite location must simultaneously close.

613.10D At a satellite location, winning outside tickets for amounts up to $1,499.99 may be verified and paid by the keno writer, or where applicable verified and paid electronically.

Nothing in this regulation precludes a county, city, village, lottery operator, or sales outlet location from requiring lottery operator or keno manager approval of winning tickets of less than $1,500.

613.10D(1) Wins of $1,500 or more must be presented for payment at the main location of the keno game or the office of the lottery operator, unless the ticket is verified and paid electronically, or unless an alternative method of verification is approved by the Department. The same verification procedures must be applied to outside tickets purchased at both the satellite location and the main location.

613.10D(2) The Department may authorize a larger amount to be paid at a satellite location based upon a written request from the county, city, village, or lottery operator if all of the winning ticket verification procedures required by these regulations are followed. The request must include the exact procedures to be followed by the satellite location to insure compliance with the verification requirements in these regulations. If the request is made by a lottery operator, the approval of the county, city, or village is also required.

613.10E If reports are printed and produced from the keno system at the satellite location, they must be limited to the activity at that satellite location and cannot include information for the entire satellite configuration.

613.10F At a satellite location, the standards for game play, maintenance, checkout, and shift statistics must be the same as for the main location.

613.11 Prize Fund Requirements. Every county, city, village, or lottery operator conducting a lottery must have sufficient funds available to pay every winning ticket by the end of the business day following the date that the winning tickets are verified. Verification must be completed no later than the third business day following the day the outside ticket is declared a winner by the keno system. Prizes must be paid in full to the winning player and cannot be paid over a period of time or through an annuity. The prize funds must be insured or guaranteed by monies deposited into an insured account maintained by a financial institution, an irrevocable letter of credit issued by a financial institution, or other security approved in writing by the Department.

613.11A If an irrevocable letter of credit is used to secure the prize funds, a copy must be provided to the Department and is subject to the Department’s approval. An irrevocable letter of credit issued by the financial institution must name the county, city, or village as the beneficiary.

613.11B Prizes may be insured by a county, city, village, or lottery operator if the Department has previously approved the arrangement in writing. Any premium expense incurred by the county, city, village, or lottery operator is considered an expense of operating the lottery and is subject to the 14% expense limitation if paid for by the county, city, or village.

613.11C The county, city, or village must be able to draw on the insured deposit, irrevocable letter of credit, or insurance as needed. If the account, letter of credit, or insurance is drawn on and the remaining amount is less than the top prize offered, keno cannot resume play until the account, letter of credit, or insurance is replenished to an amount at least equal to the top prize offered.

613.11D If two or more outside tickets are verified as winning the jackpot prize on the same game, the full jackpot prize amount is divided equally among the winning tickets subject to the aggregate prize payout limit per game. The aggregate prize payout limit must be legibly posted at each keno location and printed on the schedule of prize payouts.

613.11E If two or more outside tickets are verified as winning the jackpot prizes in different games associated through an interlocal agreement or different games within the same county, city, or village, the full jackpot amount as well as other prizes may be apportioned among all the winning tickets. The amount apportioned among the winning tickets is subject to the aggregate prize payout limit applicable to all participating games for a given day. The aggregate prize payout limit must be legibly posted at each keno location and printed on the schedule of prize payouts.

613.11F All unclaimed prizes are the property of the county, city, or village. The total value of unclaimed prizes must be taken into account in computing the overall prize payout percentage of the keno activity.

613.12 Player Account. A lottery operator may allow participants to establish a player account to be used for lottery play. Such accounts must only be funded with cash, a debit card, the cash balance of a payment application, or a transfer from a deposit account at a financial institution. The player must apply for this account in person with a lottery worker who will confirm their identity unless an alternate method of establishing and maintaining player accounts has been approved by the Department. A participant must not deposit funds into any such account from a debit card transaction if the total amount of funds from all such debit card transactions in that calendar day would exceed $200. Players purchasing tickets through the operator’s digital-on-premises application or operator’s tablet must use a player account.

613.12A Funds must not be transferred between player accounts.

613.12B The operator must take reasonable steps to ensure that a player has only one account.

613.12C The operator must not profit from fees associated with opening, maintaining, or closing the account, nor are they permitted to profit from fees charged to the player to deposit or withdraw funds. Operators should take reasonable steps to provide a no-fee option for deposit and withdrawal of funds.

613.12D Operators must not limit the size of the withdrawal from a player account. The operator must take reasonable steps to ensure the identity of the player prior to completing the withdrawal of funds and set reasonable limits regarding hours in which deposits and withdrawals are available and regarding the timing in which fund transactions are considered settled and available for withdrawal.

613.12E Records pertaining to a player’s accounts, including deposits, withdrawals, wagers, and wins must be made available to the verified player upon request within a reasonable time frame at no charge. The operator may specify the manner in which this request is to be made.

613.12F Operators must take reasonable steps to ensure the security of players’ personal information and financial information associated with the account.

613.12G An account which has been inactive for more than five years is considered abandoned. Inactive means that the account holder has not made any deposits, withdrawn any money, nor placed any wager via the account. Accounts which are abandoned are not the property of the operator, the sponsoring community, or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act and all funds associated with the abandoned account must be referred to the Nebraska State Treasurer Unclaimed Property Division.

613.12H The operator will notify the player if their deposits will be comingled in a single bank account as described in Reg-35-613.12J, as well as providing the insurance limitations of said bank account.

613.12I The limitations contained in Reg-35-613.12 must be made known to the player when creating their player account.

613.12J Unless an alternate method of establishing and maintaining player accounts has been approved by the Department, the operator will establish a separate non-interest bearing bank account at a financial institution which will receive the deposits for the player accounts. No funds from any other source are permitted in this account. This account will only be used for the following purposes: transferring funds to and from the prize account for the community or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act, accepting deposits from players, placing wagers, receiving winnings to be credited to the player accounts, and be used to fund player account withdrawals. With the permission of each sponsoring community or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act, an operator who is licensed in more than one community may comingle the player account funds from multiple communities into a single bank account. The financial institution must insure deposits up to the standard limit required by the Federal Deposit Insurance Corporation (FDIC), and the operator will make clear to the community and those who have player accounts what the insurance limits are.

613.13 Digital-On-Premises Purchasing Application or Operator’s Tablet. A lottery operator may use digital-on-premises tickets sold via mobile device or operator’s tablet after completing construction and testing of a mobile application or operator’s tablet through an independent third-party laboratory approved by the Department, as well as obtaining the consent of the community. The operator must obtain the consent via resolution from the community’s governing authority or in the lottery operator agreement.

613.13A The lottery operator must file with the Department the address of each location where digital-on-premises tickets are sold.

613.13B Unless an alternate method of confirming regulatory compliance has been approved by the Department, a location will not be permitted to use a digital-on-premises purchasing application until a representative of the Department has inspected and tested the application at the location.

613.13C The lottery operator must use reasonable safeguards approved by the Department to ensure that digital-on-premises tickets are only accessible to individuals 19 years of age or older.

613.13D The lottery operator must submit controls, for approval by the Department, that include the following at the location of the lottery operator or the locations of its associated authorized sales outlets at which digital-on-premises tickets are sold:

613.13D(1) Any specific procedure and any technology partner used to fulfill the requirements set forth by the Department;

613.13D(2) Any location monitoring procedure to reasonably detect and dynamically monitor the location of a player attempting to purchase a digital-on-premises ticket for a keno game. The location procedures must be designed so that a player attempting to place a wager or void a ticket outside the permitted boundary is rejected and the player is notified. The permitted boundary must be established in such a manner that access is not regularly available away from the property on which the licensed premises is situated and such boundary is as closely matching to the actual or legal boundaries of the licensed premises as reasonably possible. Further controls may include but are not limited to: source of location data, how often the location is verified, events which trigger a check, listing of all data collected and length of time held, location fraud detection capabilities and response to such activity, and frequency of boundary checks;

613.13D(3) A process to prominently display and easily impose any limitation parameters relating to the purchase of a digital-on-premises ticket for a keno game;

613.13D(4) An easy and obvious method for a player to make a complaint and to enable the player to notify the Department if such complaint has not been or cannot be addressed by the lottery operator; and

613.13D(5) Any other specific controls as designated by the Department including but not limited to: preventing keno writers from playing on duty, length of time tickets are stored on the application, ensure purchases made are completed before the game closes, age verification, ticket identification (where the ticket was played), ticket verification, payment processes for the player, accounting processes for the location including how the end of day reconciliation of business will operate, fraudulent activity monitoring, and security of player information.

613.13E The Department must approve or deny the controls within thirty (30) days after submission. If denied, the Department must provide the reasons for denial and allow the lottery operator to resubmit revised controls.

613.13F The Department must be notified when updates to the application are made by the lottery operator. Changes made to the application regarding monitoring of player accounts, interactions with the premises’ location monitoring system, and other significant processes must be approved prior to implementation. Changes to the application which will fix issues, provide updates that do not impact functionality in a significant manner, or which are otherwise minor do not need approval prior to implementation.

REG-35-614 Keno Equipment Maintenance

614.01 An effective maintenance plan must be established to service keno equipment, including computer program updates, hardware servicing, and keno number selection equipment.

614.02 With the exception of routine maintenance, all keno equipment maintenance must be performed by persons other than the lottery operator and its employees. Routine maintenance shall include:

614.02A Cleaning of keno balls;

614.02B Clearing of ticket printer paper jams;

614.02C Changing printer heads and cutter bars; and

614.02D Changing paper tape, adding paper to the ticket printer or aligning the paper on the ticket printer.

614.03 Nonroutine maintenance must be performed by the manufacturer’s service personnel or other service personnel authorized by the manufacturer. Nonroutine maintenance shall include:

614.03A Software updates or modifications;

614.03B Removal or replacement of PROMS or EPROMS;

614.03C Removal or replacement of logic boards; and

614.03D Any other maintenance of a technical nature.

614.04 A manufacturer may service the keno equipment on a “pull and replacement basis.” Under such circumstances, a lottery operator or its employees would be allowed to remove a logic board, PROM or EPROM, and return it to the manufacturer for repair and exchange it for a replacement board, PROM or EPROM. Upon receipt and installation of the replacement board, PROM or EPROM, the lottery operator must submit a written report of the replacement to the Department within twenty-four hours. The report must include the serial number of the replacement board, PROM or EPROM. The lottery operator must maintain a written record of all access to the logic board area of the equipment. Such record shall include the date, the name of the person accessing the area, and the reason for any access.

614.05 If the computerized keno system allows the lottery operator to update or modify the prize pay tables, such updates may only be performed by the keno manager. Modification of the pay tables includes the pre-programming of special prize payouts conducted periodically by the lottery operator. Any time the pay tables are updated or modified, the lottery operator must notify the Department of the changes within twenty-four hours. The system must be capable of maintaining a log of all updates to the prize pay tables or a manual list must be retained by the lottery operator including the date, the name of the person updating the prize pay tables, and the changes made.

If updates or modifications to the prize pay tables require the entire replacement of PROMS or EPROMS, such updates may only be performed by the manufacturer’s service personnel, other service personnel authorized by the manufacturer, or on a “pull and replacement” basis as explained in Reg-35-614.04. The lottery operator must notify the Department of the changes within twenty-four hours.

614.06 A county, city, or village or lottery operator shall maintain a record of all nonroutine maintenance as identified in Reg-35-614.03 performed by the manufacturer’s service personnel or other personnel authorized by the manufacturer including equipment malfunctions and irregularities. Such record shall include the identification of any down time experienced in the operation of the lottery attributable to equipment malfunctions or irregularities. This information shall be available for inspection by the Department or the sponsoring county, city, or village upon request.

614.06A Irregularities with any number selection device (i.e., random number generator, electronic blower device) must be reported to the Department and the sponsoring county, city, or village immediately.

REG-35-615 Keno Checkout Standards

615.01 Keno Writer Banks.

615.01A Every lottery operator is accountable for the starting amount located in each keno writer's bank. Each keno writer bank must contain a starting amount established in writing by the lottery operator and maintained under lock and key.

615.01B As keno writers are assigned banks, they must count and verify that the bank contains the starting amount prior to beginning their shift. The amount must be verified by the keno writer coming on duty at the beginning of the next shift and by the keno manager. The arriving and departing keno writers or management personnel must verify the starting amount in the bank and prepare a checkout sheet containing the following information:

615.01B(1) Day and shift;

615.01B(2) Count of cash;

615.01B(3) Bank over/short;

615.01B(4) Bank starting amount; and

615.01B(5) The signature of the departing and arriving keno writers and management personnel.

615.01C When a keno writer is unable to pay a player's winnings from his or her bank, he or she may obtain cash from the keno manager's bank. The keno manager must enter the amount of fill and the keno writer's personal identification number (PIN) into the keno system. The keno system must generate a fill ticket which is verified and signed by both the keno writer and the keno manager. The fill is then credited to that particular keno writer who retains the completed fill ticket until the close of the shift or day when it is turned in with the keno writer's cash.

615.01C(1) If keno writer fills are not recorded on the keno system, the following procedure is required:

615.01C(1)(a) The keno writer notifies the keno manager that additional cash is needed in the keno writer's bank;

615.01C(1)(b) The keno manager completes a two-part "fill slip" with the date and total fill completed on the form;

615.01C(1)(c) The keno manager obtains the required cash and verifies the amount with the keno writer. Both the keno manager and keno writer sign the "fill slip"; and

615.01C(1)(d) The cash and one copy of the "fill slip" are given to the keno writer. The other copy is retained by the keno manager. At the end of the shift or day, the keno writer turns in the "fill slip" with the remaining cash in the keno writer's bank.

615.01D When a keno writer accumulates excess cash in his or her bank, he or she may turn in cash to the keno manager's bank. A cash turn-in slip must be prepared and signed by the keno writer and the keno manager. The cash turn-in is credited to that particular keno writer who retains the completed cash turn-in slip until the close of his or her shift when it is turned in with the keno writer's cash.

615.01E Each keno writer must segregate his or her starting amount bank from cash taken in during his or her shift. The excess cash, paid (if applicable), void, and fill tickets, and cash turn-in slips must be turned over to the keno manager at the end of the shift. The cash turn-in must be verified by the keno manager who must record the amount on the keno turn-in summary. In addition, each keno writer must sign in ink next to the corresponding entry on the keno daily summary.

615.01F The cash turn-in is listed on a cash turn-in slip. The keno manager places the cash and the cash turn-in slip in the keno manager's bank or transports the cash and cash turn-in slip along with the various keno reports and tickets to a secured area. The cash turn-in must be recorded.

615.01G As an alternative for sales outlet locations or satellite locations, the management personnel at the sales outlet location or satellite location may perform the keno writer checks required by this regulation.

615.01H During the hours that keno is conducted at a lottery operator location or sales outlet location, cash constituting the starting bank, cash receipts from the sale of keno tickets, and any fills must be segregated from all other revenue of the lottery operator location or sales outlet location.

615.02 Keno Manager's Bank.

615.02A If the lottery operator chooses to use a keno manager bank in addition to the keno writer's bank, the lottery operator is also responsible for the starting amount of the keno manager's bank. If a keno manager's bank is used, a checkout sheet must be prepared at the beginning of the day with the following information:

615.02A(1) Date and shift;

615.02A(2) Bank starting amount;

615.02A(3) Count of cash; and

615.02A(4) The signature of the keno manager.

615.02B The keno manager may need to order additional cash from the lottery operator to pay a large winning ticket. When this occurs, the keno manager enters the amount of the fill and his or her PIN into the keno system. A fill ticket must be generated which is verified and signed by both the keno manager and the lottery operator. The fill is then credited to the keno manager's bank and the completed fill ticket retained until it is turned in with the keno manager's cash at the end of the shift or the end of the day.

615.02B(1) If keno manager fills are not recorded on the keno system, the following procedure is required:

615.02B(1)(a) The keno manager notifies the lottery operator that additional cash is needed in the keno manager's bank;

615.02B(1)(b) The lottery operator completes a two-part "fill slip" with the date and total fill completed on the form;

615.02B(1)(c) The lottery operator obtains the required cash and verifies the amount with the keno manager. Both the lottery operator and keno manager sign the "fill slip"; and

615.02B(1)(d) The cash and one copy of the "fill slip" are given to the keno manager. The other copy is retained by the lottery operator. At the end of the shift or day, the keno manager turns in the "fill slip" with the remaining cash in the keno manager's bank.

615.02C If the keno manager changes during the day, the arriving and departing keno managers must verify the starting amount in the keno manager's bank and record the following information on the checkout sheet:

615.02C(1) Date and time;

615.02C(2) Bank starting amount;

615.02C(3) Count of cash;

615.02C(4) Total keno writer fills by the departing keno manager;

615.02C(5) Total cash turn-ins received by the departing keno manager;

615.02C(6) Total keno manager pays on winning tickets;

615.02C(7) Total keno manager fills by the lottery operator;

615.02C(8) Bank over and short; and

615.02C(9) The signatures of the departing and arriving keno managers.

615.03 End of Shift or End of Day Checkout.

615.03A Once the last game has been completed for a shift or for the day, the keno manager or the keno manager's designee, must perform the close of shift or day procedures on the keno system. The completed shift or day report must be recorded on the transaction log and show for each keno station or keno writer the following information:

615.03A(1) Date and time;

615.03A(2) Beginning cash balance;

615.03A(3) Total dollars wagered on tickets written;

615.03A(4) Total keno writer fills;

615.03A(5) Total keno writer pays on winning tickets;

615.03A(6) Total number and value of voided tickets;

615.03A(7) Total number and value of coupons redeemed;

615.03A(8) Total cash turn-in;

615.03A(9) Ending cash balance; and

615.03A(10) Net per station or keno writer.

615.03B If a keno manager's bank is used, a similar report must be recorded on the transaction log for the keno manager's bank showing the following information:

615.03B(1) Date and time;

615.03B(2) Beginning cash balance;

615.03B(3) Total keno writer fills;

615.03B(4) Total cash turn-in from keno writers;

615.03B(5) Total keno manager pays on winning tickets;

615.03B(6) Total keno manager bank fills;

615.03B(7) Ending cash balance; and

615.03B(8) Net per keno manager.

615.03C The information required in Reg-35-615.03B must be recorded on the transaction log.

615.03D A cash summary report (count sheet) must be prepared at the conclusion of the shift or the day on a form approved by the Department and must include the following information:

615.03D(1) Total value of voided tickets;

615.03D(2) Net write (total dollars wagered less the value of voided tickets);

615.03D(3) Total value of wins paid;

615.03D(4) Total hold (net write less wins paid);

615.03D(5) Total value of wins paid by check and the value of coupons redeemed;

615.03D(6) The calculated deposit amount and the actual amount deposited;

615.03D(7) The date of the deposit;

615.03D(8) The difference between the calculated deposit and the actual deposit, and an explanation of any overage or shortage;

615.03D(9) The value of unclaimed wins; and

615.03D(10) The signatures of all individuals who prepared the cash summary report.

615.03E The cash turn-in for the shift or day must be deposited into a bank account of the county, city, village, or the lottery operator five (5) business days following the day the cash was collected. Keno funds must be separately stated on a deposit slip or otherwise documented for each separate day of gaming and must be clearly identified as keno funds. At the option of the lottery operator, a sales outlet location or satellite location may directly deposit the cash into the bank account of the county, city, village, the lottery operator, or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act. This rule may be referred to as the “5-Day Rule.”

615.03E(1) For purposes of this regulation, cash collected from midnight until such time as keno must no longer be conducted as established in Reg-35-613.02D will be considered collected on the most previous calendar day.

615.04 Duty to Report Late Deposits.

615.04A It is the operator’s duty to report to the Department and the sponsoring county, city, village, or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act each deposit that violates the 5-Day Rule within one week of violation.

615.04B The report must contain the following information:

615.04B(1) Operator’s name;

615.04B(2) Name of sponsoring community;

615.04B(3) Name of sales outlet location whose deposit violated the 5-Day Rule;

615.04B(4) Dates associated with the violation, including the date of gaming for the late deposit, the date the deposit was due under the regulations, and the actual date the funds were deposited;

615.04B(5) Amount of expected deposit for each violation, if known; and

615.04B(6) An explanation for each violation, if known.

615.04C This report must be e-mailed to keno.deposits@nebraska.gov. The report must also be emailed to the lottery worker or an otherwise agreed to individual for the sponsoring county, city, village, or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act.

615.05 An operator must not deviate from the procedures prescribed in this regulation unless otherwise approved in writing by the Department.

615.06 Player Account Deposits. If a lottery operator chooses to use player accounts and the location will allow the player to deposit money, in a form allowed by statute and regulation, via the keno writer, the lottery operator will first provide specific controls to be approved by the Department on how it will ensure the money is deposited in the correct bank account, credited to the correct player, how it will do so securely, and how the transaction will be documented clearly to allow for auditing by the community and/or Department. Upon approval of controls, training must be done in accordance with Reg-35-605.03.

REG-35-616 Keno Compliance Procedures

616.01 On an annual basis, a county, city, or village shall, at a minimum, perform the compliance procedures prescribed by the Department of its keno lottery activity. The compliance procedures shall cover the fiscal year of the county, city, or village unless otherwise authorized by the Department.

616.01A In the case of a joint lottery conducted pursuant to an interlocal cooperation agreement as provided for in Neb. Rev. Stat. § 9-625, the compliance procedures shall be performed by each county, city or village which is a party to the agreement and cover the fiscal year of each such county, city, or village or be performed by any joint entity created pursuant to the agreement on behalf of each such county, city, or village and cover the fiscal year of such entity.

616.01B The keno compliance procedures required by Reg-35-616.01 through 35-616.03 are the responsibility of the county, city, or village and shall be performed by the county, city, or village or by a person which has contracted with the county, city, or village.

616.01B(1) In the case of a joint lottery conducted pursuant to an interlocal cooperation agreement, the keno compliance procedures may be performed by a joint entity created pursuant to the agreement or by a person which has contracted with such joint entity.

616.01C The lottery operator shall not perform the compliance procedures nor shall the lottery operator contract for the performance of the procedures on behalf of the county, city, or village.

616.01C(1) In the case of a joint lottery conducted pursuant to an interlocal cooperation agreement, the lottery operator shall not perform the compliance procedures nor shall the lottery operator contract for the performance of the procedures on behalf of any county, city, or village which is a party to the agreement or on behalf of any joint entity created pursuant to the agreement.

616.01D Any costs incurred by a county, city, or village in the performance of the annual compliance procedures shall be considered an audit and legal expense of operating the lottery as defined in Neb. Rev. Stat. § 9-629(4).

616.01E A county, city, or village or, in the case of a joint lottery, any joint entity created pursuant to an interlocal cooperation agreement may require a lottery operator to pay for any costs incurred in the performance of the annual compliance procedures.

616.02 Such analysis shall be performed in accordance with the compliance procedures established by the Department unless otherwise authorized by the Department. A county, city, or village may submit a written request to the Department to obtain authorization to deviate from the compliance procedures prescribed by the Department. Such request shall include a description of the alternative procedures proposed.

616.02A In the case of a joint lottery conducted pursuant to an interlocal cooperation agreement, a joint entity created pursuant to the agreement may submit the request on behalf of each county, city, or village which is a party to the agreement and desires to deviate from the compliance procedures prescribed by the Department. Such request shall include a description of the alternative procedures proposed.

616.02B Documentation such as a log, checklist, or other similar materials shall be maintained evidencing the performance of all keno compliance procedures.

616.03 Management personnel from both the county, city, or village and the lottery operator shall review keno compliance exceptions, and shall perform and document investigations into unresolved exceptions. A report outlining the findings from the performance of the compliance procedures or alternative procedures approved by the Department shall be submitted by the county, city, or village to the Department within 90 days of the end of the fiscal year of the county, city, or village. In the event a county, city, or village cancels its license or allows such license to expire prior to the end of the reporting period, a final report shall be filed with the Department within 90 days of the date the license was canceled or expired.

616.03A In the case of a joint lottery conducted pursuant to an interlocal cooperation agreement, any joint entity created pursuant to the agreement and the lottery operator shall review keno compliance exceptions, and shall perform and document investigations into any unresolved exceptions. The joint entity may submit the report outlining the findings from the performance of the compliance procedures or alternative procedures approved by the Department. The report shall be filed with the Department within 90 days of the end of the fiscal year of the joint entity. A copy of the report shall be provided to each county, city, or village which is a party to the agreement. In the event any county, city, or village which is a party to the agreement cancels its license or allows such license to expire prior to the end of the reporting period of the joint entity, a final report for such county, city, or village shall be filed with the Department within 90 days of the date the license was canceled or expired.

REG-35-617 Lottery Equipment

617.01 A manufacturer-distributor shall not offer or market in Nebraska any type of lottery equipment for use in a lottery conducted pursuant to the Nebraska County and City Lottery Act unless it has been approved by the Department. Approval of lottery equipment will be based upon, but not be limited to, its conformance with the requirements contained in the Nebraska County and City Lottery Act, County and City Lottery Regulations, and test criteria established by the Department.

617.01A Lottery equipment subject to approval includes all proprietary devices, machines, and parts used in the manufacture or maintenance of equipment which is used in and is an integral part of the conduct of the lottery. Lottery equipment does not include any associated equipment, that is, all proprietary devices, machines, and parts which do not directly affect the outcome of the lottery or are not an integral part of any system that monitors the operation of the lottery.

617.01A(1) For the purpose of this regulation, lottery equipment includes, but is not limited to:

617.01A(1)(a) Keno balls;

617.01A(1)(b) Keno ball selection devices including electrically operated blower machines, automated ball draw systems, and other electronic selection devices;

617.01A(1)(c) Random number generators (internal and external); and

617.01A(1)(d) Keno systems.

617.01A(2) For the purpose of this regulation, lottery equipment does not include, but is not limited to:

617.01A(2)(a) Keno display boards and monitors;

617.01A(2)(b) Rabbit ears used in conjunction with electrically operated blower machines;

617.01A(2)(c) Magnetic, electronic, and digital storage media (including, but not limited to, floppy disks, magnetic tape, CD-ROM, USB flash drives) and other supply items used with the lottery equipment which do not directly affect the outcome of the game;

617.01A(2)(d) Video and digital recording equipment required for ball draw methods of winning number selection; and

617.01A(2)(e) Security cameras and systems.

617.01B The Department shall have the authority to request the testing and approval of any lottery equipment at any time if deemed necessary in order to insure fairness to the public and maintain the integrity of the lottery activity. This includes any equipment previously designated by this regulation to be excluded from the definition of lottery equipment.

617.01C A manufacturer of lottery equipment is responsible for obtaining approval of lottery equipment for use in Nebraska. Lottery equipment may not be submitted for approval until a manufacturer-distributor’s license has been obtained from the Department. Any sole proprietorship, partnership, limited liability company, or corporation which has obtained a manufacturer-distributor’s license who only distributes lottery equipment is not required to apply for and obtain approval of lottery equipment. However, such licensee must verify that the necessary approvals have been obtained by the manufacturer before such equipment can be marketed in Nebraska. Lottery equipment verification shall be requested in writing from the Department.

617.01D The Department may require that the manufacturer-distributor use the services of an independent testing laboratory which has contracted with the Department to test and examine lottery equipment.

617.01E The costs of any testing, examination, and analysis of lottery equipment, including the time and material required and any special testing equipment needed, shall be the responsibility of the manufacturer-distributor seeking approval of the lottery equipment.

617.02 Requests for approval of lottery equipment must be made and processed in such manner and using such forms as the Department may prescribe. A separate request shall be submitted by the manufacturer-distributor to the Department or its independent testing laboratory for each type or system of lottery equipment to be marketed in Nebraska. Such request shall be on company letterhead and include, at a minimum, the following:

617.02A The name and complete address of the manufacturer-distributor seeking approval of the lottery equipment;

617.02B The manufacturer-distributor’s Nebraska Identification Number and license number issued by the Department;

617.02C The name, title, and telephone number of an employee of the manufacturer-distributor who will serve as the main point of contact for the Department during evaluation of the lottery equipment and who is authorized to discuss the lottery equipment with the Department or its independent testing laboratory;

617.02D The items requested for certification. In the case of software, the manufacturer-distributor shall include identification numbers and revision levels, if applicable. In the case of proprietary hardware, the manufacturer-distributor shall indicate the manufacturer, model, and part and revision number of the associated components of hardware.

617.02E Unless otherwise authorized by the Department or its independent testing laboratory, one working model of the machine and associated equipment transported to the location designated for testing, examination, and analysis. Each item of lottery equipment supplied by a manufacturer-distributor to a lottery location in Nebraska shall be functionally identical to the equipment tested and certified;

617.02F The complete address of other non-Nebraska locations where the equipment is currently in use or is installed;

617.02G If deemed necessary by the Department or its independent testing laboratory, each submission of hardware shall contain the following, if applicable:

617.02G(1) Server, Database, Front End Controller, and Ancillary Stations to include but not limited to: Writer Station functionality; Callers Desk/Ball Draw functionality; System Configuration Parameters functionality; and Accounting/Reporting functionality;

617.02G(2) Monitors, keyboards, mouse, printers, etc., to support the items listed above;

617.02G(3) A supply of blank outside ticket stock to facilitate testing;

617.02G(4) Uninterruptible Power Supply (UPS) for critical components;

617.02G(5) All accompanying technical documents, manuals, and schematics shall be submitted. In addition, the following items shall be provided:

617.02G(5)(a) If applicable, all UL, CSA, EC, AS3100, etc., or equivalent certification. This certification information may be supplied at a later date;

617.02G(5)(b) Any other proprietary equipment that may be used in the field in conjunction with the submission, if necessary to test the requirements set forth;

617.02G(5)(c) Accompanying software; and

617.02G(5)(d) If the manufacturer-distributor has specialized equipment and/or software which is needed by the test laboratory to test the submitted system, such as load/game simulators or test data files, then the specialized equipment and/or software and all appropriate operation and user manuals for the equipment and/or software shall be included with the submission.

617.02G(6) Such other information deemed necessary by the Department.

617.02H If deemed necessary by the Department or its independent testing laboratory, the following software documentation, if applicable:

617.02H(1) A complete, comprehensive, and technically accurate description and explanation in both technical and layman’s terms of the manner in which the software operates;

617.02H(2) Two sets of all EPROMs, CD-ROMs, or other storage media which contain identical contents. This includes all program executables, system component firmware, bin files, etc.;

617.02H(3) Source Code, a Link Map, and Symbol Table for all primary software executables. In addition, if requested, explanation of all non-volatile RAM on any system device with the non-volatile RAM locations described. The following items shall be contained within all submitted source code or related modules:

617.02H(3)(a) Module Name;

617.02H(3)(b) Brief description of module function; and

617.02H(3)(c) Edit History, including who modified it, when, and why. All source code submitted shall be commented in an informative and useful manner. All source code submitted shall be correct, complete, and able to be compiled.

617.02H(4) All user manuals in both hard and soft copy format to include a general overview of the system from a component level, software and hardware setup and integration, and system block diagrams and flow charts for the communication program, if required;

617.02H(5) If not included in the user manuals, a connectivity manual for all associated peripheral devices or remote sales or monitoring units;

617.02H(6) If not included in the user manuals, provide example reports for each standard report capable of being generated on the system with a formula summary detailing all reporting calculations including data types involved, mathematical operations performed, and field limit;

617.02H(7) If not included in the user manuals, a list of all supported communication protocols specifying version, if applicable;

617.02H(8) If utilizing a software verification algorithm, provide a description of the algorithm, theoretical basis of the algorithm, results of any analyses or tests to demonstrate that the algorithm is suitable for the intended application, rules for selection of algorithm coefficients or “seeds,” and means of setting the algorithm coefficients or “seeds;”

617.02H(9) On the primary system software components submitted and subsequently placed in the field, each program shall be uniquely identified and either display version information at all times or utilize a user accessible function.

For EPROM based firmware, the identification label shall be placed over the UV window to avoid erasure or alteration of the program.

617.02H(10) Where a system requires the use of defined user roles with associated passwords or personal identification numbers (PIN), a default list of all users and passwords or PINs must be submitted, including a method to access the database.

617.02I A description of all testing criteria, if performed, and the results of the tests for the following:

617.02I(1) Random number generator;

617.02I(2) Electromechanical interference;

617.02I(3) Radio frequency interference;

617.02I(4) FCC standards;

617.02I(5) A.C. line noise;

617.02I(6) Static electricity; and

617.02I(7) Extreme temperature conditions.

617.03 The testing, examination, and analysis of lottery equipment may include entire dismantling of the equipment and may result in damage or destruction to one or more systems or components of the equipment. Once submitted, the lottery equipment may not be returned to the manufacturer-distributor unless otherwise authorized by the Department.

617.04 Upon the completion of the testing, examination, and analysis of the lottery equipment, the Department or its independent testing laboratory shall provide the manufacturer-distributor with a report containing the findings, conclusions, and results of the tests. The report may contain recommendations for modifications to bring the lottery equipment into compliance with statutory and regulatory requirements. Prior to approving any lottery equipment, the Department may require a field test of the equipment for a period of up to 60 days. The equipment shall be field tested in a location in Nebraska where an approved and licensed lottery activity is being conducted. During the field test, the manufacturer-distributor shall not make any modifications to the lottery equipment unless previously approved by the Department.

617.04A The Department may order the termination of the test period, if it is determined that the manufacturer-distributor or the lottery location has not complied with the terms and conditions of the field testing procedure or the lottery equipment fails to meet the performance standards contained in these regulations.

617.04B If the test period is terminated due to the lottery location’s failure to comply with the terms and conditions of the field testing procedure, the Department may order the test to be conducted at another lottery location.

617.04C A manufacturer-distributor may object to the termination of test period by filing a written objection with the Department. The filing of an objection shall not stay the termination of the test. If the Department fails to order the resumption of the field test within 60 days of the written objection, the objection will be deemed denied. If the Department sustains the objection, the field test may be resumed under terms approved or required by the Department.

617.05 Final approval or disapproval of the lottery equipment shall be made by the Department either upon the completion of the testing, examination, and analysis of the equipment by the Department or its independent testing laboratory or upon the completion of the field test, if required. Such determination shall be in writing and state the reasons for any disapproval. A manufacturer-distributor may appeal a disapproval determination of the Department provided such appeal is in writing and is filed with the Department within 30 days of the service of notice to the manufacturer-distributor of the Department’s disapproval of the lottery equipment. The appeal shall set forth the basis for reconsideration of the disapproval including any applicable statutory or regulatory cites in support of reconsideration.

617.06 A manufacturer-distributor may not change the operational functions of previously approved lottery equipment for use in Nebraska unless the following conditions are met:

617.06A A request for modification to existing lottery equipment is made, on company letterhead, to the Department or its independent testing laboratory that contains information relating to the type of change, reason for change, and all documentation required in Reg-35-617.02 unless such documentation has not changed.

617.06A(1) Modifications to previously approved hardware shall include:

617.06A(1)(a) Identification of the individual items being submitted (including part number);

617.06A(1)(b) A complete set of schematics, diagrams, data sheets, etc., describing the modification along with the reason for the change(s) for any manufacturer-distributor designed and built component; and

617.06A(1)(c) The updated or new hardware, a description and the method of connection to the original system or hardware components.

617.06A(2) Modifications to previously approved software shall include a description of the software change(s) and modules affected, and new source code for the entire program, if applicable.

617.06B In emergency cases, when a change is deemed necessary to prevent cheating or malfunction, temporary verbal approval may be requested prior to submitting a formal request for approval of a modification to existing lottery equipment. Any temporary approval must be followed within 15 days by a formal written request noting that temporary approval was given and include all documentation required in Reg-35-617.02.

617.06C All regulatory requirements that apply to the initial approval of lottery equipment shall also apply to a request for approval of a modification to existing lottery equipment unless waived in writing by the Department. The Department may also require a field test of any modification to existing lottery equipment in the same manner as may be required for an initial approval of lottery equipment.

617.06D The Department may authorize a field test of modifications to previously approved lottery equipment in advance of formal testing by its independent testing laboratory to determine whether a proposed modification resolves a problem intended to be corrected by the modification. The Department shall specify in its authorization the location(s) to be included in the field test and the duration of the field test. Upon satisfactory completion of the field test, the modification shall be submitted to the independent testing laboratory for formal testing and approval.

617.07 All lottery equipment placed in a lottery location must conform to the exact specifications of the lottery equipment tested and approved by the Department. Prior to the installation of any lottery equipment in a lottery establishment, the manufacturer-distributor shall provide the Department the following:

617.07A The serial number(s) of the lottery equipment to be installed;

617.07B The model number(s) of the lottery equipment to be installed;

617.07C The location(s) of the lottery establishment(s) where the lottery equipment will be installed; and

617.07D With respect to software, the version and release number.

617.08 A manufacturer-distributor shall provide similar information for all associated lottery equipment installed at a lottery location even though such equipment may not be subject to testing and approval by the Department.

617.09 Any replacements of lottery equipment at a lottery location shall be communicated to the Department by the manufacturer-distributor or lottery operator. Verbal notice shall be given to the Department within 24 hours of the installation. Written confirmation shall be provided within ten days of the installation and include the information required in Reg-35-617.07 and an explanation of the reason(s) for replacement of the lottery equipment.

617.10 A manufacturer-distributor or its authorized service personnel shall not alter the operation of approved and installed lottery equipment and shall maintain the equipment in the manner and condition approved by the Department. The manufacturer-distributor or its authorized service personnel shall maintain a record of all nonroutine maintenance of the lottery equipment and any required replacement parts. This record may be requested by the Department at any time. For the purpose of this regulation, the definition of nonroutine maintenance in Reg-35-614.03 shall apply.

617.11 The Department shall have discretionary authority to conditionally approve lottery equipment subject to the following:

617.11A Final approval of the lottery equipment is contingent upon the satisfactory testing, examination, and analysis of the equipment as set forth in Reg-35-617.02.

617.11B Conditional or final approval may be withdrawn by the Department upon a determination that the lottery equipment does not conform to the statutory and regulatory requirements for lottery equipment and test criteria established by the Department, including new or revised requirements that differ from those in effect at the time conditional or final approval was granted.

617.11C Conditional approval may be granted only upon receipt by the Department or its independent testing laboratory of the information prescribed in Reg-35-617.02. No business other than a licensed manufacturer-distributor may request conditional approval of lottery equipment.

617.12 If the Department subsequently determines that lottery equipment previously granted conditional approval does not meet the statutory and regulatory requirements, the manufacturer-distributor shall immediately, upon receipt of the Department’s notice of disapproval, remove the lottery equipment from any and all lottery locations wherein such equipment has been installed.

617.12A If new rules are adopted which cause previously approved or conditionally approved equipment to no longer be in compliance with statutory and regulatory requirements, the Department may allow up to 120 days for the manufacturer-distributor to modify the equipment and bring the equipment into compliance. Under these circumstances, the Department shall have discretionary authority to allow the continued use of the lottery equipment while such modifications are being made.

617.12A(1) Notwithstanding the requirements of Reg-35-617.12A, any lottery equipment which has been approved for use in Nebraska prior to the effective date of these regulations and which is no longer in compliance with the statutory and regulatory requirements for lottery equipment or the test criteria established by the Department may, with the approval of the Department, continue to be used until such time as a modification is otherwise required by the manufacturer-distributor. In conjunction with such modification, the manufacturer-distributor shall include all technical changes identified by the Department which are necessary in order for the lottery equipment to be compliant.

617.13 Technical Standards for Lottery Equipment.

617.13A Hardware Requirements.

617.13A(1) All electrical and mechanical parts and design principles shall follow acceptable industrial codes and standards in both design and manufacture.

617.13A(2) Logic boards and software EPROMs must be in a locked or sealed area within the machine, or in a separate machine. No access to this area is allowed by individuals other than the manufacturer-distributor’s service personnel, other service personnel authorized by the manufacturer-distributor, or as provided for in Reg-35-614.04. Any unauthorized tampering or entrance into the logic area is prohibited.

617.13A(3) All EPROMs must have unique serial numbers that may be used to identify the EPROM for approval and inspection purposes. All logic boards must have unique serial numbers or model numbers for approval or inspection purposes.

617.13A(4) A machine must have a nonremovable identification label externally attached to the machine which shall include the name of the manufacturer-distributor, the serial number of the machine, the model or make of the machine, and any other information required by the Department.

617.13B Safety Requirements.

617.13B(1) Lottery equipment must not present a physical, mechanical, electrical, or fire hazard when used in its intended mode of operation. The device must be designed in such a manner that the operator or public is not exposed to any safety hazards.

617.13C Machine Protection and Integrity.

617.13C(1) A surge protector that feeds all power to the equipment must be installed. A uninterruptible power supply (UPS) must also be installed to insure the retention of all game data during power fluctuations and loss. The UPS must be in a state of charge during normal operation of the equipment.

617.13C(2) The operation of the lottery equipment must be unaffected by influences from outside including, but not limited to, electro-magnetic interference, electro-static interference, and radio frequency interference.

617.13C(3) All computer functions and programs must be secured in a locked and protective housing.

617.13C(4) The design of the lottery equipment shall ensure that there are no readily accessible game function related points which would allow any input and that there is no access to input or output circuits unless it is necessary for the proper operation of the equipment. No switches or other controlling devices may be added to the machine that would cause the machine to operate in a manner other than in which it is designed to play.

617.13C(5) The random number generator and random selection process must be impervious to influences from outside the device including, but not limited to, electro-magnetic interference, electro-static interference, and radio frequency interference. The lottery equipment must use appropriate communication protocols to protect the random number generator and random selection process from influence by associated equipment which is conducting data communications with the lottery equipment.

617.13C(5)(a) Lottery equipment which is used in a satellite configuration with on-line communications capability between the main location and satellite locations must include appropriate communication protocols to safeguard the integrity of the information transmitted between sites, prevent unauthorized interception and use of transmitted data, and access to the computer and computer software via electronic communications equipment. Encryption systems, message authentication, and network access control systems are methods of protecting transmitted data. An application for approval of lottery equipment shall include a complete, comprehensive, and technically accurate description and explanation in both technical and layman’s terms of the manner in which the system communicates between the main location and the satellite locations.

617.13C(6) Lottery equipment must be capable of detecting and recording errors in the system such as a disk drive error or a communications problem including date and time of each occurrence. Lottery equipment must be capable of continuing the current game with all current game features after a machine malfunction or communication error is cleared and corrected.

617.13D Software Requirements.

617.13D(1) The logic of the hardware or software may not interfere with the approved random number generator software.

617.13D(2) Machine programs shall be capable of detecting corruption and shall provide an error message due to failure of the program storage media and cause the machine to cease play until corrected.

617.13D(3) All programs residing in the equipment must be contained in a storage media which is not alterable through any use of the circuitry or programming of the machine itself.

617.13E Retention of Game Data.

617.13E(1) Lottery equipment shall be capable of retaining the information required in Reg-35-613, 35-615, and 35-622. This data may be retained electronically or mechanically or any combination thereof.

617.13E(2) No lottery equipment shall have a mechanism whereby an error will cause the game data to automatically clear. Game data must be maintained at all times, regardless of whether the machine is being supplied with power.

617.13E(3) Game data must be stored in such a way as to prevent loss of the data when replacing parts or modules during normal maintenance.

617.13E(4) All keno systems shall incorporate the use of fault tolerant technology or an alternative method approved by the Department to insure the retention of game data in the event of hard drive failure or network failure.

617.13F Random Number Generator.

617.13F(1) If number selection is by random number generator, each possible combination of numbers which produce winning or losing game outcomes must be available for random selection at the initiation of each game. The random selection process must not produce any patterns of game outcomes, or be dependent upon any previous number selections or game outcomes, the amount wagered, or upon the style or method of play. At a minimum, the random values produced by the random number generator shall pass the 95 percent confidence level for the following tests:

617.13F(2) Each number position must satisfy the 95 percent confidence level using the standard chi-squared analysis. “Chi-squared analysis” is the sum of the squares of the difference between the expected result and the observed result. “Number position” means first number drawn, second number drawn in sequential order, up to the 20th number drawn.

617.13F(3) Each number position does not produce a significant statistic with regard to producing patterns of occurrences. Each number position will be considered random if it meets the 95 percent confidence level with regard to the “runs test” or any similar pattern testing statistic. The “runs test” is a mathematical statistic that determines the existence of recurring patterns within a set of data.

617.13F(4) Each number position is independently chosen without regard to any other number drawn within that game play. This test is the “correlation test.” Each pair of number positions is considered random if the pair meets the 95 percent confidence level using standard correlation analysis.

617.13F(5) Each number position is independently chosen without reference to the same number position in the previous game. This test is the “serial correlation test.” Each number position is considered random if it meets the 95 percent confidence level using the standard serial correlation analysis.

617.13G Printer.

617.13G(1) The numbers that the player selects shall be displayed on a printed ticket. The ticket must display all of the information required in Reg-35-613.

617.13G(2) Printer mechanisms shall have a paper sensing device that upon sensing a “paper low” condition will allow the printer to finish printing the ticket and then prevent further ticket writing.

617.13G(3) A keno system must recognize a printer power loss occurrence and cease play until power has been restored to the printer and the printer is capable of producing a valid ticket.

617.13G(4) Printed game data or shift data must be printed in ink and on paper stock that will remain legible throughout the retention period required by the Department. The use of thermal printers is permissible subject to the same requirements for record retention.

617.13H Keno Balls.

617.13H(1) If keno balls are used for number selection, two entire sets of the balls shall be submitted to the Department by the manufacturer-distributor for testing. All keno balls shall be essentially the same in size, shape, weight, balance, and all other characteristics so that at all times during the number selection process, each ball possesses the capacity for equal agitation with any other ball within the receptacle.

REG-35-618 Sales Outlet Locations

618.01 Any individual, sole proprietorship, partnership, limited liability company, corporation, nonprofit organization, or nonprofit corporation that has contracted with a lottery operator to allow a lottery to be conducted at their location on behalf of a county, city, or village must apply for and obtain a sales outlet location license from the Department. A sales outlet location license is required for a satellite location which is connected to the main location and an independent location running a separate lottery. This includes any business which only provides space to the county, city, village, or lottery operator for a satellite location or an independent location, even if the leased space is only a portion of the business location and is staffed by the county, city, village, or lottery operator.

618.01A In the case of a joint lottery conducted pursuant to an interlocal cooperation agreement in which each county, city, or village operates an independent game location, a sales outlet location license is required of each business location for the county, city, or village in which the independent game is located.

618.01B In the case of a joint lottery conducted pursuant to an interlocal cooperation agreement in which each county, city, or village operates a satellite location, a sales outlet location license is required of each business location for each county, city, or village included in the joint lottery activity.

618.01C If a lottery operator leases a portion of a business location to operate keno as a satellite location or an independent location, the business location must obtain a sales outlet location license. Notwithstanding the provisions of this regulation, any individual, sole proprietorship, partnership, limited liability company, corporation, nonprofit organization, or nonprofit corporation which leases space to a lottery operator to allow a lottery to be conducted at their location on behalf of a county, city, or village whose only business involvement at the location is a landlord and tenant relationship with the lottery operator is not required to apply for and obtain a sales outlet location license from the Department.

618.02 Although the lottery operator has overall responsibility for the daily operation of the lottery, many of the specific functions or tasks associated with the lottery are often performed by the sales outlet location. These functions or tasks may include, but are not limited to, maintenance of the lottery location, staffing, record keeping, conduct of the lottery, prize payments to winners, and providing or leasing space to the lottery operator, all as specified in the written agreement between the lottery operator and the sales outlet location.

618.02A A sales outlet location is selected by the lottery operator to conduct the lottery on behalf of the county, city, or village. A written contract commonly referred to as a site location agreement or location lease is executed by the lottery operator and the sales outlet location setting forth the obligations and responsibilities of both parties.

618.02B The sales outlet location must also be approved by the governing body of the county, city, or village in accordance with the county, city, or village’s previously adopted sales outlet location qualification standards. The license is unique to the individuals involved in the location and the county, city, or village’s approval is to be based on the individual owners and/or officers, not solely the address or trade name of the location.

618.02B(1) The county, city, or village shall provide a copy of the sales outlet location qualification standards to the Department within 30 days of their adoption. Should the standards be revised after initial adoption, a copy of the revised standards is to be provided the Department along with copies of the county, city, or village approval of each existing sales outlet location based on the newly adopted standards.

618.02B(2) The county, city, or village approval of each sales outlet location shall be provided to the Department by the county, city, or village within 30 days of such approval.

618.03 No individual, sole proprietorship, partnership, limited liability company, corporation, nonprofit association, or nonprofit corporation shall conduct a lottery as a sales outlet location without having first obtained a sales outlet location’s license from the Department. Such license shall be applied for using the Nebraska Schedule II - County/City Sales Outlet Location Application, Form 50G. In addition to the information required on the application form, each applicant shall provide the following:

618.03A Two completed fingerprint cards for each individual who has an ownership interest, either directly or indirectly, in the applicant. If a sole proprietorship, by the individual owner and spouse. If a partnership, by each partner and spouse and any officer or director of the partnership. If a limited liability company, by each member and spouse. If a corporation, by each officer and spouse and each individual who owns 10 percent or more of the debt or equity of the corporation. If a nonprofit organization or nonprofit corporation, by the manager.

618.03A(1) Completion of the two fingerprint cards by a spouse may be waived if such individual has no proprietary interest, directly or indirectly, in the operation or profit derived from the activities of his or her spouse as a corporate stockholder, corporate debt holder, corporate officer, corporate director, limited liability company member, or partner of a sales outlet location. An Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record for Charitable Gaming License Application must be completed, notarized, and submitted for each individual.

618.03A(2) The fingerprinting requirement for an applicant may be waived if the Nebraska Liquor Control Commission has received fingerprint reports on the applicant within the past two years of the filing date of the Schedule II or if the license issued by the Nebraska Liquor Control Commission has been continuously maintained since documented fingerprints were filed to obtain such license.

618.03A(3) The fingerprinting requirement shall be waived for any debt holder of the applicant which is a financial institution organized or chartered under the laws of Nebraska, any other state, or the United States relating to banks, savings institutions, trust companies, savings and loan associations, credit unions, and installment loan licensees, or similar associations organized under the laws of this state which are subject to supervision by the Department of Banking and Finance.

618.03A(4) Two sets of fingerprints on cards supplied by the Department and the required processing fees must be submitted to the Nebraska State Patrol.

618.03B A copy of the county, city, or village approval of the sales outlet location based on the adopted sales outlet location qualification standards.

618.03C A copy of the current contract or lease between the lottery operator and the sales outlet location.

618.04 The Department must be informed within 30 days after the licensee learns of any inaccuracies or makes any changes in the information supplied by the licensee in its most recent filing with the Department. Changes that will not require a new license to be issued can be reported by filing an amended application and identifying only the information to be changed. All requests for changes must be signed by an owner, partner, limited liability company member, corporate officer, or individual authorized by Power of Attorney on file with the Department and by a representative of the county, city, or village.

618.05 A sales outlet location is not considered licensed until such time it has physical possession of the printed license issued by the Department.

618.05A The current original sales outlet location’s license(s) issued by the Department must be prominently posted at the licensed location. A reproduced copy of the license shall not be substituted for the original(s).

618.05A(1) A sales outlet location whose license has been lost, stolen, or destroyed must notify the Department as soon as possible. A duplicate license for the sales outlet location will be issued.

618.05A(2) A sales outlet location which is no longer under contract with the lottery operator or is no longer approved by the county, city, or village for which it is licensed or which no longer desires to be licensed shall notify the Department, in writing, of its intention to cancel the license. Such notification must be accompanied by the original license. In the event that a sales outlet location’s license is suspended, canceled, or revoked, the sales outlet shall surrender physical possession of its license immediately upon receipt of the order of suspension, cancellation or revocation. In the case of suspension, the Department shall return the license to the county, city, or village at the end of the suspension period. In the case of cancellation, the former licensee may reapply for a license when the period of cancellation has expired. In the case of revocation, the former licensee may not reapply for any license at any time in the future under the Nebraska County and City Lottery Act.

618.05A(3) If a licensee has successfully appealed an order of suspension, revocation, or cancellation, the Department shall return the license which had been surrendered to the Department.

618.06 All sales outlet location licenses shall expire on May 31 of every even-numbered year and may be renewed biennially.

618.06A Applications for renewal of a sales outlet location license shall be submitted to the Department on the prescribed form at least 60 days prior to the expiration date of the license.

618.07 A sales outlet location’s license may not be transferred under any circumstance including change of ownership. If a change of ownership occurs, a new sales outlet location’s license must be applied for and include a copy of the county, city, or village’s approval of the new ownership of the sales outlet location and the new sales outlet location’s contract with the lottery operator.

618.07A The following changes of ownership are to be reported by the county, city, or village, lottery operator, or sales outlet location when they occur:

618.07A(1) For a partnership, whenever a new partner is added to the partnership. If the same partnership continues in existence, an amended application is to be filed. Otherwise, a new application is to be submitted.

618.07A(2) For a limited liability company, whenever a new member is added to the limited liability company. If the same limited liability company continues in existence, an amended application is to be filed. Otherwise, a new application is to be submitted.

618.07A(3) For a corporation, whenever a change of ownership of shareholders or equity holders in the corporation results in any person becoming a holder directly or indirectly of 10 percent or more of any class of stock or equity interest in the corporation who did not hold such interest prior to the change in ownership and the same corporation continues in existence, an amended application is to be filed. Otherwise, a new application is to be submitted.

618.07A(4) For a nonprofit organization or nonprofit corporation, when any changes are made in the manager or officers. Since the same nonprofit organization or nonprofit corporation continues in existence, an amended application is to be filed.

618.07B When a change of ownership of a business licensed as a sales outlet location is anticipated, the current owner of the sales outlet location may designate the party purchasing the business as his or her agent. In order to be designated as an agent, the following criteria must be satisfied:

618.07B(1) A Nebraska Schedule II - County/City Lottery Sales Outlet Location Application, Form 50G, must be on file with the Department;

618.07B(2) A Temporary Agency Agreement on a form prescribed by the Department must be filed with the Nebraska Schedule II;

618.07B(2)(a) The Temporary Agency Agreement must be approved by the Department and a copy returned to the sales outlet for posting with the current sales outlet license.

618.07B(2)(b) A Temporary Agency Agreement is not effective without the Department’s approval.

618.07B(3) Throughout the duration of the temporary agency agreement, the designated agent may operate the lottery using the current sales outlet’s license with the licensed sales outlet fully responsible to the county, city, or village and to the state for the proper operation of the lottery until such time as the new sales outlet location is licensed;

618.07B(4) Temporary agency agreements for sales outlet locations may not exceed 120 days;

618.07C The following are changes to a sales outlet location licensee that are to be reported promptly:

618.07C(1) For a sole proprietorship, the death of the owner or the owner’s spouse, or the marriage or divorce of the owner.

618.07C(2) For a partnership, the death of one or more of the partners or partner’s spouse, or the marriage or divorce of one or more of the partners.

618.07C(3) For a limited liability company, the death of one or more of the members or member’s spouse, or the marriage or divorce of one or more of the members.

618.07C(4) For a corporation, the death of an officer or director, or the marriage or divorce of an existing officer or director of the corporation.

618.07C(5) For a nonprofit organization or nonprofit corporation, any change in manager, officers, or directors of the nonprofit.

618.07D To report these other changes, the licensee or licensee’s representative is to provide:

618.07D(1) In the case of death, if applicable, a copy of the court appointment of the Personal Representative, executor, administrator, or trustee.

618.07D(1)(a) The Personal Representative, executor, administrator, or trustee appointment will be valid for a sales outlet location license for a period not to exceed the shorter of (1) the expiration of the existing sales outlet location license, (2) the expiration of the existing site location agreement or location lease, or (3) one year.

618.07D(1)(b) A revised expiration date may be requested in writing with adequate documentation to indicate why the ownership of the licensed business could not change hands within the specified period. The prior written approval of such revision by the Department is required.

618.07D(2) In the case of marriage, the spouse’s name, social security number, address, and date of birth are to be provided with the applicable pair of fingerprint cards or the Affidavit by Spouse for Waiver of Fingerprinting and/or Personal History Record for Charitable Gaming License Application. If fingerprints are required, the fingerprint cards and the required processing fees must be submitted to the Nebraska State Patrol.

618.07D(3) In the case of divorce, a copy of the decree and property settlement agreement or other legal documentation showing the deletion of the spouse’s name from the business holding the sales outlet location license.

618.08 A business licensed as a sales outlet location may apply for and obtain licenses to conduct other activities pursuant to the Nebraska Bingo Act and the Nebraska Pickle Card Lottery Act, subject to the statutory limitations and eligibility criteria of those acts. However, a business licensed as a sales outlet location may not hold a license as a manufacturer or distributor pursuant to the Nebraska Bingo Act or the Nebraska Pickle Card Lottery Act or as a manufacturer-distributor pursuant to the Nebraska County and City Lottery Act. No sole proprietor, partner in a partnership, member in a limited liability company, officer or director of a corporation, or individual with a substantial interest in the person which is applying for or holds a sales outlet location license shall have a substantial interest in any person licensed as a manufacturer or distributor of bingo equipment and supplies, as a manufacturer or distributor of pickle card units and punchboards, or as a manufacturer-distributor of lottery equipment and supplies.

618.09 All purchases of lottery supplies in Nebraska are subject to the Nebraska sales or use tax. A sales outlet location which purchases lottery supplies from a manufacturer-distributor which is not required to collect the Nebraska sales or use tax must report and pay a use tax to the Department on all such purchases.

618.09A A sales outlet location may not use the sales tax-exempt status of a county, city, or village to avoid the payment of any applicable sales or use tax on the purchase of lottery supplies.

REG-35-619 Lottery Workers

619.01 Any individual who performs any duties that are within the definition of a lottery worker, must complete a Nebraska Schedule III - County/City Lottery Worker Application, Form 50G.

619.01A Individuals who are required to file a Nebraska Schedule III include, but are not limited to, the following:

619.01A(1) Any individual, except one who acts solely as a keno writer, who performs work directly related to the conduct of a lottery, even though the individual may not be an actual employee of the county, city, village, lottery operator, or sales outlet location;

619.01A(2) Any employee or agent of the county, city, or village who is involved with the record keeping of the lottery activity. Normally, this includes county, city, or village clerks and treasurers, as well as individuals who have administrative responsibilities for the lottery; and

619.01A(3) In the case of lottery operators and sales outlet locations, any individual with an ownership interest if the individual is involved in the day-to-day conduct of the lottery, except individuals acting solely as keno writers.

619.01B The following individuals are not required to file a Nebraska Schedule III:

619.01B(1) Individuals whose sole responsibilities are as keno writers;

619.01B(2) Individuals whose sole responsibilities relate to concession activities or the sale of pickle cards at the location;

619.01B(3) Individuals whose sole responsibilities are as custodial or maintenance personnel at the location;

619.01B(4) Individuals whose sole responsibilities are for security at the location if the security service is provided by a third-party professional security contractor; or

619.01B(5) Individuals with whom the county, city, or village contracts to provide bookkeeping, accounting, or auditing services. This includes outside individuals compiling information for tax returns or reports for the county/city lottery.

619.01C If an individual works or intends to work as a lottery worker for more than one county, city, or village lottery, a separate Nebraska Schedule III must be filed for each county, city, or village unless otherwise authorized by the Department.

619.01D An individual must be at least 19 years of age to be eligible for a lottery worker license.

619.02 A Nebraska Schedule III must be on file with the Department prior to any individual beginning his or her duties as a lottery worker. Once a Nebraska Schedule III is on file with the Department, the individual may begin performing duties as a lottery worker and is considered to be acting under a 120-day probationary license.

619.02A The Nebraska Schedule III will be considered on file with the Department when it has been received by the Department or, if mailed, when it is postmarked. The Nebraska Schedule III will also be considered on file when electronically transmitted to the Department, provided the physical application is received by the Department within 10 days after the date it was electronically transmitted.

619.02A(1) A Nebraska Schedule III that is electronically transmitted but not physically received by the Department within 10 days after the electronic transmission is not considered filed. The county, city, village, authorized representative, or lottery operator is responsible for confirming that the application was actually received by the Department within 10 days. If it was not received within 10 days, the lottery worker applicant must cease performing any duties for the lottery until a Nebraska Schedule III is received by the Department.

619.02A(2) If the tenth day falls on a Saturday, Sunday, or legal holiday, the time period expires on the next business day.

619.02B The Nebraska Schedule III will be considered properly completed if accurate and legible entries are made for all required fields and the required signatures are affixed.

619.02B(1) A governing official of the county, city, or village or an authorized representative of the county, city, or village as defined in Reg-35-600.02B must sign the Nebraska Schedule III, signifying that the governing official or authorized representative has examined the completed Nebraska Schedule III and approved the Nebraska Schedule III for submission to the Department.

619.02B(2) All information requested on the Nebraska Schedule III must be properly completed.

619.02C An incomplete Nebraska Schedule III will be returned to the county, city, village, or authorized representative of the county, city, or village. If the Nebraska Schedule III is returned, the lottery worker applicant cannot perform any duties for the lottery until a properly completed Nebraska Schedule III is received by the Department.

619.03 In addition to the information required on the Nebraska Schedule III, an applicant who is designated as a keno manager or who has the authority to verify winning number selection by an electrically-operated blower machine must be fingerprinted for criminal background investigation purposes. Lottery workers licensed as of July 20, 2002 are not required to be fingerprinted as long as they remain actively licensed.

619.03A The fingerprinting requirement for an applicant may be waived if the Nebraska Liquor Control Commission has received fingerprint reports on the applicant within the two years preceding the filing date of the Nebraska Schedule III, or if the license issued by the Nebraska Liquor Control Commission has been continuously maintained since documented fingerprints were filed to obtain a license.

619.03B The applicant must promptly submit two sets of completed fingerprint cards and the required processing fees to the Department. Blank fingerprint cards are available from the Department.

619.03C The Department must receive the fingerprint reports from the Nebraska State Patrol prior to the expiration of the 120-day probationary license or the lottery worker's application will be denied.

619.04 If a lottery worker license applicant has: (a) been convicted of or forfeited bond upon a charge of, any felony within ten years preceding the date the Nebraska Schedule III is filed; (b) been convicted of or forfeited a bond upon a charge of any felony or misdemeanor involving fraud, theft, or any gambling activity at any time; (c) willfully failed to make required payments or reports; or (d) filed false reports with a governmental agency at any level; the applicant must furnish the Department the following information for each incident to the extent that it is available to the applicant:

619.04A The date and place each incident occurred;

619.04B The court case or docket number under which it is filed;

619.04C The original charge and ultimate disposition of the matter; and

619.04D A description of the events which are the subject of the incident.

619.05 If the Department determines that a false or incorrect response has been made on the Nebraska Schedule III to the questions regarding prior criminal activities, the applicant may be disqualified from being a lottery worker for falsifying information on the Nebraska Schedule III.

619.06 Once a Nebraska Schedule III has been filed with the Department, the applicant will be granted a probationary license to perform work directly related to the conduct of a lottery.

619.06A A probationary license is valid for a period of 120 days from the date the Nebraska Schedule III is filed with the Department, unless:

619.06A(1) The applicant is subsequently disqualified;

619.06A(2) The Department returns the Nebraska Schedule III because it is incomplete; or

619.06A(3) The license application is denied by the Department.

619.06B If a notice of disqualification or the notice of intent to deny a license has not been issued by the Department prior to the expiration of the probationary period, the applicant is considered licensed to perform work directly related to the conduct of a lottery

619.06B(1) Notice of the Department's intent to deny will be sent to the applicant, the county, city, or village, the lottery operator, and, if applicable, the sales outlet location. The individual may continue performing his or her duties for the lottery until the denial becomes final.

619.06B(2) Notice of an applicant's disqualification will be sent to the applicant, the county, city, or village, the lottery operator, and, if applicable, the sales outlet location. Upon receiving the notification of disqualification, the individual must cease working with the lottery immediately.

619.07 Every lottery worker licensee must keep the information on the Nebraska Schedule III filed with the Department current. All changes must be reported on a Nebraska Schedule III, marked "Report Changes", and signed by the lottery worker licensee and a governing official or authorized representative of the county, city, or village.

619.07A The report must be made within 30 days after the lottery worker licensee learns of any inaccuracies or has any changes in the information supplied by the lottery worker licensee in his or her most recent application filed with the Department. Reportable changes include, but are not limited to: a new surname; a new street or mailing address; new duties; any new conviction; bond forfeiture; guilty plea; or nolo contendere plea to any felony or to any felony or misdemeanor involving fraud, theft, or any gambling activity; willful failure to make required payments or reports; or filing false reports to a governmental agency at any level.

619.07B If an individual licensed as a lottery worker is no longer working for the county, city, village, or lottery operator for which the license was obtained, or for any sales outlet location with which the county, city, village, or lottery operator contracts, the license is no longer valid. This may be reported to the Department by the county, city, village, or lottery operator on a Nebraska Schedule III marked "Inactive." The signature of the lottery worker licensee is not required.

619.07B(1) Seasonal, periodic, or emergency workers may maintain a valid license although not actively working on a regular basis. Once it is known that an individual will not return to work, the Nebraska Schedule III marked "Inactive" may be filed.

619.08 All lottery worker licenses expire on May 31 of every odd-numbered year and may be renewed biennially.

619.08A Applications for renewal of a lottery worker license must be submitted to the Department electronically or on the Nebraska Schedule III at least 60 days prior to the expiration date of the license.

619.08B A lottery worker's license is not transferrable.

619.09 An individual acting as a keno writer or licensed as a lottery worker under the Nebraska County and City Lottery Act cannot be connected with or interested in, directly or indirectly, any individual, sole proprietorship, partnership, limited liability company, corporation, or other party licensed as a distributor, manufacturer, or manufacturer-distributor under Neb. Rev. Stat. §§ 9‑255.07, 9-255.09, 9-330, 9-332, or 9-632.

REG-35-620 Proration and Refund of License Fees

620.01 The fees paid pursuant to the Nebraska County and City Lottery Act for any license issued to a county, city, village, or lottery operator are due in full for the biennial licensing period. A license fee may be prorated or refunded by the Department on an annual basis under the following circumstances:

620.01A If a new application for a county, city, village, or lottery operator license is received by the Department for a license which will become effective on or after June 1 of the second year of the biennial licensing period, the applicable license fee shall be one-half of the biennial fee.

620.01B If a new application for a county, city, village, or lottery operator license is received by the Department for a license which will become effective prior to June 1 of the second year of the biennial licensing period, no proration of the license fee shall be allowed.

620.01C In the event a license application for a county, city, village, or lottery operator is denied and a temporary license was issued to the applicant prior to the effective date of the license application denial, one-half of the biennial license fee paid by the applicant may be refunded provided the effective date of the license application denial is prior to June 1 of the second year of the biennial licensing period.

620.01D In the event a license application for a county, city, village, or lottery operator is denied and a temporary license was not issued or a license application is withdrawn, the license fees paid by the applicant may be refunded.

620.02 The fees paid pursuant to the Nebraska County and City Lottery Act for any license issued to a manufacturer-distributor are due in full for the biennial licensing period. A license fee may be prorated or refunded by the Department on an annual basis under the following circumstances:

620.02A If a new application for a manufacturer-distributor license is received by the Department for a license which will become effective on or after October 1 of the second year of the biennial licensing period, the applicable license fee shall be one-half of the biennial fee.

620.02B If a new application for a manufacturer-distributor license is received by the Department for a license which will become effective prior to October 1 of the second year of the biennial licensing period, no proration of the license fee shall be allowed.

620.02C In the event a license application for a manufacturer-distributor is denied and a temporary license was issued to the applicant prior to the effective date of the license application denial, one-half of the biennial license fee paid by the applicant may be refunded, provided the effective date of the license application denial is prior to October 1 of the second year of the biennial licensing period.

620.02D In the event a license application for a manufacturer-distributor is denied and a temporary license was not issued or a license application is withdrawn, the license fees paid by the applicant may be refunded.

620.02E The Department may apply the portion of any manufacturer-distributor’s license fee to be refunded to any amount owed by the licensee or applicant with respect to a background investigation or facility inspection conducted by the Department.

620.03 No license fee paid pursuant to the Nebraska County and City Lottery Act may be refunded for any portion of the licensing period in which a license was not used unless otherwise authorized by the Department.

620.04 In the event a license issued pursuant to the Nebraska County and City Lottery Act is suspended, cancelled, or revoked by the Department, no portion of the license fee shall be refunded unless otherwise authorized by the Department.

REG-35-621 Automated Ball Draw System

621.01 For the purposes of this regulation, the following definitions apply:

621.01A Automated ball draw system means a mechanical and electronic system consisting of machine readable keno balls, an electronic blower device, ball calling unit, glass bowl, control unit, and vision system which:

621.01A(1) Selects the winning numbers for the keno game after the keno operator informs the keno system to begin a new game;

621.01A(2) Reads the number of the keno ball by use of the vision system; and

621.01A(3) Electronically transmits the number to the keno system as if the keno operator had manually entered the number into the system after confirmation by the vision system of the ball number read.

621.01B No Read condition means the automated ball draw system is unable to read the number of the keno ball.

621.01C Misread condition means the automated ball draw system reads the number of the keno ball incorrectly. The number of the ball selected as it appears in the ball calling unit is not the same as the number of the ball transmitted electronically to the keno system.

621.01D Keno management personnel means management or administrative personnel of the lottery operator other than an on-site shift manager or shift supervisor in charge of the daily operation of the keno game.

621.01E Selected ball means the keno ball selected by the automated ball draw system for a particular wheel position in a particular game. A keno ball is selected when the number of the ball has been electronically transmitted to and recorded by the keno system and the wheel has advanced to the next empty position.

621.02 An automated ball draw system and related keno system software may be sold, leased, rented, or otherwise provided in Nebraska only by a licensed manufacturer-distributor of lottery equipment. Unless otherwise authorized by the Department, no automated ball draw system and related keno system software may be sold, leased, rented, or otherwise provided in this state for use in a keno lottery conducted pursuant to the Nebraska County and City Lottery Act unless and until the automated ball draw system and related keno system software has been approved by the Department. Approval is based on conformance with the written requirements of this regulation and any other test criteria established by the Department for the testing and evaluation of these types of systems.

621.03 A licensed manufacturer-distributor seeking approval of an automated ball draw system and related keno system software must adhere to the requirements of County and City Lottery Reg-35-617 relating to the submission of lottery equipment for testing and approval.

621.04 The vision system consisting of a computer, monitor, and camera may be used only for system set up, monitoring of system performance, and system adjustments and may not perform any functions related to the conduct of the keno lottery except for reading the numbers of the keno balls and electronic transmission of the numbers read either directly or through an approved interface unit to a keno system approved for use in Nebraska.

621.04A The vision system may be maintained only by the manufacturer-distributor of the automated ball draw system or its authorized representative, and operated only by the keno manager on duty.

621.04B The camera which reads the numbers of the keno balls must be secured in a locked box or by other means approved by the Department and accessed solely for system set up, adjustments, and required system maintenance by an authorized representative of the licensed manufacturer-distributor of the automated ball draw system or an authorized representative of the lottery operator or sponsoring county, city, or village. The key for a locked box arrangement must be secured by management personnel when not in use.

621.04C The keno balls used in conjunction with the automated ball draw system must be supplied by the licensed manufacturer-distributor of the automated ball draw system and approved for use by the Department. The keno balls may be supplied by another licensed manufacturer-distributor of lottery equipment if the keno balls meet the specifications of the licensed manufacturer-distributor of the automated ball draw system and have been approved for use by the Department.

621.05 In addition to the technical standards for lottery equipment prescribed in County and City Lottery Reg-35-617.13, all keno systems which communicate directly or through an approved interface unit with an automated ball draw system must include the following characteristics:

621.05A The use of an automated ball draw system for winning number selection must be an option in the system configuration menu which can be enabled only by the licensed manufacturer-distributor of the keno system, its authorized representative, or keno management personnel with appropriate password authorization.

621.05B All access to the system configuration menu to enable or disable the automated ball draw system must be recorded on the system exception log.

621.05C When the blower is activated on the automated ball draw system, it must send a message to the keno system and receive an acknowledgment which is recorded on the transaction log or system exception log. The transaction log must also reflect that winning number selection for the game was performed by an automated ball draw system.

621.05D All numbers selected must be sent to the keno system and recorded on the transaction log for the current game number. If there are not any No Read conditions detected during the winning number selection process, the keno system must verify that no two numbers are the same. If 20 unique numbers are reported, the system records the draw as official and calculates the game results in the same manner as any other method of winning number selection.

621.05E If a No Read condition occurs during the winning number selection process or duplicate numbers are supplied to the system, the system must alert the operator of the condition and require the operator to intervene and make the appropriate corrections to the draw before the game is declared official. All No Read conditions and duplicate number occurrences which require operator intervention must be recorded on the transaction log or system exception log and summarized in an end of day report. The system must be capable of maintaining a cumulative record of these occurrences for periodic audit purposes;

621.05F Operator intervention to correct a No Read condition may only be performed with authorized password access and is limited to keno managers.

621.05G If operator intervention is required to correct a No Read condition, only the numbers not read or duplicate numbers can be changed. The keno system may not allow valid numbers to be changed. All corrections performed by the keno manager must be recorded on the transaction log or system exception log reflecting the ball position not read, the ball number entered, and the user identification number of the individual who made the change; for example, “Ball position 4 manually entered as number 36 by 999.”

621.05H The edit ball draw feature of the keno system must be disabled when using an automated ball draw system for winning number selection.

621.05I If the automated ball draw system malfunctions due to component failure prior to the completion of the draw, the ball draw is invalid and the game must be redrawn after the malfunction has been remedied. All these occurrences must be recorded on the transaction log or system exception log with a notation that the game was redrawn. The operator may initiate a redraw of a game only with authorized password access by the keno manager.

621.05J If the keno system powers down or otherwise fails prior to the completion of the draw, the automated ball draw system must continue to send the numbers selected to the keno system until the keno system acknowledges receipt of the information. The keno system must be capable of resuming the winning number selection process from the point when the power went down or the system failed. The keno system must be equipped with an uninterrupted power source (UPS) to minimize the occurrence of power fluctuations or power loss. The UPS must meet the minimum specifications recommended by the licensed manufacturer-distributor of the keno system and must be of sufficient run time to enable the completion of the ball draw process during power fluctuations or power losses of short duration.

621.05K If the automated ball draw system powers down or otherwise fails prior to the completion of the draw and it drops all or any of the balls previously selected, the ball draw is invalid and the game must be redrawn after power has been restored to the system or the system is rendered operable again. For the operator to initiate a redraw of a game authorized password access by the keno manager is required. If the system is designed so that none of the balls previously selected are dropped, the ball draw can resume from the point when the power down or system failure occurred. All automated ball draw system interruptions must be recorded on the transaction log or system exception log. The automated ball draw system must be equipped with an UPS to minimize the occurrence of power fluctuations or power loss. The UPS must meet the minimum specifications recommended by the licensed manufacturer-distributor of the automated ball draw system and be of sufficient run time to enable the completion of the ball draw process during power fluctuations or power losses of short duration.

621.06 When winning numbers are selected using an automated ball draw system, number selection and verification must be conducted in the following manner:

621.06A After the keno manager informs the keno system to begin a new game, the ball numbers must be randomly selected by the automated ball draw system and electronically transmitted to the keno system either directly or through an approved interface unit.

621.06B Only one individual must be on duty when winning number selection is performed by use of an automated ball draw system. However, this individual must have at least keno manager responsibility.

621.06C Cameras must be used to videotape or digitally record the following prior to, during, and after calling a game, respectively:

621.06C(1) Empty ball calling unit;

621.06C(2) Date and time;

621.06C(3) Game number;

621.06C(4) Ball calling unit throat;

621.06C(5) The entire wheel and all ball numbers selected or each wheel position and each individual ball number selected; and

621.06C(6) The immediate work area where the automated ball draw system is located.

621.06D The videotape or the digital recording of the ball calling unit throat and each occupied wheel position must provide a legible identification of the numbers on the balls drawn. If a split image screen is used to accomplish the required views, each track must be capable of independent play in a full screen format.

621.06E If the game number can be determined by comparing the date and time display on the videotape or the digital recording to the date and time of the game recorded on the keno system transaction log the game number need not be videotaped or digitally recorded.

621.06F Videotapes or digital recordings must be retained for at least three months or until the keno compliance procedures are completed, whichever is later.

621.06G All security camera systems used in conjunction with an automated ball draw system must be inspected and approved by the Department prior to the use of the automated ball draw system.

621.06H The automated ball draw system must be configured by the licensed manufacturer-distributor of the system or by the licensed manufacturer-distributor of the keno system to render it inoperable when the video or digital recording device malfunctions or the video or digital recording device is out of recording capacity . These safeguards must be inspected and approved by the Department prior to the use of the automated ball draw system.

621.06I If a No Read condition occurs during the winning number selection process or duplicate numbers are supplied to the system, the keno system will alert the individual on duty and he or she, or another keno manager, must access the system with appropriate password authorization to make the appropriate corrections to the draw before the game is declared official. The individual on duty, or another keno manager, must determine the corrections to be made by visual observation of the wheel positions in the ball calling unit.

621.06J All No Read conditions and duplicate number occurrences which required operator intervention to correct must be reviewed by keno management personnel daily to insure that the corrections made were appropriate. This review may not be performed by the individuals on duty for the day or time being evaluated. This review must be accomplished by reviewing the video or digital recording of the applicable game's draw and determining that the corrections made were appropriate. Any discrepancies noted must be communicated immediately to the Department and the sponsoring county, city, or village. Telephone, fax, email, or written communications are acceptable. This review may be performed at a location other than the location where the ball draw occurred. A written record of the daily review must be maintained by keno management personnel and include the game numbers reviewed, the results of the review, and the signatures of the individuals who performed the review.

621.06K If a Misread condition is detected during or after the completion of the draw but prior to closing the next game, the Department and the sponsoring county, city, or village must be notified immediately of the occurrence by telephone. The Department will determine the corrective action to be taken.

621.06L If the automated ball draw system malfunctions due to component failure prior to the completion of the draw, the ball draw is invalid and the game must be redrawn after the malfunction has been remedied. The keno manager must announce to players at the main location that a problem has been encountered during the ball draw and provide players the opportunity to request a refund of any single race tickets they have purchased for that game. Players with active multirace tickets may quit the race, be paid any accumulated winnings, and be refunded the amount wagered for games not played. All these occurrences must be recorded on the transaction log or system exception log with a notation that the game was redrawn. The keno manager may initiate a redraw of a game only after the problem has been corrected and all requested refunds and accumulated winnings on multirace tickets have been paid.

621.06L(1) If the problem which caused the failure of the automated ball draw system cannot be immediately remedied, the keno manager must announce to players at the main location that a problem has been encountered during the ball draw and provide players the opportunity to request a refund of any single race tickets they have purchased for that game. Players with active multirace tickets may quit the race, be paid any accumulated winnings, and be refunded the amount wagered for games not played. The keno game may be resumed with the approval of the sponsoring county, city, or village with an alternative method of winning number selection, either random number generator or manual ball draw. This circumstance is an emergency situation which must be reported to the Department within 24 hours of its occurrence. The change in the method of winning number selection must be performed in the system configuration menu by the licensed manufacturer-distributor of the keno system, its authorized representative, or keno management personnel with appropriate password authorization and must be recorded on the system exception log.

621.06L(2) Once the problem with the automated ball draw system has been corrected, the keno game may resume using the automated ball draw system. The automated ball draw method of winning number selection will be reactivated in the manner prescribed in this regulation.

621.06M If the automated ball draw system powers down prior to the completion of the draw and it drops all or any of the balls previously selected, the ball draw is invalid and the game must be redrawn after power has been restored to the system. The keno manager must announce to players at the main location that a problem has been encountered during the ball draw and provide players the opportunity to request a refund of any single race tickets they have purchased for that game. Players with active multirace tickets may quit the race, be paid any accumulated winnings, and be refunded the amount wagered for games not played. All these occurrences must be recorded on the transaction log or system exception log with a notation that the game was redrawn. The keno manager may initiate a redraw of a game only after the problem has been corrected and all requested refunds and accumulated winnings on multirace tickets have been paid. If the system is designed so that none of the balls previously selected are dropped, the ball draw can resume from the point when the power down or system failure occurred.

621.06N If a ball splits in half during a ball draw selection process and one-half of the ball is selected or both halves are selected, the ball draw is invalid and the game must be redrawn after the damaged ball has been replaced. The keno manager must announce to players at the main location that a problem has been encountered during the ball draw and provide players the opportunity to request a refund of any single race tickets they have purchased for that game. Players with active multirace tickets may quit the race, be paid any accumulated winnings, and be refunded the amount wagered for games not played. The keno manager may initiate a redraw of a game only after the problem has been corrected and all requested refunds and accumulated winnings on multirace tickets have been paid. All these occurrences must be recorded on the transaction log or system exception log with a notation that the game was redrawn.

621.06O All winning ticket verifications must be performed in accordance with the requirements of County and City Lottery Reg-35-613.06.

621.06P A county, city, village, or lottery operator using an automated ball draw system for winning number selection may not deviate from the operational procedures in this regulation unless otherwise authorized by the Department based upon a written request from the county, city, village, or lottery operator describing the alternative procedures. A request made by a lottery operator must have the concurrence of the county, city, or village prior to submission to the Department.

621.07 To minimize the occurrence of No Read and Misread conditions, the keno manager:

621.07A Must inspect all keno balls for cleanliness and defects prior to use at the beginning of each day. Cracked balls and any balls on which the optical coding or numbers have been worn off must be replaced. The keno balls must be waxed periodically according to directions provided by the licensed manufacturer-distributor of the automated ball draw system. Back-up keno ball inventories must be maintained in a locked storage cabinet to prevent unauthorized access.

621.07B Must inspect and clean the ball calling unit periodically according to directions provided by the manufacturer-distributor of the automated ball draw system.

621.07C Must clean the glass lens on the camera inside the ball calling unit periodically according to directions provided by the manufacturer-distributor of the automated ball draw system.

621.08 A county, city, village, or lottery operator using an automated ball draw system for winning number selection must adhere to all other requirements of County and City Lottery Reg-35-614 relating to the maintenance of lottery equipment.

REG-35-622 Record Keeping and Reporting Requirements - Keno Lottery

622.01 In the case of a keno lottery, unless otherwise stated in these regulations, records shall be retained and disposed of by the county, city, or village as provided for in Schedule 59 - County/City Lottery Records approved by the Records Management Division of the Secretary of State’s office.

622.02 In the case of a keno lottery conducted by a county, city, or village, the following information shall be reported to the Department on a quarterly basis:

622.02A The gross proceeds of the keno lottery for the reporting quarter;

622.02B The value of prizes paid for the reporting quarter;

622.02C Lottery operator commission(s) paid or incurred by the county, city, or village for the reporting quarter;

622.02D State lottery taxes paid or incurred by the county, city, or village for the reporting quarter;

622.02E State license fees paid or incurred by the county, city, or village for the reporting quarter;

622.02F Audit and legal expenses as defined in Neb. Rev. Stat. § 9-629(4) paid or incurred by the county, city, or village for the reporting quarter;

622.02G An itemized listing of all other expenses paid or incurred by the county, city, or village in the operation of the keno lottery for the reporting quarter (not the lottery operator’s expenses); and

622.02H An itemized listing of disbursements made by the county, city, or village for community betterment purposes for the reporting quarter.

622.02I The report shall be prepared on a form prescribed by the Department and accompany the quarterly tax return prescribed in Neb. Rev. Stat. § 9-648 of the Nebraska County and City Lottery Act.

622.02I(1) A county, city, or village may submit a written request to the Department to obtain authorization to deviate from the quarterly report format prescribed in this regulation. Such request shall include a description of the alternative format proposed.

622.03 In the case of a keno lottery, the county, city, or village shall:

622.03A Ensure that adequate documentation of all pertinent keno information is generated by the keno system and that such documentation is restricted to authorized personnel. This documentation shall include, but not be limited to:

622.03A(1) Ticket information including date, ticket serial number, conditioning of the ticket, writer station number, game number, and amount of wager;

622.03A(2) Prize payout information including date, time, ticket serial number, amount, etc.;

622.03A(3) Game information including game number, ball draw, date and time, etc.;

622.03A(4) Daily summary information including write (handle), wins, wins paid, voids, net handle;

622.03A(5) System exception information including manual voids, late pays, pays not authorized by the keno system, and appropriate system parameter information (changes in pay tables, ball draw edits, unauthorized access, etc.); and

622.03A(6) Employee duty list which includes employee name, employee user identification number or personal identification number, and authorized system functions.

622.03B Ensure that records are maintained which include write (handle), wins, wins paid, voids, and net handle by individual writer and writer station for each shift;

622.03C Ensure that records are maintained which include at a minimum write (handle), wins, wins paid, voids, and net handle for:

622.03C(1) Each shift (if applicable);

622.03C(2) Each day;

622.03C(3) Month-to-date; and

622.03C(4) Year-to-date;

622.03D Ensure that management from both the county, city, or village and the lottery operator review on a monthly basis cash overages or shortages in excess of $25.00 per keno writer per shift/day and investigate and notify the Department immediately of any such overages or shortages which are not attributable to accounting or system errors and warrant further investigation by the Department. Such investigations shall be documented and maintained for inspection by the Department; and

622.03E Ensure that the gross proceeds of the lottery less prizes paid in cash are deposited into a separate bank account of the county, city, village, or lottery operator within five business days following the day the cash was collected. The county, city, or village must notify the Department immediately of any instances of noncompliance with this requirement.

622.03E(1) Subject to Reg-35-623 the transfer of funds from the lottery operator location’s or sales outlet location’s segregated bank account to the bank account of the lottery operator, county, city, village, or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act may be done by an electronic transfer of funds.

622.03E(2) A transfer made pursuant to Reg-35-622.03E(1) must be made no later than five business days following the day the funds were collected.

622.03E(3) For purposes of this regulation, cash collected from midnight until such time as keno must no longer be conducted as established in Reg.35-613.02D will be considered collected on the most previous calendar day.

622.03F Ensure that a player does not purchase more than $200 of keno wagers by debit card in a single business day. The county, city, village or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act must notify the Department immediately of any instances of noncompliance.

622.04 In the case of a keno lottery, each county, city, or village shall file with the Department an annual report of its keno lottery activity. The annual report shall be on a form prescribed by the Department unless otherwise authorized by the Department. A county, city, or village may submit a written request to the Department to obtain authorization to deviate from the annual report format prescribed in this regulation. Such request shall include a description of the alternative format proposed.

622.04A The annual report shall cover the fiscal year of the county, city, or village and be filed with the Department within 90 days of the end of the period covered by the report. In the event a county, city, or village cancels its license or allows such license to expire prior to the end of the reporting period, a final report shall be filed with the Department within 90 days of the date the license was canceled or expired. The annual report shall include at a minimum the following information:

622.04A(1) The gross proceeds of the keno lottery and the retail value of any free play coupons accepted or redeemed. If the lottery operator uses digital-on-premises tickets the report must identify the value of the gross proceeds of such wagers;

622.04A(2) The total value of prizes paid. If the lottery operator pays wins electronically, the report must identify the value of the prizes paid electronically;

622.04A(5) A summary of each keno operations bank account maintained by the lottery operator for lottery proceeds including the name and complete address of the financial institution where such account is maintained, the account number, the beginning and ending account balances for the reporting period, total deposits to the account and disbursements made from the account during the reporting period, and total interest earned during the reporting period.

622.04A(5)(a) The keno operations bank account information shall also include:

622.04A(5)(a)(i) The amount of cash on hand or deposits in transit as of the beginning of the reporting period;

622.04A(5)(a)(ii) The amount of cash on hand or deposits in transit as of the end of the reporting period;

622.04A(5)(a)(iii) Prizes paid by check and withdrawals from the keno operations bank account for keno manager or keno writer bank fills made during the reporting period;

622.04A(5)(a)(iv) The balance in the prize reserve account as of the end of the reporting period;

622.04A(5)(a)(v) The balance in the community betterment account as of the end of the reporting period; and

622.04A(5)(a)(vi) Deposits made to the keno operations bank account other than daily lottery proceeds (i.e., transfers from the prize reserve account, community betterment account, or any other account).

622.04A(5)(a)(vii) Any electronic transfer requests authorized under Reg-35-622.03E(1) and Reg-35-623.05C that are not fulfilled due to non-sufficient funds;

622.04A(5)(a)(viii) If the operator uses a digital-on-premises purchasing application or operator’s tablet and has established a bank account in only the community’s name to hold player account funds, the balance in said bank account as of the end of the reporting period. If the operator uses a joint account with multiple communities to hold these funds, this information need not be supplied.

622.04A(6) The annual report shall be signed by the preparer and a governing official of the county, city, or village and made available for public inspection by the residents of the county, city, or village.

622.05 In the case of a keno lottery conducted by a county, city, or village, the results of the performance of the annual compliance procedures shall be submitted to the Department as prescribed in Reg-35-616.

622.06 Each licensed manufacturer-distributor shall maintain complete and detailed records relating to the quantity and types of lottery equipment or supplies sold to any county, city, village, licensed lottery operator, or licensed manufacturer-distributor including, but not limited to:

622.06A The name and address of any county, city, village, licensed lottery operator, licensed manufacturer-distributor, or any other purchaser located in Nebraska purchasing lottery equipment or supplies;

622.06B Relative to each sale, the quantity and type of lottery equipment or supplies sold; and

622.06C Any other information concerning lottery equipment or supplies sold which the Department deems necessary.

REG-35-623 Comingling of Keno Funds in Non-Segregated Bank Account

623.01 Unless specifically modified by the regulations in this section, all regulations of Reg-35-600 to 35-622 remain in effect. This section will only apply to lottery operators seeking authorization to comingle keno funds in a non-segregated bank account of the lottery operator location or sales outlet location.

623.02 If a lottery operator intends to have the lottery operator location or sales outlet location deposit keno funds into a non-segregated bank account of the location at the close of business each day, the operator and participating lottery operator location or sales outlet location must follow one of the two methods outlined in Reg-35-623.03 and 35-623.04, unless other sufficient controls are agreed to in writing by the Department. The operator must inform the Department in writing which method they intend to use for each lottery operator location or sales outlet location for compliance with Reg-35-623.02.

623.03 An operator may comply with Reg-35-623.02 by instituting the following audit procedures:

623.03A The operator must perform at least one monthly random audit of every keno drawer at each lottery operator location and sales outlet location.

623.03B The operator must maintain documentation relating to all audits performed pursuant to Reg-35-623.03A. Documentation must include all of the following unless agreed to in writing with the Department:

623.03B(1) The reason for audit;

623.03B(2) The person who performed audit;

623.03B(3) The date and time of audit;

623.03B(4) All keno writers on duty;

623.03B(5) All keno managers on duty;

623.03B(6) The results of the audit;

623.03B(7) Any action taken as a result of the audit; and

623.03B(8) Any other information and documentation the auditor deems necessary.

623.03C Documentation of all audits must be maintained by the operator for a period of three years and be provided to the Department upon request within a reasonable time.

623.03D A copy of audit documentation relating to the lottery operator location or sales outlet location must be kept on the premises of the location for a period of three months and be provided to the Department upon request.

623.04 An operator may comply with Reg-35-623.02 by installing video cameras with recording equipment and adhering to the following procedures:

623.04A At each lottery operator location or sales outlet location, at least one camera must be installed to monitor each keno writer station. The camera(s) must be positioned to provide a full view of the keno drawer, terminal, scanner, printer, and area where the customer transactions take place.

623.04A(1) The Department reserves the right to request any camera be adjusted and/or moved to provide an adequate line of sight.

623.04A(2) A single camera may be positioned to record multiple stations only if the Department after reviewing the position determines that the items referenced in Reg-35-623.04A can be adequately monitored.

623.04B The operator must notify the Department of the date they intend to install the camera(s) to allow the Department, if they choose, to be present for the installation and inspect the cameras and recording equipment.

623.04C Cameras installed in accordance with Reg-35-623.04 must meet the following technical requirements:

623.04C(1) Have a minimum resolution of 704 x 480;

623.04C(2) Record at a minimum of 30 frames per second;

623.04C(3) Must display the date and time for all recordings; and

623.04C(4) Be equipped with an uninterruptable power supply.

623.04D Recording equipment may record in any format of media. Recording equipment must be housed in secured location under lock and key. Physically stored recordings must be stored in secured location under lock and key. If recordings are stored electronically, password protection must be used.

623.04D(1) Recording equipment must be equipped with an uninterruptable power supply.

623.04D(2) All recordings, regardless of format, must be retained for at least three months.

623.04D(3) Regardless of the format of recording, the stored recordings must be accessible by the Department upon demand within a reasonable time.

623.04E All cameras and recording equipment must be inspected daily prior to beginning the first game. All cameras and recording equipment must also be monitored throughout the day.

623.04E(1) All camera and recording equipment failures must be reported to the Department immediately upon discovery and repaired as soon as is practical.

623.04E(1)(a) The game may continue upon noticing the failure only if the Department has been notified.

623.04E(1)(b) If the camera or recording issue has not been resolved after five days, then the lottery operator location or sales outlet location where the issue is occurring is not permitted to comingle keno funds until the repair is completed, unless the location utilizes the audit procedures outlined in Reg-35-623.03.

623.05 An operator who follows the provisions of Reg-35-623.01 to 35-623.04 at a lottery operator location or sales outlet location is permitted to have lottery proceeds from the location deposited into a non-segregated bank account of the lottery operator location or sales outlet location. Such bank account must be designated by the lottery operator, county, city, village, or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act. Keno funds must remain segregated from all other revenue of the lottery operator location or sales outlet location until the deposit is made into the non-segregated bank account.

623.05A If the deposit is made with non-lottery funds from the lottery operator location or sales outlet location, the deposit slip must clearly indicate the amount of keno funds being deposited.

623.05B The deposit must be made within five business days following the day such gross proceeds were collected.

623.05C Transfer of funds from the lottery operator location or sales outlet location non-segregated bank account to the bank account of the lottery operator, county, city, village, or joint entity created by the county, city, or village pursuant to the Interlocal Cooperation Act may be done by an electronic transfer of funds.

623.05C(1) A transfer pursuant to Reg-35-623.05C must be made no later than five business days following the day the funds were collected.

History

• Effective 2026-05-24

Chapter 36 Rules for the Collection of Delinquent Taxes

Neb. Admin. Code tit. 316, ch. 36 Rules for the Collection of Delinquent Taxes {#sec-316-nac-36 omnilex-key=us-ne-regs-official--title-316--316 NAC 36}

REG-36-001 SCOPE, DUTIES, AND GENERAL PRINCIPLES

001.01 It is the duty of the Tax Commissioner and the Nebraska Department of Revenue (Department) to execute, administer, and effectively enforce all provisions of the revenue laws of this state.

001.02 These regulations govern collection procedures for the Department arising from and as required under any law administered, enforced, or supervised by the Department or the Tax Commissioner, except where a specific regulation of the Department applies.

001.03 No injunction, writ of mandamus, or other legal or equitable process may be issued in any suit, action, or proceeding in any court against this state to enjoin the collection of any tax required to be collected under any tax program administered by the Tax Commissioner.

001.04 The methods of enforcement and collection provided in the Uniform State Tax Lien Registration and Enforcement Act and Chapter 36 of these regulations, including distraint and sale, are fully independent, so that pursuing any one method is not conditioned upon use of any other method. The use of any one method does not limit the right of the Tax Commissioner to pursue any of the other methods of enforcement or collection.

001.05 Due Process of Law. A taxpayer has the right to due process of law in collection matters before the Department. The Department will provide a fair and efficient review and resolution of disputes. When possible, informal meetings with a taxpayer in connection with collection efforts will be held at a time reasonable to the taxpayer during normal business hours of the Department. The taxpayer may employ representation at all stages of a disputed tax matter.

001.06 Installment Payment of Tax Liabilities. At the time the first demand for payment is issued, a taxpayer may pay delinquent taxes in installments by executing a payment agreement within the limits established in Reg-36-005, Payment Agreements. Once collection efforts commence, the Department will consider the financial condition of the taxpayer and the ability of the taxpayer to make full payment. If a payment agreement will facilitate collection of the delinquent taxes, the Department will enter into a payment agreement with the taxpayer in accordance with Reg-36-005.

001.07 Fair Collection Process.

001.07A The Department will attempt other collection actions before seizing a taxpayer’s assets. The Department will take steps to assure that every taxpayer is treated consistently and fairly. The Department will honor exemptions from levy and seizure and provide a process for asserting these claims as provided in Reg-36-010.

001.07B The Department will issue a demand for payment before commencing any collection action, except in the case of jeopardy. The demand for payment will notify the taxpayer of the collection actions that will commence if payment is not made. (Reg-36-006)

001.07C The Department will issue a demand for payment at least ten days before recording a notice of state tax lien, except in the case of jeopardy.

001.07D A taxpayer may demonstrate that recording a notice of state tax lien would be in error within ten days after the postmark date of the demand for payment. (Reg-36-006)

001.07E If, after recording a notice of state tax lien, the Department determines that its actions were in error, it will mail a lien termination within seven business days to the taxpayer and the filing office that recorded the lien. The lien termination will contain a statement that the notice of state tax lien was recorded in error. If the erroneous lien is obstructing a lawful transaction, such as a transfer of real property, the Department will immediately issue a lien termination to the appropriate parties. A copy of the lien termination and an explanation of the error will be transmitted to the major credit reporting companies.

(Neb. Rev. Stat. §§ 77-361, 77-366, 77-2710, 77-27,111, 77-3904, 77-3906, and 77-3908(2). July 3, 2013.)

REG-36-002 DEFINITIONS

002.01 The definitions in this regulation apply throughout Title 316, Chapter 36.

002.02 Balance due notice means a notice mailed by the Department to the taxpayer stating:

002.02A That the Department, after reviewing a return, has determined that tax, interest, or penalties remain due and owing after all payments and credits have been applied, either as indicated by the taxpayer on the return, or as calculated by the Department; and

002.02B The amount of the tax, interest, or penalties that remain due and owing.

002.03 Bankruptcy petition means a petition filed in the Bankruptcy Court under 11 U.S.C. §§ 301, 302, 303, or 304 commencing a bankruptcy case, whether filed by the taxpayer/debtor or creditors of the taxpayer/debtor.

002.04 Collection action means any action available to the Department to collect delinquent taxes from taxpayers. Collection action includes, but is not limited to: issuing levies; perfecting state tax liens; seizing and selling property; and revoking permits.

002.05 Corporation means any corporation and any other entity that is taxed as a corporation under the Internal Revenue Code.

002.06 Date of assessment, except as provided below, means the date the liability is posted to the books of the Department and a balance due notice is generated.

002.06A Income tax which is shown to be due on an income tax return, including revisions for mathematical errors, is assessed on the date the return is filed.

002.06B Any amended tax return showing an increase of tax is assessed on the date the return is filed.

002.06C If a tax return is properly filed without the correct computation of the tax, or without full payment of the tax due, the tax is assessed on the date when payment is due.

002.06D If an amended tax return or report filed pursuant to Neb. Rev. Stat. § 77-2775 concedes the accuracy of a federal change or correction, or if a state change or correction has become final, any deficiency is assessed on the date of filing of the report or amended return.

002.06E If a notice of proposed deficiency determination is issued, the date of assessment is the date the proposed deficiency determination becomes final.

002.07 Debtor means a person or taxpayer concerning which a bankruptcy petition has been filed.

002.08 Delinquency means any tax, interest, penalties, or costs which are owed and past due, regardless of whether the amount was simply unpaid or issued by the Department as a balance due notice, jeopardy assessment, notice of proposed deficiency determination, or any other assessment.

002.09 Demand for payment means a notice which informs the taxpayer of the final amount due, including interest, penalties, and costs, and the tax programs for which it is due. (Reg-36-004, Demand for Payment)

002.10 Department means the Nebraska Department of Revenue.

002.11 Hearing Officer means the Tax Commissioner, or an individual designated by the Tax Commissioner, to conduct a hearing or other proceeding pursuant to the Administrative Procedure Act, whether designated as the presiding officer, administrative law judge, or some other title designation.

002.12 Jeopardy means a situation which may require immediate action under Reg-36-003.03.

002.13 Levy means a collection action where the Department executes against the income, cash flow, or property of the taxpayer. Levies may be made against the income or assets of the taxpayer, including, but not limited to: wages; bank accounts; securities; rents owed to; debts owed to; or other property of the taxpayer.

002.14 Notice of proposed deficiency determination means a notice mailed to the taxpayer informing the taxpayer that the Department has examined relevant books and records and determined that returns should have been filed, or that the returns filed, or the remittances made, do not accurately report and pay the correct amount of any tax, interest, or penalty; and that additional tax, interest, or penalty is due.

002.15 Person means bodies politic and corporate, public officials, societies, communities, nonprofit organizations, nonprofit corporations, the public generally, individuals, partnerships, LLCs, joint stock companies, associations, and any other entities and organizations.

002.16 Petition for redetermination means a protest filed with the Tax Commissioner as set out in Reg-33-003, disagreeing with a proposed jeopardy determination or a notice of proposed deficiency determination issued by the Department, which asserts that additional tax, interest, or penalty is due. A petition for redetermination asks that the Tax Commissioner reconsider the notice of proposed determination and begins a contested case for purposes of the Nebraska Administrative Procedures Act.

002.17 Revocation hearing means an action initiated by the Department where a hearing officer requires a taxpayer to appear and show cause why any licenses or permits held by the taxpayer should not be revoked or suspended for failure to comply with any law or regulation governing the collection of any tax.

002.18 Seizure means a collection action in which the Department levies against the property of the taxpayer for purposes of selling the property to satisfy the tax liability.

002.19 State tax lien means a claim or encumbrance on the real, personal, or intangible property of the taxpayer to enforce the collection of taxes owed the state.

002.20 Tax means any tax, fee, or in-lieu-of-tax contribution which is imposed by the laws of this state and administered or collected and enforced by the Tax Commissioner or Department. Unless the context suggests otherwise, the term “tax” includes interest and penalties that were due or assessed with the tax.

002.21 Tax Commissioner means the chief executive officer of the Department.

002.22 Taxpayer means any person responsible for filing a tax return or paying or remitting any tax.

002.23 Willful failure means a failure which was the result of an intentional, conscious, and voluntary action.

(Neb. Rev. Stat. §§ 77-1783.01, 77-2709, 77-2710, 77-2776, 77-2785, 77-27,102, 77-27,111, 77-3901, 77-3902, and 77-3908, and 11 U.S.C. § 101, 2007. July 3, 2013.)

REG-36-003 INITIATING A COLLECTION ACTION

003.01 Balance Due Notice. If a tax return is filed but the correct amount of tax is not paid in full when due, and no payment arrangements were made, the Department will mail a balance due notice. If the taxpayer fails to pay the balance due, or make arrangements to pay the balance due, the Department will mail a written demand for payment to the taxpayer.

003.02 Notice of Proposed Deficiency Determination. If the Tax Commissioner finds that a return should have been filed and was not, or that the amount shown as due on a tax return is less than the correct amount, the Department must notify the taxpayer of the amount of the deficiency proposed to be assessed. If a taxpayer fails to file a return, the Department will estimate the amount due, based on the best information available to the Department, and must notify the taxpayer of the amount of deficiency proposed to be assessed. When any notice of proposed deficiency determination becomes final, as determined in Reg-36-004.01 of these regulations, the Department will mail a written demand for payment to the taxpayer.

003.03 Jeopardy.

003.03A A jeopardy action may be initiated if the Tax Commissioner finds that a taxpayer is about to:

003.03A(1) Depart from the state;

003.03A(2) Conceal property or remove property from the state;

003.03A(3) Hide from creditors; or

003.03A(4) Do any other act tending to stop, impede, or delay any collection action for the preceding or current taxable year, unless the proceedings are brought without delay.

003.03B If the Tax Commissioner finds one of the conditions described in 003.03A(1) through 003.03A(4), he or she may declare the taxable period for the taxpayer immediately terminated, and issue a notice of jeopardy determination to the taxpayer stating these findings, together with a demand for immediate payment of any tax due for this period. This may be done whether or not the time otherwise allowed by law for filing returns and paying the tax has expired.

003.03C This tax becomes due and payable immediately.

(Neb. Rev. Stat. § 77-2709. July 3, 2013.)

REG-36-004 DEMAND FOR PAYMENT

004.01 Collection actions may not commence until a written demand for payment has been mailed by the Department to the taxpayer. Except for jeopardy assessments under Reg-36-003.03, no demand for payment may be issued until a balance due notice is mailed or a notice of proposed deficiency is final. A notice of proposed deficiency determination is final:

004.01A If no petition for redetermination is timely filed by the taxpayer, 60 days after the notice of proposed deficiency determination is mailed by the Tax Commissioner, except;

004.01A(1) A notice of proposed deficiency determination for income tax is final 150 days after the notice is mailed if the taxpayer was outside the United States when the notice was mailed, and

004.01A(2) A notice of jeopardy determination or a notice of proposed deficiency determination for the drug tax is final ten days after the notice is mailed, but collection actions may begin immediately.

004.01A(3) In any collection action brought to enforce payment of taxes made due and payable by a notice of jeopardy determination, the findings of the Tax Commissioner are prima facie evidence of the taxpayer’s intent and design.

004.01B If a petition for redetermination is timely filed by the taxpayer, the notice of proposed deficiency determination is final 30 days after the decision of the Tax Commissioner is mailed to the taxpayer unless the decision of the Tax Commissioner is appealed as provided in Reg-33-015.

004.02 Balance Due Notice. On or after the date a balance due notice is sent, the Department will mail the taxpayer a demand for payment which notifies the taxpayer that a collection action will be initiated.

004.03 Notice of Proposed Deficiency Determination. On or after the date a notice of proposed deficiency determination becomes final, the Department will mail the taxpayer a demand for payment notifying the taxpayer that a collection action will be initiated.

004.04 Requirements for a Demand for Payment.

004.04A A demand for payment must identify the taxpayer and the type of ownership interest, if applicable.

004.04B A demand for payment must inform the taxpayer of the total amount due and the tax programs for which it is due. This total includes the amount of tax, penalties, interest, and costs.

004.04C A demand for payment must be served personally or by first class mail addressed to the taxpayer or authorized representative at the last known address of the taxpayer.

004.04D A demand for payment must notify the taxpayer that if payment is not made and the taxpayer makes no arrangements with the Department for payment by the deadline stated in the notice, the Department may commence collection actions.

004.04E A demand for payment must also inform the taxpayer of the options available to the taxpayer that may avoid a collection action, including installment payment agreements.

004.05 If no payment or payment agreement as described in Reg-36-005 has been received by the Department by the due date stated in the demand for payment, the Department may begin collection actions.

(Neb. Rev. Stat. §§ 77-2709, 77-2710, 77-2711, 77-2777, 77-2778, 77-27,102, 77-27,111, 77-27,129, and 77-3908. July 3, 2013.)

REG-36-005 PAYMENT AGREEMENTS

005.01 When a taxpayer becomes delinquent in paying or remitting taxes, or is unable to pay the liability in full, the Department may enter into a payment agreement with the taxpayer.

005.01A A taxpayer may pay any delinquency over a period of 90 days without a written payment agreement.

005.01B Any arrangement between a taxpayer and the Department to pay a delinquency over more than 90 days must be in writing and must provide for electronic payments, if possible.

005.02 Any payment agreement must require the taxpayer to make timely payments and to timely file all future returns and pay or remit all future taxes.

005.03 Except as provided in 006.03A or 006.03B, a financial statement from the taxpayer may be required for any payment agreement. Information in the financial statement which cannot be verified or seems unreasonable may be adjusted when determining how much the taxpayer will pay.

005.03A If the delinquency is for individual income tax, and the agreement provides for electronic funds transfers that will satisfy the delinquency within 24 months, a financial statement is not required.

005.03B If the delinquency is for any tax program other than individual income tax, and the agreement provides for electronic funds transfers that will satisfy the delinquency within 12 months, a financial statement is not required.

005.04 A signed payment agreement is considered a current demand for payment for the duration of the agreement. If the taxpayer defaults on the payment agreement, the Department may proceed with a collection action without further notification to the taxpayer.

(Neb. Rev. Stat. § 77-2792. July 3, 2013.)

REG-36-006 STATE TAX LIENS

006.01 If any person liable to pay any tax under any tax program administered by the Tax Commissioner neglects or refuses to pay any delinquency after a demand for payment, the amount of the tax, including any interest, penalty, and costs that may accrue, is a lien in favor of the state upon all property and rights to property, then owned by the person or acquired before the expiration of the state tax lien.

006.01A Unless another date is specifically provided by law, the state tax lien arises on the date of assessment and remains in effect:

006.01A(1) For three years after that date, or one year after a payment agreement signed by a taxpayer to resolve a delinquency expires, whichever is later, if the notice of state tax lien is not recorded with the Secretary of State;

006.01A(2) For ten years after the date the notice of state tax lien or continuation statement is recorded with the Secretary of State;

006.01A(3) Until the amounts have been paid or a judgment against the taxpayer arising out of the liability has been satisfied; or

006.01A(4) Until the state tax lien has expired, unless a continuation statement is recorded prior to the lapse.

006.01B A state tax lien may be continued for additional consecutive ten-year periods.

006.01C A state tax lien expires and becomes unenforceable if the Department does not record the state tax lien or continuation statement within the time periods provided in §§ 006.01A(1) or 006.01A(2) of this regulation.

006.02 The notice of state tax lien may be recorded with the Secretary of State if any of the following conditions exist:

006.02A There is a balance due as a result of non-payment or partial payment, after a demand for payment has been made;

006.02B There is a balance due as a result of a notice of proposed deficiency determination that has become final; or

006.02C There is a balance due as a result of a notice of jeopardy determination, in which case the notice of state tax lien should be recorded at the time the notice of jeopardy determination and demand for payment is mailed or delivered to the taxpayer.

006.03 A notice of state tax lien will not be recorded:

006.03A Before a demand for payment has been issued to the taxpayer.

006.03B While the taxpayer is under the jurisdiction of the Bankruptcy Court, unless relief or permission is granted by the court;

006.03C When the statute of limitations for recording state tax liens has expired;

006.03D When a notice of proposed deficiency determination is still open to protest, unless the proposed deficiency determination was issued as a jeopardy assessment;

006.03E Before a corporate officer or responsible person has been properly notified and the demand for payment has become final; or

006.03F Before a transferee or successor has been properly notified and the assessment has become final.

006.04 The notice of state tax lien recorded with the Secretary of State must include: the names of the taxpayers responsible for the tax; the amount of tax, penalty, interest, and costs through the date of the state tax lien; the tax periods and tax programs involved; and a statement that the state tax lien will become unenforceable by operation of law ten years after the date of recording if no continuation statement is recorded on or before the expiration of the most recent notice of state tax lien or continuation statement. The taxpayers responsible for the tax are:

006.04A For a sole proprietorship, the taxpayer responsible for the tax is the individual who owns the business based on the records of the Department;

006.04B For a corporation, the taxpayer responsible for the tax is the corporation as its name appears in the records of the Secretary of State;

006.04C For a general partnership, the taxpayers responsible for the tax are all the partners as jointly and severally liable, and if there is property held in the partnership name, the partnership;

006.04D For a limited partnership, the taxpayers responsible for the tax are all the general partners as jointly and severally liable, and if there is property held in the partnership name, the partnership; or

006.04E For a limited liability company (LLC), Subchapter S corporation, cooperative, joint venture, or any other entity, the taxpayer responsible for the tax is the business as its name appears in the records of the Secretary of State.

006.05 The Priority of a State Tax Lien.

006.05A With regard to the Internal Revenue Service, the priority of a state tax lien is determined from the date of assessment.

006.05B With regard to all other creditors, the priority of a state tax lien is determined when the notice of state tax lien was recorded with the Secretary of State or, in the case of real property, the date the notice of state tax lien was recorded with the register of deeds of the appropriate county.

006.05C Unless otherwise provided by law, a state tax lien is valid against any purchaser, successor to business property, holder of a security interest, holder of a mechanic’s lien, or judgment lien creditor as of the date the notice of state tax lien is recorded with the Secretary of State, or in the case of real property, the register of deeds of the appropriate county.

006.05DThe state tax lien is valid against any subsequent creditor, but is subject to a prior lien.

006.05E In the case of a prior mortgage on real property, or a secured transaction covering personal property written to secure a present debt and future advances, the state tax lien is subject to the prior lien unless the Tax Commissioner has notified the lienholder in writing of the recording of the state tax lien. In this case, any subsequent indebtedness created under the mortgage or secured transaction is junior to the state tax lien.

006.06 Termination of State Tax Liens. A state tax lien will be terminated by the Department if the delinquency is paid, abated, adjusted, or reduced to less than $50. The Department must record a termination statement upon the termination of any state tax lien.

006.07 A state tax lien may be released in whole or in part with respect to particular persons or property by the Department if:

006.07A The tax amount and any interest, penalties, and costs have been secured sufficiently by a lien on other property;

006.07B A surety bond or other satisfactory security has been posted, deposited, or pledged with the Tax Commissioner in an amount sufficient to secure the payment of the taxes and any interest, penalties, and costs; or

006.07C The release, or partial release of the state tax lien, will not jeopardize the collection of the taxes and any interest, penalties, and costs.

006.07D The Department must record a release statement upon the release, in whole or in part, of any state tax lien.

006.08 A state tax lien may be subordinated to other liens and encumbrances by the Department if subordination of the state tax lien will not jeopardize the collection of the taxes and any interest, penalties, and costs. To subordinate a state tax lien, the Department must record a subordination statement with the Secretary of State.

006.09 The Department will send a demand for payment notifying the taxpayer that a tax lien may be recorded. This demand for payment and notice must state that the taxpayer may request in writing, a determination that a state tax lien is not valid against the taxpayer’s interest in property within 20 days after the demand for payment and notice is mailed to the taxpayer.

006.09A If the taxpayer requests a determination that a state tax lien is not valid against the taxpayer’s interest in property, the Department must respond to the taxpayer’s request in writing within ten days of receipt of the request, and mail its response by first class mail.

006.09B The taxpayer may appeal the decision as provided in Neb. Rev. Stat. § 84-917.

(Neb. Rev. Stat. §§ 77-27,103 and 77-3904.October 26, 2014.)

REG-36-007 JUDICIAL ENFORCEMENT OF STATE TAX LIENS

007.01 At any time within three years after any amount of tax to be collected is assessed, or within ten years after the last recording of the state tax lien or continuation statement, the Tax Commissioner may bring an action in the District Court of Lancaster County, or in the courts of any other state, or the United States, in the name of the people of the State of Nebraska to collect the delinquent amount together with interest, penalties, and costs.

007.02 The Attorney General will prosecute the action on behalf of the Tax Commissioner.

007.03 The rules of civil procedure relating to service of summons, pleadings, proofs, trials, and appeals are applicable to the proceedings.

007.04 In the action, a writ of attachment may be issued, and no bond or affidavit is required before issuing the attachment.

007.05 In the action, a certificate by the Tax Commissioner showing the delinquency is prima facie evidence:

007.05A That the taxpayer is liable for the tax, interest, penalties, and costs;

007.05B Of the amount of tax, interest, penalties, and costs;

007.05C That the amount of tax, interest, penalties, and costs are delinquent; and

007.05D That the Tax Commissioner has complied with all provisions of the applicable tax programs.

(Neb. Rev. Stat. §§ 77-2713(6), 77-27,109(2), and 77-3905. July 3, 2013.)

REG-36-008 LEVY ON AN EMPLOYER OR FINANCIAL INSTITUTION

008.01 The Department may issue a notice of levy if a taxpayer is delinquent in the payment of any Nebraska taxes, the taxpayer has not shown satisfactory cooperation regarding delinquent taxes, and a demand for payment has been sent for the total amount owing within the last 60 days. The notice of levy must inform the taxpayer, and the employer, bank, or financial institution of the right to request in writing, a determination that a notice of levy is not valid against his or her interest in the property within 20 days after service of the notice of levy as provided in Reg-36-006.06.

008.01A Notices of levy may be issued without recording a notice of state tax lien.

008.01B If the notice of levy is on wages, and the balance will be resolved through levy payments prior to the expiration of the statutory lien, it is not necessary to record the notice of state tax lien. If a wage levy will extend beyond the expiration of the statutory lien, the notice of state tax lien must be recorded with the Secretary of State.

008.01C Except as provided in § 008.01C(1), a notice of levy must be served personally or by first class mail to the payor, bank, or other financial institution in control of wages or assets of the taxpayer.

008.01C(1) The Tax Commissioner may enter into agreements with one or more financial institutions in Nebraska to serve notices of levy to those financial institutions in any medium and format agreed upon, including electronic transmittal.

008.01D The payor, bank, or other financial institution must respond to the notice of levy within 20 days after receipt of the notice by either complying with the levy or requesting a determination that the levy is not valid against the interest of the payor, bank, or financial institution as provided in Reg-36-008.06.

008.02 A notice of levy served on a payor is effective upon all wages, salaries, or other income that is in the control of the payor, and that is not exempt, until the amount of tax, interest, penalties, and costs are satisfied or the levy is released. (Reg-36-010, Exemptions from Levies). The Department may approve a reduction in the amount of wages, salaries, or other income that is subject to levy.

008.02A If the taxpayer is an employee of the payor, and ceases to be employed by the payor before the entire amount of tax, interest, penalties, and costs are satisfied, the employer must immediately notify the Tax Commissioner in writing of the termination date of the employee and the total amount withheld from the taxpayer. No employer may discharge the employee solely because the Department has issued the initial notice of levy.

008.02B The Tax Commissioner must refund any amounts withheld from the taxpayer and paid over to the Department that are in excess of the tax, interest, penalties, and costs.

008.02C The notice of levy is continuing and will be released only when:

008.02C(1) The amount of the levy is paid in full;

008.02C(2) The levy is voluntarily released by the Department; or

008.02C(3) The taxpayer comes under the protection of the U.S. Bankruptcy Court.

008.03 A notice of levy served on a bank or other financial institution is effective only for the amount stated in the levy and to the extent of funds under the control of the bank or other financial institution at the time of the service of the notice of levy.

008.03A Funds subject to the notice of levy include, but are not limited to, funds in checking accounts, savings accounts, certificates of deposit, individual retirement accounts, and club savings plans.

008.03B Additional levies may be served at different intervals to seize additional real, personal, or intangible property or rights to real, personal, or intangible property (property).

008.03C A bank or other financial institution cannot subtract a service fee, processing fee, or any other amount from amounts returned to the Department under the notice of levy to reimburse the financial institution for its cost of processing the levy.

008.03D A bank or other financial institution may not subtract a loan payment, loan balance, check that was honored despite insufficient funds, bank charges, or any other amount owed the financial institution by the taxpayer from the amounts returned to the Department under the notice of levy.

008.04 Effect of Honoring a Notice of Levy. Any person in possession of assets who has been served a notice of levy and who surrenders the property pursuant to the notice of levy, is discharged from any liability to the taxpayer with respect to the property surrendered or paid.

008.05 Effect of Refusing to Honor a Notice of Levy. Any employer, bank, or other financial institution who is served a notice of levy, and who fails or refuses to honor the levy without cause, may be held liable for the amount of the levy up to the value of the property of the taxpayer under its control at the time the notice of levy was served or, if it is a continuing levy, assets that come into its possession at any time thereafter until the notice of levy is released. The employer, bank, or other financial institution is subject to the same collection provisions as set forth in Chapter 36 of these regulations.

008.06 A taxpayer, employer, bank, or other financial institution may request in writing, a determination that a notice of levy is not valid against his or her interest in the property within 20 days after service of the notice of levy.

008.06A The Department must respond to the taxpayer’s request in writing within ten days of receipt of the request, and mail its response by first class mail.

008.06B Any person who disagrees with the decision may appeal as provided in Neb. Rev. Stat. § 84-917.

(Neb. Rev. Stat. §§ 25-1558, 77-3906, and 77-3910.October 26, 2014.)

REG-36-009 SEIZURE AND SALE OF PROPERTY

009.01 The Department may seize and sell real, personal, or intangible property, or rights to real personal, or intangible property (property) of a taxpayer when: the taxpayer is delinquent in the payment of any Nebraska taxes; the taxpayer has not shown satisfactory cooperation regarding delinquent taxes; and a demand for payment has been sent for the total amount owing within the last 60 days.

009.01A The Tax Commissioner, or an authorized employee, may levy, or by warrant issued under his or her hand, authorize a sheriff or duly authorized employee of the Tax Commissioner to levy upon, seize, and sell property belonging to the taxpayer, that is not exempt, to the extent necessary to satisfy the liability for the payment of the amount due (Reg-36-010, Exemptions from Levies).

009.01B Before a writ of seizure is issued, the Department must identify the property to be seized, verify the nature and extent that the title to the property rests with the taxpayer, and identify all other known lienholders on the property.

009.01C If the writ of seizure is to be executed by the county sheriff, the Department must first record the state tax lien in the office of the Secretary of State or the appropriate county and pay the costs of the county sheriff.

009.02 The taxpayer must be served a copy of the writ of seizure either in person at the time the writ is executed or by first class mail. The writ must inform the taxpayer of his or her right to request in writing a determination that the seizure of property was invalid within 20 days after service of the writ of seizure.

009.03 A writ of seizure is deemed issued when signed by an officer of the Department.

009.04 Any person whose property has been seized has the right to pay the amount due, together with the expenses of the proceeding, if any, to the Department, or reach a payment agreement with the Department at any time before the sale of the property. Upon payment or acceptance of a payment agreement, the Department must restore the property to the person, and all further proceedings in connection with the levy on the property must cease from the time of payment or acceptance of a payment agreement. If the property is in the possession of the county sheriff, the taxpayer must pay the taxes, interest, and penalties, plus costs directly to the sheriff.

009.05 Effect of Honoring a Seizure. Any person in possession of property who has been served a writ of seizure and who surrenders the property pursuant to the writ of seizure is discharged from any liability to the taxpayer with respect to the ownership or possession of property surrendered or paid over.

009.06 Effect of Refusing to Honor a Seizure. Any person in possession of property who has been served a writ of seizure and who fails or refuses to honor the writ of seizure without cause, may be held liable for the amount of the writ of seizure up to the value of the property of the taxpayer under his or her control at the time the writ of seizure was served. The person who fails or refuses to honor the writ may be subjected to the same collection provisions as set forth in Chapter 36 of these regulations.

009.07 Property Seized by the County Sheriff. Any property that is seized by the county sheriff will be sold by the county sheriff at public auction under the authority of Chapter 25, Article 15 of the Nebraska Revised Statutes.

009.08 Any property seized by the Department will be sold under the authority of Neb. Rev. Stat. § 77-3906 as follows:

009.08A Seized property will be secured as safely as possible before sale for at least 20 days to give the taxpayer or any other persons known to have an interest in the property the opportunity to contest the seizure or claim an exemption.

009.08B A minimum of 20 days prior to the date of the sale, the taxpayer and any other persons with an interest in the property must be notified by mail of the date, time, and place of the sale. The notice must specify the amount due and contain:

009.08B(1) In the case of real property, or rights to real property, a legal description of the property seized; or

009.08B(2) In the case of all other property, or rights to property, an account of the property seized.

009.08C In addition to personal notification of the taxpayer and other persons with an interest in the property, the Department must publish a notice in a newspaper of general circulation in the county where the sale is to be held at least once per week for four successive weeks. If there is no newspaper of general circulation, a notice must be posted in three public places within the county.

009.08D The notice must contain:

009.08D(1) A description of the property to be sold;

009.08D(2) A statement of the type of tax due and the amount, including interest, penalties, and costs;

009.08D(3) The name of the delinquent taxpayer; and

009.08D(4) A statement that unless the amount due, including interest, penalties, and costs, is paid on or before the time fixed in the notice for the sale; or security in an amount determined by the Tax Commissioner is placed with the Tax Commissioner, or his or her authorized representative, on or before that time, the property, or so much of it as is necessary, will be sold in accordance with law and the notice.

009.08E At the sale, the Department will sell the property at public auction to the highest bidder or sell it under sealed bids in accordance with law. If several items of property were seized, the items may be offered separately, in groups, or in the aggregate, and may be sold using whichever method produces the highest aggregate amount. Payment for the property must be tendered in certified funds or cash on the day of the sale. If the buyer cannot tender certified funds or cash, the Department will immediately proceed to sell the property again in the same manner.

009.08F After the sale, the Department must issue a bill of sale or deed to the buyer. The bill of sale or deed vests the interest or title to the property in the purchaser. If the property is real estate, the purchaser must record the deed in the appropriate county. The unsold portion of any property seized remains in the custody and control of the Tax Commissioner until offered for sale again under this section or redeemed by the taxpayer.

009.09 If the property seized and sold under this section is not sufficient to satisfy the demand for payment for which the seizure was made, the sheriff or an authorized employee may thereafter, and as often as necessary, seize and sell any other property of the taxpayer that is available for seizure until the amount due from the taxpayer, together with all expenses, is fully paid. The procedures described in this regulation will govern any subsequent seizure and sale of any property of the taxpayer.

009.10 If any other person having an interest or lien upon the property files a notice of his or her interest or lien with the Tax Commissioner before the sale, the Tax Commissioner must withhold any excess pending a determination of the rights of the respective parties by a court of competent jurisdiction. If, for any reason, the taxpayer is not available, the Tax Commissioner must deposit the excess money with the State Treasurer, as trustee for the taxpayer or his or her heirs, successors, or assigns. If the money received from the sale exceeds the total of all amounts due, together with all expenses, and if there is no other interest in or lien upon the money received, the Tax Commissioner must return the excess to the taxpayer and obtain a receipt. Any interest earned will not be paid to the taxpayer.

009.11 All employees and officers of companies must open all books containing evidence or statements relating to the property eligible for seizure, on demand of a sheriff or an authorized employee about to seize, or having seized, any property.

009.12 Property seized by the Department may be returned to the taxpayer when:

009.12A The amounts due, together with all expenses are paid in full or a payment agreement is reached with the Department;

009.12B Return of the property will facilitate collection of the tax liability;

009.12C The taxpayer deposits security with the Tax Commissioner in the form prescribed in Reg-36-012.05 and in an amount equal to the tax liability, and any interest, penalties, and costs; or

009.12D The Tax Commissioner determines that the seizure was improper or unnecessary.

009.13 A taxpayer or any other person with an interest in the property seized by the Department may request in writing a determination that a seizure of property was invalid within 20 days after service of the writ of seizure.

009.13A The Department must respond to the taxpayer’s request in writing within ten days of receipt of the request, and mail its response to the requesting taxpayer or other person with an interest in the property by first class mail.

009.13B Any person who disagrees with the decision may appeal as provided in Neb. Rev. Stat. § 84-917.

(Neb. Rev. Stat. §§ 77-3906 and 77-3908.October 26, 2014.)

REG-36-010 EXEMPTIONS FROM LEVIES

010.01 The Department may not levy against or seize the exempt property or income of a taxpayer. The Department may levy against or seize non-exempt property or income of a taxpayer for any amount which is over and above the exempt amounts, if any. Exemptions from execution include, but are not limited to, those in the following sections of this regulation.

010.02 Exemptions from Levy or Seizure. The following property or dollar amounts are exempt from levy and seizure as provided by the law of this state:

010.02A Any federal or state earned income tax credit refund;

010.02B The immediate personal possessions of the taxpayer and his or her family;

010.02C All necessary clothing of the taxpayer and his or her family;

010.02D The taxpayer's interest, up to an aggregate fair market value of $1,500, in household furnishings, household goods, household computers, household appliances, books, or musical instruments which are held primarily for personal, family, or household use of the taxpayer and any dependents;

010.02E The taxpayer's interest, up to an aggregate fair market value of $2,400, in implements, tools, or professional books or supplies held for use in the principal trade or business of the taxpayer and any dependents. This may include one motor vehicle used by the taxpayer in connection with his or her principal trade or business or to commute to and from his or her principal place of trade or business;

010.02F The taxpayer's interest in any professionally prescribed health aids for the taxpayer and any dependents;

010.02G Up to $2,500 in personal property in addition to property exempted under Reg-36-010.02A through Reg-36-010.02F;

010.02H A homestead as defined in Neb. Rev. Stat. § 40-101, not exceeding $60,000; and

010.02I Any other payment or property that is exempt from levy or execution to satisfy a state tax lien under state or federal law.

010.03 Stock bonus, pension, profit-sharing, or similar plan. Any interest held under a stock bonus, pension, profit-sharing, or similar plan or contract payable on account of illness, disability, death, age, or length of service, to the extent necessary for the support of the taxpayer and any dependents, is exempt from levy or execution unless:

010.03A Within two years prior to bankruptcy, or entry against the taxpayer of a money judgment which becomes final, the plan or contract was established or was amended to increase contributions by or under the auspices of the taxpayer or of an insider that employed the taxpayer at the time the taxpayer's rights under the plan or contract arose; or

010.03B The plan or contract does not qualify under §§ 401(a), 403(a), 403(b), 408, or 408A of the Internal Revenue Code.

010.04 Compensation for personal injuries or death. All proceeds and benefits, including interest earned, paid either as a lump sum or as periodic payments, which are made as compensation for personal injuries or death, are exempt from levy unless there is a written assignment allowing a levy.

010.05 Claiming an exemption. To claim an exemption from levy or seizure, the taxpayer must file a list of all of the sources of income received, or property owned by the taxpayer, with the Department in writing within 20 days of the notice of levy or writ of seizure, showing which items or amounts of income or property he or she claims to be exempt from execution pursuant to this regulation, along with a value for each item of property listed.

010.05A The Department must respond to the taxpayer’s request in writing within ten days of receipt of the request, and mail its response by first class mail.

010.05B The taxpayer may appeal the decision as provided in Neb. Rev. Stat. § 84-917.

(Neb. Rev. Stat. §§ 25-1552 through 25-1559, 25-1563.01, 25-1563.02, 40-101, and 77-3906. July 3, 2013.)

REG-36-011 REVOCATION OR SUSPENSION OF A TAX LICENSE OR PERMIT

011.01 The Tax Commissioner may set a hearing requiring the taxpayer to show cause why his or her licenses or permits should not be revoked or suspended whenever the holder of a license or permit:

011.01A Fails to comply with any provision of the Nebraska Revenue Act, another tax statute, or with any rule or regulation of the Tax Commissioner relating to a tax;

011.01B Fails to maintain or provide the Department with any books, records, documents, or other items required by law, rule, or regulation; or

011.01C Misrepresents, or fails to disclose, a material fact to the Department.

011.02 The Department may request that the hearing officer set a hearing to show cause why the taxpayer’s licenses, or permits should not be revoked or suspended.

011.02A An affidavit listing the violations giving rise to the request for a revocation hearing must be attached to the request for a revocation hearing.

011.02B The request for a revocation hearing and the supporting affidavit must be sent to the hearing officer and must also be mailed to the taxpayer at his or her business address by first class mail.

011.02C The hearing will be conducted in accord with the Practice and Procedure regulations of the Department, Reg-33-001 through Reg-33-015.

(Neb. Rev. Stat. §§ 77-2705 and 77-2710. July 3, 2013.)

REG-36-012 SECURITY FOR PAYMENT AND COLLECTION OF TAX

012.01 The Tax Commissioner may require any taxpayer to file a bond or other security (security), to ensure payment and collection of any tax, in an amount that the Tax Commissioner prescribes and as provided by 012.04.

012.02 Security may be required in the following circumstances.

012.02A Existing Permitholders. Existing permitholders may be required to post security in the following circumstances:

012.02A(1) If the taxpayer files returns on an annual basis and has had one or more delinquencies in remitting tax or filing timely returns during the last 24 months;

012.02A(2) If the taxpayer files returns on a quarterly basis and has had two or more delinquencies in remitting tax or filing timely returns during the last 24 months; or

012.02A(3) If the taxpayer files returns on a monthly or more frequent basis and has had four or more delinquencies in remitting tax or filing timely deposits or returns during the last 24 months.

012.02B Applicants for New Permits. Applicants for new permits may be required to post security in the following circumstances:

012.02B(1) When the applicant has previously held a tax permit and met one of the conditions of 012.02A(1) through 012.02A(3) at that time;

012.02B(2) When the applicant previously held a sales tax permit that was revoked;

012.02B(3) When the business location was previously used for a similar business or businesses that met one of the conditions of 012.02A(1) through 012.02A(3) at that time; or

012.02B(4) When an investigation of the applicant's financial status by the Department shows that the applicant will likely be unable to timely remit the tax.

012.03 Security may be posted by the taxpayer to release a state tax lien, or secure the return of property seized from the taxpayer.

012.04 Amount of Security. If one of the conditions in 012.02A or 012.02B is met, or if the taxpayer chooses to post security to avoid a collection action, the Tax Commissioner may require up to three times the average reporting period liability on any permit.

012.04A If the permitholder has been habitually delinquent, the Tax Commissioner may require up to five times the average reporting period liability. A permitholder will be considered habitually delinquent if the permitholder is delinquent for three or more months or has previously had a permit revoked for nonpayment of taxes.

012.04B A specific amount of security may be required in an order for continuance issued following the scheduling of a revocation hearing, or may be an amount reasonably determined by the Department.

012.05 Length of Time of Security. If security is required, it may be held for three years after the security is posted, if there are no violations. It may be held for a reasonable time after termination of a permit to allow for an audit or examination of the taxpayer’s records.

012.06 Forms of Acceptable Security. The following may be posted as security:

012.06A Nebraska state tax bond, underwritten by a surety company licensed to transact business in this state by the Nebraska Department of Insurance;

012.06B Certificate of deposit, issued by a federally insured Nebraska financial institution;

012.06C Passbook savings account, issued by a federally insured Nebraska financial institution;

012.06D Irrevocable letter of credit issued by a federally insured Nebraska financial institution;

012.06E Cash, cashier’s checks, money orders, or certified checks, if they will be held for less than 60 days. Any of these forms of security which are held, or expected to be held, longer than 60 days should be converted to a passbook or certificate of deposit;

012.06F Any other security must be approved by the Department in writing.

012.07 Form of Ownership. Certificates of deposit or passbook savings accounts must be held in the Department’s name. If any changes are made to the security, the form of ownership must be updated.

012.07A The financial institution must be provided the taxpayer’s federal identification number or Social Security number for interest reporting purposes.

012.07B All withdrawals from any form of security must be made in the form of a bank draft or cashier’s check.

012.08 To enforce collection of any tax, interest, penalties, and costs not paid when due, the Tax Commissioner may make demand upon any security which has been submitted to the Tax Commissioner on behalf of the taxpayer. If necessary, the security may be sold by the Tax Commissioner in the manner provided by Neb. Rev. Stat. § 77-27,131.

(Neb. Rev. Stat. §§ 77-2710, 77-27,131, and 77-3907. July 3, 2013.)

REG-36-013 CORPORATE OFFICER LIABILITY

013.01 Any officer or employee with the duty to collect, account for, or pay over any taxes imposed upon a corporation, or with the authority to decide whether the corporation will pay taxes imposed upon a corporation, is personally liable for the payment of the taxes in the event of willful failure on his or her part to have a corporation perform this act.

013.01A Officers or employees with the duty to collect, account for, or pay over any taxes include, but are not limited to those:

013.01A(1) Designated as officers of the corporation in the records of the Secretary of State;

013.01A(2) With the ability to write checks on corporate accounts or otherwise disburse corporate funds;

013.01A(3) Filing and signing tax returns and other Department forms;

013.01A(4) With the ability to hire and fire employees;

013.01A(5) In charge of the financial affairs of the corporation;

013.01A(6) With access to the books and records of the corporation; and

013.01A(7) With significant ownership of the company.

013.01B Willful failure means a failure that is the result of an intentional, conscious, and voluntary action. Evidence of willfulness includes, but is not limited to, a showing that while taxes were due and owing, the corporate officer or employee knew, or should have known, that taxes were due and owing and:

013.01B(1) Paid other creditors or corporate obligations;

013.01B(2) Directed that other creditors or corporate obligations be paid; or

013.01B(3) Failed to pay or direct payment of taxes when corporate funds were available.

013.02 Issuance of the Notice of Proposed Deficiency Determination and Demand for Payment. The notice of proposed deficiency determination and demand for payment must state that the taxpayer may protest the notice and demand within 60 days after the date the notice was issued and describe the requirements of the petition for redetermination as provided in Reg-33-003.01.

013.02A If the Department has not issued a notice of proposed deficiency determination to the corporation, the statutes which govern when a notice of proposed deficiency determination must be issued to the corporation also apply to issuing a notice and demand for payment to a corporate officer or employee.

013.02B If a notice of proposed deficiency determination has been issued to the corporation, the notice and demand for payment must be issued to a corporate officer or employee within three years after the date the assessment to the corporation became final.

013.02C If a corporation defaults on a payment plan, the notice and demand for payment must be issued to a corporate officer or employee within three years after the date that the liability which is the subject of the payment plan became final, due, and owing.

013.02D If the corporation appeared as a debtor or debtor in possession in a bankruptcy, the notice and demand for payment must be issued to the corporate officer or employee within three years of the date the assessment to the corporation became final, or one year after the closure or dismissal of the bankruptcy case, whichever is later.

013.03 Within 60 days after the day the notice and demand for payment were issued for the payment of any taxes, any officer or employee seeking to challenge the Tax Commissioner's determination may petition for a redetermination. The petition may include a request for the redetermination of the personal liability of the corporate officer or employee, the redetermination of the amount of the corporation's unpaid taxes, or both. If a petition for redetermination is not filed within the 60-day period, the determination becomes final.

013.04 If a petition for redetermination is filed, the Tax Commissioner may not commence collection actions, and must grant the officer or employee a hearing, and give him or her ten days' notice of the time and place of the hearing. The hearing will be conducted as provided in the Practice and Procedure regulations, Chapter 33 of this Title.

013.05 Once an assessment against a corporate officer or employee is final, the taxes will be collected from the corporate officer or employee in the same manner as provided under the Uniform State Tax Lien Registration and Enforcement Act and Chapter 36 of these regulations.

(Neb. Rev. Stat. §§ 77-1783.01, 77-2709 and 77-27,118. July 3, 2013.)

REG-36-014 COLLECTION AGENCIES

014.01 The Tax Commissioner may contract with any collection agency licensed pursuant to the Collection Agency Act, within or outside the state, for the collection of delinquent taxes, interest, penalties, and costs.

014.01A Delinquent tax claims may be assigned to the agency, for the purpose of litigation in the agency's name and at the agency's expense, to facilitate or expedite the collection process.

014.01B To be assigned delinquent tax claims, a private collection agency must post a bond not to exceed $100,000, guaranteeing compliance with the terms of the contract. This bond is in addition to any bond required by Neb. Rev. Stat. § 45-608.

014.01C The terms of the contract with the agency will govern the relationship between the Department and the agency, including the portion of the taxes collected by the agency that will be remitted to the Department, except that the percentage remitted may be no less than 50 percent of the amount collected.

014.02 For purposes of this regulation, delinquent taxes mean any tax liability that is due and owing for a period longer than six months and for which the taxpayer has been given at least three notices requesting payment, one of which has been sent by mail. The notice sent by mail must include a statement that the taxpayer's delinquency may be referred to an agency in the taxpayer's home state for collection.

(Neb. Rev. Stat. §§ 77-377.01, 77-377.02, 77-377.03, 77-2710, and 77-27,107. July 3, 2013.)

REG-36-015 CLAIMS

015.01 While the estate of a deceased taxpayer is open, the Department will not record a notice of state tax lien or levy against any property of the estate, but may:

015.01A Enter the premises, or a location where the books are maintained, to do an audit or examination after notifying the personal representative that the Department may be auditing or examining records;

015.01B Issue a notice of proposed deficiency determination for any filed or non-filed periods;

015.01C Require the personal representative to prepare tax returns;

015.01D Assess any tax or issue a demand for payment regarding any tax;

015.01E Continue a notice of state tax lien that was recorded prior to the death of the taxpayer;

015.01F Issue a demand for payment to the estate of a responsible corporate officer or employee, or to any other responsible corporate officer or employee, as provided in Reg-36-013.01; or

015.01G Set off a pre-death income tax refund against a pre-death income tax liability.

015.02 To collect delinquent taxes, interest, penalties, and costs from the estate of a deceased taxpayer that arose before death, the Department must file a claim against the estate with the county court or personal representative:

015.02A Within two months after the first published notice of the appointment of a personal representative under Neb. Rev. Stat. § 30-2483; or

015.02B Within three years after death if the Department has not received mailed notice in compliance with Neb. Rev. Stat. §§ 25-520.01 and 30-2483.

015.03 To collect delinquent taxes, interest, penalties, and costs from the estate of a deceased taxpayer that arise after death, the Department must file a claim against the estate with the county court or personal representative within four months after the claim arises, or within three years after death, if the Department has not received mailed notice in compliance with Neb. Rev. Stat. §§ 25-520.01 and 30-2483.

015.04 If the assets of the estate have been distributed, any claims for taxes, interest, penalties, and costs that were not paid by the personal representative, may be collected against the distributees of the estate within the later of three years after the death of the taxpayer or one year after the assets of the estate have been distributed. These claims are prosecuted in the county court where the estate was administered.

015.05 The priority of claims against the estate will be determined under the provisions of Neb. Rev. Stat. § 30-2487.

015.06 To collect any delinquent taxes, interest, penalties, and costs, the Department may file a claim with the State Treasurer regarding any property of a taxpayer delivered to the state under the Uniform Disposition of Unclaimed Property Act.

015.07 The Department may file claims to collect unpaid taxes, interest, and penalties under any other procedure authorized by law.

(Neb. Rev. Stat. §§ 25-520.01, 30-2483, 30-2485, 30-2487, 30-2494, 30-24,118, 30-24,120, 69-1318, 69-1318.01, and 69-1320. July 3, 2013.)

REG-36-016 BANKRUPTCY CLAIMS

016.01 If a bankruptcy petition is filed concerning any taxpayer, an automatic stay is usually operative and the Department may not act against the property of the bankruptcy estate, property of the debtor, or against a debtor personally to collect a debt; exercise control over, or take possession of property of a bankruptcy estate; or create or enforce a state tax lien. In cases of consecutive bankruptcy filings, the automatic stay may not be operative. During the pendency of a bankruptcy, the Department may:

016.01A Enter the premises or a location where the books are maintained to do an audit or examination after notifying the management, the trustee, and the debtor’s bankruptcy attorney that the Department may be auditing or examining records;

016.01B Issue a notice of proposed deficiency determination for any filed or non-filed periods;

016.01C Require tax returns;

016.01D Assess any tax or issue a demand for payment regarding this assessment;

016.01E Continue a notice of state tax lien that was recorded prior to the filing of the bankruptcy petition;

016.01F Issue a demand for payment to a responsible corporate officer or employee as provided in Reg-36-013.01 who is a debtor, subject to exceptions in the demand for payment;

016.01G Set off a pre-bankruptcy petition income tax refund against a pre-bankruptcy petition income tax liability.

016.02 If a bankruptcy petition is filed with regard to any taxpayer, Nebraska Rules of Bankruptcy Procedure require the taxpayer to file any delinquent tax returns that were due prior to the filing of the bankruptcy petition within 30 days after the bankruptcy petition was filed, unless an extension is granted by the Bankruptcy Court.

016.03 The Department must file a claim with the Bankruptcy Court for any taxes reported, but not paid; any taxes that have been assessed and not paid; any taxes currently due; and any interest, penalties, and costs assessed prior to the filing of the petition to share in any dividend from the bankruptcy estate.

016.03A If a notice of state tax lien has been recorded under Reg-36-006 prior to the filing of the bankruptcy petition, the taxes which are the subject of the lien may be a secured obligation with priority as against other creditors based on seniority of the lien.

016.03B If a notice of state tax lien has not been recorded prior to the filing of the bankruptcy petition, taxes are an unsecured debt and may be granted priority as provided in 11 U.S.C. § 507(a)(8).

016.03C A tax obligation that covers a period ending prior to the filing of the bankruptcy petition that becomes due after the bankruptcy petition was filed, is considered to have arisen before the petition was filed.

016.03D The Bankruptcy Court may determine the amount or legality of any tax, interest, penalty, or costs owed by the taxpayer at the time the bankruptcy petition was filed, whether previously assessed or not, or any refund claim asserted by the debtor/taxpayer, unless the tax or refund amount or legality was contested before and determined under Chapter 33 of this Title or by a court of this state on appeal prior to the filing of the bankruptcy petition.

016.04 When the debtor is an individual, liquidation under Chapter 7, or liquidation or confirmation and completion of a plan of reorganization under Chapters 11 or 13, may result in a general discharge of debts. However, this discharge does not discharge any tax obligation or its associated interest, penalties, or costs, or prevent the Department from assessing taxes that became due during the pendency of the bankruptcy if:

016.04A The return is for individual income tax for a taxable year that was last due, including extensions, after the date that is three years prior to the date the bankruptcy petition was filed;

016.04B The tax is for individual income tax that was assessed, and the assessment was final less than 240 days before the date the bankruptcy petition was filed, not counting;

016.04B(1) Any time during which an offer in compromise was pending, plus 30 days, or

016.04B(2) Any time during which a stay against collection was in effect in a prior bankruptcy petition, plus 90 days;

016.04C The tax is a trust fund tax;

016.04D The tax is an excise tax on a transaction occurring before the date of the petition, for which a return, if required, is last due, under applicable law or any extension, after three years before the date of the petition;

016.04E The tax was assessed as a result of a fraudulent return or a willful attempt to evade tax even if the taxes, interest, penalties, or costs arose more than three years prior to the date the bankruptcy petition was filed;

016.04F The tax is a tax for which no return, or equivalent report or notice, was filed; or

016.04G The tax is a tax for which a return was filed within two years before the date the bankruptcy petition was filed.

016.05 If the debtor is not an individual, no claims for taxes, interest, penalties, or costs are discharged under liquidation or confirmation of a plan of reorganization under Chapter 7 or Chapter 11. Only individuals may file under Chapter 13.

016.06 Debtors under Chapter 12 (farm reorganizations) are not discharged of any tax claims listed in subsections 016.04A or 016.04B except for income taxes resulting from capital gains generated from sales of property used to fund and complete a plan of reorganization.

016.07 Property exempted in a bankruptcy remains encumbered to the extent of the value of a state tax lien that was properly filed before the filing of the bankruptcy petition.

(Neb. Rev. Stat. § 77-27,112, R.R.S., and sections 11 U.S.C 362(b)(9), 11 U.S.C. 502, 11 U.S.C. 506, 11 U.S.C. 507(a)(8)(A)(i),(ii),(iii),(C),&(E), 11 U.S.C. 522(c)(2)(B), and 11 U.S.C. 523(a)(1). July 3, 2013.)

REG-36-017 OFFERS IN COMPROMISE

017.01 The Department may consider settling a delinquent tax account by means of an offer in compromise for less than the full amount of the liability, if the taxpayer is not disputing the tax, interest, penalties, and costs involved and is not currently in a bankruptcy proceeding. Each offer in compromise for settlement will be considered on its own merits.

017.01A An offer in compromise may be considered in situations where:

017.01A(1) An offer in compromise will resolve the liability, close the account, avoid additional time and expense in collection, or in situations where collection of the account cannot be accomplished by normal collection efforts; or

017.01A(2) The taxpayer does not have, and will not have in the foreseeable future, income, assets, or other means to pay the delinquency.

017.01B Circumstances where an offer in compromise could be considered include, but are not limited to: older unresolved accounts; corporate officer assessments; hardship cases; retired or limited income taxpayers; nonresident taxpayers; and over-assessed or canceled businesses.

(Neb. Rev. Stat. §§ 77-2792(3) and 77-3907(2). July 3, 2013.)

History

• Effective 2014-10-26

Chapter 54 Mechanical Amusement Device Tax Regulations

Neb. Admin. Code tit. 316, ch. 54 Mechanical Amusement Device Tax Regulations {#sec-316-nac-54 omnilex-key=us-ne-regs-official--title-316--316 NAC 54}

REG-54-001 PURPOSE OF THE ACT

001.01 The purpose of the Mechanical Amusement Device Tax Act is to exempt the gross receipts from the operation of mechanical amusement devices from the Nebraska Revenue Act of 1967. The occupation tax and license fee levied by the Act is considered to be a payment in lieu of the sales or use tax on the gross receipts from the operation of mechanical amusement devices.

001.02 The Act does not exempt the sale of mechanical amusement devices from the application of the sales or use tax. The administration of this Act is vested in the Tax Commissioner and the Nebraska Department of Revenue.

(Sections 77-3001, 77-3002, and 77-3005, R.R.S. 1943. September 15, 1975.)

REG-54-002 DEFINITIONS

002.01 Act shall mean the Mechanical Amusement Device Tax Act.

002.02 Mechanical amusement device (device) shall mean any machine which, upon insertion of a coin, currency, credit card, or substitute into the machine, operates or may be operated or used for a game, contest, or amusement of any description; and also shall mean game and draw lotteries. Generally, such devices would include, but are not limited to:

002.02A Pinball games,

002.02B Shuffleboard,

002.02C Bowling games,

002.02D Radio-ray games such as rifles, tanks, cannons, and darts,

002.02E Baseball games,

002.02F Football and foosball games,

002.02G Racing games,

002.02H Boxing games,

002.02I Air hockey games,

002.02J I.Q. games,

002.02K Light tennis and ping pong,

002.02L Game and draw lotteries,

002.02M Automatic musical devices (juke boxes),

002.02N Pool or billiards games, and

002.02O Video and electronic games.

002.03 The conduct of game and draw lotteries may be governed by the provisions of the Nebraska Lottery and Raffle Act, Nebraska Small Lottery and Raffle Act, Nebraska County and City Lottery Act, and section 9-701 R.R.S. 1997. It is suggested therefore that those organizations desiring to conduct such activities consult their county attorney regarding the legality of the operation.

002.04 Mechanical amusement devices shall not include the following:

002.04A Vending machines which dispense tangible personal property.

002.04B Devices located in private homes for private use. Multiple family dwellings with common recreation center facilities will not be considered private homes.

002.04C Devices which are mechanically constructed in a manner that would render their operation illegal under the laws of the State of Nebraska.

002.04D Pickle card dispensing devices which are required to be registered under section 9-345.03.002.05 Operator shall mean any person who operates a place of business in which a device owned by the operator is physically located or any person who places and either directly or indirectly manages or controls such device.

002.06 Distributor shall mean any person who sells, leases, or delivers a device to operators for a consideration whether directly or indirectly received. A distributor will also be an operator and subject to the same licensing and payment of the occupation tax on each device where the distributor leases or rents a device to business owners.

002.07 Decal shall mean the stamp issued by the Department of Revenue denoting payment of the occupation tax for one device.

(Sections 9-345.03, 9-401, 77-3001, and 77-3004, R.S.Supp., 1998, and sections 9-501, 9-601, 9-701, R.R.S. 1997. November 11, 1998.)

REG-54-003 LICENSE FEES FOR OPERATORS AND DISTRIBUTORS

003.01 Operators and distributors are required to obtain an annual license from the Department of Revenue even if the application fee is zero. The license may be issued by the Department of Revenue upon application by the operator or distributor and the payment of the correct fee for the specific type of license to be obtained or renewed.

003.01A The fee for a distributor’s license for the period July 1, 1998, through December 31, 1999, is two hundred fifty dollars ($250.00). For periods beginning on or after January 1, 2000, the license fee is zero.

003.01B The fee for an annual operator’s license is based upon the number of devices operated, until January 1, 2000.

003.01B(1) For the period July 1, 1998, through December 31, 1999, the annual operator’s license fee is zero if the operator is operating less than ten devices.

003.01B(2) For the period July 1, 1998, through December 31, 1999, the fee for an annual operator’s license to operate ten or more devices is two hundred fifty dollars ($250.00).

003.01B(3) For the period July 1, 1998, through December 31, 1999, upon the addition of the tenth device, the annual operator’s license fee is two hundred fifty dollars ($250.00).

003.01B(4) For periods beginning on or after January 1, 2000, the fee for the annual operator’s license is zero.

003.01C No license shall be issued:

003.01C(1) If the applicant is not a resident of this state or has not filed an appointment with the Secretary of State as agent for the service of summons,

003.01C(2) If the operator or distributor is not of good character and reputation in the community in which he resides,

003.01C(3) If the operator or distributor has been convicted of or has pleaded guilty to a felony under the laws of this state, any other state, or of the United States,

003.01C(4) If the operator or distributor has been convicted of or has pleaded guilty to being the proprietor of a gambling house, or of any other crime or misdemeanor opposed to decency and morality, or

003.01C(5) If the applicant is a corporation whose majority stockholders could not obtain a license, then such corporation shall likewise not be issued a license.

(Sections 77-3002 and 77-3003, R.S.Supp., 1998. November 11, 1998.)

REG-54-004 OCCUPATION TAX

004.01 The operator of any such device in the state shall pay an occupation tax for each device he or she actually operates during the taxable year. The tax shall be due and payable on January 1 of each year for every device in operation on that date.

004.01A The amount of occupation tax shall be:

004.01A(1) Fifty dollars ($50.00) for each device for the period July 1, 1998, through December 31, 1999, except for devices placed in operation after April 1, 1999, the occupation tax shall be twenty five dollars ($25.00).

004.01A(2) Thirty-five dollars ($35.00) for each device for periods beginning on and after January 1, 2000, except for devices placed in operation on or after July 1, the occupation tax shall be twenty dollars ($20.00).

004.01B It shall be unlawful to pay the occupation tax unless the operator has:

004.01B(1) Actual ownership of the device, and

004.01B(2) Paid the sales and use tax on the purchase of the device.

004.02 The serial number of each device must accompany proof of payment of sales tax.

004.03 The occupation tax levied by this Act is in addition to any other tax imposed by this State or any of its political subdivisions upon the business of operating or distributing mechanical devices. If the occupation tax and license fee imposed under the provisions of this act are not paid on or before the licensing date of each year, the exemption granted in lieu of the tax on gross receipts is inapplicable and the provisions of the Nebraska Revenue Act of 1967, including penalties, will then be operative. (Section 77-3004, R.S.Supp., 1998. November 11, 1998.)

REG-54-005 MACHINE OR DEVICE DECALS

005.01 The Department of Revenue will issue a decal, upon payment of the applicable operator’s license fee and occupation tax, which shall be displayed conspicuously on each device denoting payment of the tax on one device for the year.

005.02 Decals are not transferable from device to device or from operator to operator. Once the decal is attached to a device, it should only be removed when a new decal is issued by the Department of Revenue for the next year upon renewal of the license and payment of the occupation tax as provided in Reg-54-003 and Reg-54-004.

005.03 Devices operated without a valid decal attached thereto, except game and draw lotteries, are considered to be operated in violation of the Act. Any person who has placed a mechanical amusement device in operation in the State of Nebraska without the necessary decal posted conspicuously upon it is subject to an administrative penalty of seventy-five dollars ($75.00) for each violation and the mechanical amusement device is subject to being sealed by the Department. If the seal is broken prior to payment of the occupation tax upon the device, the device shall be subject to forfeiture and sale by the Department.

(Sections 77-3004, 77-3007, and 77-3009, R.S.Supp., 1998

November 11, 1998.)

History

• Effective 2020-11-04

Chapter 54 100 - Regulation of Cash Devices

Neb. Admin. Code tit. 316, ch. 54 100 - Regulation of Cash Devices {#sec-316-nac-54 omnilex-key=us-ne-regs-official--title-316--316 NAC 54}

REG-54-100 AUTHORIZATION TO REGULATE CASH DEVICES

General Authorization

100.01 Cash Device Regulations 54-100 through 54-106 are adopted to carry out the provisions of the Mechanical Amusement Device Tax Act and LB 538 (2019).

(Neb. Rev. Stat. §§ 28-1107, 77-3001, 77-3006, 77-3007, 77-3008, 77-3010, and 77-3011. November 4, 2020.)

REG-54-101 DEFINITIONS

101.01 Bill Acceptor means the mechanical portion of the cash device that accepts and reads the cash placed into the device.

101.02 Cash means any object, including, but not limited to, coins, paper bills, tokens, vouchers, or other monetary substitutes, which are necessary for operating a cash device.

101.03 Cash Device has the meaning provided in Neb. Rev. Stat. § 77-3001.

101.04 Cash out refers to when a player has decided to withdraw their credits from the cash device and the device prints a voucher for the player to present to the operator to be paid.

101.05 Decal for purposes of these regulations means the stamp issued by DOR denoting that DOR has approved the cash device as a game of skill after payment of the annual decal fee.

101.06 DOR means the Nebraska Department of Revenue and its representatives.

101.07 Distributor or Licensed Distributor is the licensee which has the meaning provided in Neb. Rev. Stat. § 77-3001. Additionally, for purposes of these regulations, distributor means the person or entity who obtains cash devices from a manufacturer or elsewhere and provides these cash devices to operators to be played at the operator location. Only distributors who have physical possession of their current license will be considered licensed for purposes of these regulations. All others will be out of compliance and subject to penalty.

101.08 Division means DOR’s Charitable Gaming Division, which is the division delegated by the Tax Commissioner to regulate cash devices.

101.09 Electronic Accounting Meter means the device or software involved with keeping track of all coins and bills accepted, as well as all vouchers printed.

101.10 Game of Skill means mechanical amusement devices which produce an outcome predominantly caused by skill and not chance.

101.11 Independent Testing Laboratory means any laboratory approved by DOR for use in testing whether cash devices comply with the standards set forth in these regulations.

101.12 Manufacturer means the person or entity who creates, develops, and/or builds a cash device, cash device components, and associated software.

101.13 Mechanical Amusement Device has the meaning provided in Neb. Rev. Stat. § 77-3001.

101.14 Operator or Licensed Operator is the licensee which has the meaning provided in Neb. Rev. Stat. § 77-3001. Additionally, for purposes of these regulations, the retailer or retail establishment in which any cash device is placed is considered an operator. Only operators who have physical possession of their current license will be considered licensed for purposes of these regulations. All others will be out of compliance and subject to penalty.

101.15 Person has the meaning provided in Neb. Rev. Stat. § 77-3001.

101.16 Playing Station means the cash device or the portion of a cash device that allows a player to operate the device independently of, or simultaneously with, another player. The number of playing stations may be different than the number of screens but each playing station must have a separate bill acceptor.

101.17 Reasonable Player means a player with an average level of intelligence, physical and mental skills, reaction time, and dexterity.

101.18 Retailer or retail establishment means any business location that is open to the public for the sale of goods other than cash devices and that possesses a valid sales tax permit.

101.19 Skill means the human attributes of a player such as knowledge, dexterity, visual recognition, logic, memory, reaction, strength, agility, athleticism, hand-to-eye coordination, numerical and/or lexical ability, or any other ability or expertise relevant to game play.

101.20 Voucher means the paper document printed from the cash device which the player presents to the operator, with an amount to be paid.

(Neb. Rev. Stat. §§ 77-3001, 77-3006. November 4, 2020.)

REG-54-102 GENERAL RESTRICTIONS

102.01 Distributors are required to obtain an annual license in accordance with §77-3003. The application will be provided by DOR and no fee is required. Changes to information contained on the license application throughout the year will be reported to DOR.

102.02 Operators are required to obtain an annual license in accordance with §77-3002. The application will be provided by DOR and no fee is required. If an operator has more than one location, it must obtain a license for each location. Such license will be prominently displayed near the location of the cash devices. Changes to information contained on the license application throughout the year will be reported to DOR.

102.02A If a retail establishment owns a device outright they will be required to be licensed as both a distributor and operator. A single application may be completed, but they will receive two licenses. They will be responsible for all tasks and duties which would otherwise be required of a distributor under these regulations.

102.03 Age Restrictions. Individuals under the age of nineteen (19) cannot play or participate in any way with a cash device. A winner’s age must be verified prior to receiving payment.

102.04 Unacceptable forms of payment include: credit card, charge card, debit card.

102.05 Location Limitations

102.05A A licensed operator may operate no more than four (4) cash devices in one retail location, unless the location meets the square footage thresholds set forth below. Devices are not permitted in mobile retail locations, or any location that can be made mobile in short order, or pop up retail locations.

102.05B An operator may be allowed to operate one (1) additional cash device for every 1,000 square feet over 4,000 square feet.

| Square Feet | Number of Permissible Devices | | --- | --- | | 0 to 4,999 | 4 | | 5,000 to 5,999 | 1 (total of 5) | | 6,000 to 6,999 | 1 (total of 6) | | 7,000 to 7,999 | 1 (total of 7) | | 8,000 to 8,999 | 1 (total of 8) | | 9,000 to 9,999 | 1 (total of 9) | | 10,000 to 10,999 | 1 (total of 10) | | 11,000 to 11,999 | 1 (total of 11) | | 12,000 to 12,999 | 1 (total of 12) | | 13,000 to 13,999 | 1 (total of 13) | | 14,000 to 14,999 | 1 (total of 14) | | 15,000 or more | 1 (maximum total of 15) |

102.05C Square footage does not include parking areas and outdoor patio areas or any other similar areas as determined by DOR.

102.05D In situations where a single building holds multiple retail establishments, each separate retail establishment will be entitled to its allotment of devices as a licensed operator. The square footage will be based on its separate and distinct square footage in accordance with the limitations described in the regulations. Devices for the establishment may only be placed within their separate retail space. In order to qualify as a separate retail establishment operating in the same building, the following factors will be considered: physical walls separating the businesses, dedicated entrances and exits to the outside, whether a sales tax permit has been obtained, separate points of sale, diversity of merchandise, whether the business issues receipts for sales, the number of dedicated employees on duty, level of business activity being conducted in the space, the space for the business within the building is contiguous, and whether there are distinct owners or officers of the businesses within the shared building.

102.05E Square footage will be verified through the operator’s license application. The operator will be required to provide proof of square footage as stated above. The application may include the following:

102.05E(1) Documentation from the county assessor or its website, the Nebraska Liquor Control Commission or its website, or a copy of the lease describing where the device will be placed, showing the square footage of the entire retail establishment. If none of these options is sufficient, then the applicant will contact DOR to determine suitable documentation;

102.05E(2) A diagram showing the dimensions of the areas to be included in the calculation of square footage per the requirements set forth in 54-102;

102.05E(3) If documentation provided to DOR in the application is later determined to be inaccurate, intentionally or unintentionally, and the square footage is incorrect, DOR has the opportunity to recalculate the square footage and adjust the maximum number of permissible cash devices at the location.

102.05F Distributors may be permitted to have more than 15 cash devices at their business office or warehouse location so long as the they are not accessible to the general public for playing and they are subject to inspection during normal business hours by DOR representatives just as any operator location would be. Distributors will follow the same decal application procedures for these locations, but the device limit will be waived.

102.06 Decal and Placement

102.06A No device may be placed in operation without having a valid decal affixed prominently on the front of the device where it is visible at all times so DOR representatives need not move a device to see the decal. After the first of the year, the previous year’s decals must be removed entirely, or covered entirely by placing the current year’s decal over it. If a device has more than one playing station, each station must have a valid decal.

102.06B This decal must display the year-long period for which it is valid, and be distinct from any other decals provided by DOR through other programs.

102.06C Distributors and operators are responsible for reporting any occasion they discover where a decal has been defaced, removed, stolen, or otherwise tampered with to DOR within 24 hours after discovery. Distributors and operators may be subject to penalty if DOR is not notified and DOR discovers a missing, defaced, or otherwise tampered with decal. If DOR determines the decal requires replacement, the distributor may be required to purchase a new decal at full cost if DOR determines that the decal was intentionally removed or defaced by the distributor, operator, or agent of either. Generally speaking, a defaced decal is one where the DOR logo and decal number have been rendered unreadable.

102.07 The Cash Device Tip Line phone number must be placed prominently on the front of the device at or above the bill acceptor and be visible at all times. The phone number will be provided by DOR.

102.08 Investigations by DOR

102.08A DOR’s investigators or other authorized personnel have the authority to enter any premises where cash devices are present during normal business hours or if it appears customers are still present.

102.8B All operators and distributors must comply with all requests for records and documentation made by DOR relating to cash devices.

102.8C Failing to comply with a request for documentation or records by DOR; or altering, falsifying, or otherwise destroying any records of any cash device not otherwise permitted by these regulations is strictly prohibited. Failing to comply with requests by DOR may be grounds for not issuing a decal in the following year.

102.8D Investigations may result in administrative actions as allowable under the Act.

(Neb. Rev. Stat. §§ 77-3001, 77-3002, 77-3003, 77-3003.01 77-3003.02, 77-3006. November 4, 2020.)

REG-54-103 DETERMINING WHEN A DEVICE IS A LEGAL CASH DEVICE

103.01 To be a legal cash device, the game must be a game of skill rather than a game of chance. When DOR is making a determination regarding whether a specific game meets the statutory definition of a game of skill (provided in Neb. Rev. Stat. § 77-3001(8)), it will consider the following regulations, applicable state statutes, as well as the physical operation of the game by a player of reasonable skill.

103.02 When reviewing a game, it is not a game of skill if one or more of the following apply:

103.02A The ability of any player to succeed at the game played on the device is impacted in any way by the number or ratio of prior wins to prior losses of players playing the device;

103.02B The ability of the player to succeed at the game played on the device is impacted in any way by the ability of any person to set a specified win-loss ratio for the device or by the device having a predetermined win loss percentage;

103.02C The outcome of the game played on the device can be controlled by a source other than the player playing the device;

103.02D The success of any player is or may be determined by a chance event which cannot be altered by player action;

103.02E There is no possibility for the player to win every individual play on every game on the device or there are unwinnable games or game modes on the device;

103.02F The ability of any player to succeed at the game played on the device requires the exercise of skill that no reasonable player could possess; or

103.02G The primary determination of the prize amount is the presentation or generation of a particular puzzle or group of symbols dealt to the player and the player does not have control over the puzzle or group of symbols presented. See 54-103.05D.

103.03 To be a game of skill, the prize amount may ultimately be determined by the player’s skill, but a reasonable player is capable of completing and winning every single play. For an individual play to be considered a “win,” a cash prize must be awarded as the prize.

103.04 When reviewing a game, DOR may consider the results of an analysis by any independent testing authority preapproved by the Tax Commissioner to evaluate the reaction time required for a player of a particular game on the device to perform the tasks required by the game to win.

103.05 When reviewing a game, the following factors are not, by themselves, sufficient indications that the device is a game of skill:

103.05A Whether a comprehensive list of prizes or outcomes is offered to the player or whether all outcomes are drawn from a finite pool of predetermined outcomes or starting positions;

103.05B Whether a player can increase his or her chance of winning based on knowledge of probabilities in general or the probabilities of any particular prize or outcome in a game or on a device;

103.05C Whether a player can simply choose not to play before committing money or credits; or

103.05D A game task consisting solely of moving a symbol up or down, replacing one symbol with another, or any similar action, with or without a timer.

(Neb. Rev. Stat. §§ 77-3001, 77-3003.01, 77-3006. November 4, 2020.)

REG-54-104 CASH DEVICE STANDARDS

104.01 DOR adopts the GLI-11: Gaming Devices Version 3.0, released on September 21, 2016, by Gaming Laboratories International as the standards to which all cash devices must comply, with the exception of those items specifically listed in 54-104.01A. These standards are the product of collaboration among testing laboratories, various state regulatory bodies, tribal gaming bodies, and other industry entities. These standards may be found on DOR’s website or upon request.

104.01A The following sections of GLI-11: Gaming Devices Version 3.0 are not adopted by DOR, are hereby excluded from DOR’s standards, and cannot be considered by an independent testing laboratory during its testing:

104.01A(1) The following portions of Chapter 1:

104.01(A)(1)(a) 1.1;

104.01(A)(1)(b) 1.2;

104.01(A)(1)(c) 1.4;

104.01(A)(1)(d) 1.5.

104.01A(2) The following portions of Chapter 4:

104.01A(2)(a) 4.5.4;

104.01A(2)(b) 4.6;

104.01A(2)(c) 4.7;

104.01A(2)(d) 4.8;

104.01A(2)(e) 4.10;

104.01A(2)(f) 4.11;

104.01A(2)(g) 4.12;

104.01A(2)(h) 4.14;

104.01A(2)(i) 4.18.1;

104.01A(2)(j) 4.19;

104.01A(2)(k) 4.20.1 through 4.20.3;

104.01A(2)(l) 4.20.6 through 4.20.12;

104.01A(2)(m) 4.21;

104.01A(2)(n) 4.23.

104.01B The GLI-11 standards adopted above do have standards regarding random number generators (RNGs). DOR understands that gaming software may require RNGs for various reasons that are not directly related to the skill required for a game. To this end, an RNG may be utilized by the device software so long as the skill aspect of the game is not affected by the RNG, and it is compliant with the GLI-11 standards to the extent possible.

104.01C If any item in these standards directly or indirectly conflicts with the Act or any other regulation, the Act and the Regulations take priority, and the testing laboratory must test accordingly.

104.01D If a laboratory is uncertain of what standard should apply, the laboratory should contact DOR directly to seek to clarification.

104.02 Game Limitations

104.02A No game may be placed on a device that has not been approved by DOR.

104.02B Once a game has been approved, the functionality or appearance of the game may not be changed in any way without prior approval from DOR. For purposes of these regulations, functionality will refer to the outward appearance of a game to the player, if the change will have an effect on the outcome of game play, or the record retention portion of a device.

104.02B(1) This approval process may require the game to be submitted for independent testing at the expense of the operator or distributor;

104.02B(2) At the time of application for device approval, an affidavit from the distributor affirming, that no functional changes will be made to the device or its games without prior approval from DOR;

104.02C No game may function similarly to or bear any outward appearance to any game regulated by DOR, which includes lotteries, raffles, pickle cards, bingo, or keno.

104.02D Progressively growing jackpots are permitted, but only on a per device, per game basis. Each game on each device may have its own progressively growing jackpot. Devices and games may not be linked.

104.02E If a device has more than one playing station, all playing stations must be functionally identical. This means that no advantage nor disadvantage may be given, nor can the play of the game be affected in any way by which playing station the player is using.

104.03 Internet Connectivity and Remote Access

104.03A Devices may be connected to the internet in accordance with the technical standards adopted in 54-104.01 and the laboratory report must reflect the device’s compliance.

104.03B Remote access to the device may be permitted for limited functions. Anyone proposing to access their devices remotely must demonstrate to DOR through the laboratory report, or otherwise, that security measures are in place to prevent unauthorized access and to document all remote access attempts and security incidents.

104.03B(1) Remote access will be granted for only the following activities:

104.03B(1)(a) Monitoring the cash device and software;

104.03B(1)(b) Troubleshooting issues;

104.03B(1)(c) Scheduling functions such as hours of operation;

104.03B(1)(d) Performing view-only functions such as generating reports and downloading cash device and software information;

104.03B(1)(e) Other activities if approved by DOR.

104.03B(2) No updates to the software which affect gameplay may be initiated remotely without prior approval from DOR.

104.04 Devices must have the ability to restrict which users have access to certain functions on the devices.

104.04A Only distributors and their maintenance staff, or the owner-operator if the device is owned outright, may have access to modify any of the cash device or software settings.

104.04B Non-administrative operator employees may only have access to opening the device, performing basic maintenance tasks (such as refilling paper), and collecting money.

104.05 Devices must utilize electronic accounting and occurrence meters as defined by the GLI Standards or similar technology. In addition to the GLI Standards, devices must also log the following information:

104.05A For each device:

104.05A(1) Every bill or coin inserted into the device;

104.05A(2) Every voucher the device produced.

104.05B For each game on the device:

104.05B(1) Every wager;

104.05B(2) Every individual play result (whether that individual play was a win or loss);

104.05B(3) Prize won.

104.06 Device data must be backed up daily.

104.07 If there is a malfunction or defect of the device, DOR must be notified no later than 24 hours after the initial detection of the issue by the operator. Malfunction or defect refers to anything that impedes the player’s ability to play the game, win a prize, or receive a prize from a cash device, aside from structural power failure, other extreme act of nature or circumstances. Malfunction or defect also refers to a cash device’s ability to store, generate, or produce required reports or information.

104.08 The serial number for the cash device software or game board and cash device cabinet are to be affixed to the front of the device.

(Neb. Rev. Stat. §§ 77-3001, 77-3003.01, 77-3006. November 4, 2020.)

REG-54-105 APPLICATION

105.01 Device Approval Application and Fee

105.01A A decal cannot be issued for a cash device until that device has been evaluated and approved by DOR.

105.01B An application to have a cash device evaluated by DOR must be completed by the distributor, or if the operator is functioning independently it will be completed by the operator, using the form provided by DOR and as described in this section, which may include an online application when such technology is available to DOR. A manufacturer may also submit a device for approval, but will not relieve the distributor or operator from its responsibility of also applying for approval of a device.

105.01B(1) A manufacturer may act as a distributor as defined by these regulations provided they are licensed as such. If they do, they will only be required to apply for approval of a device and pay the application fee once.

105.01C The application fee to have a cash device evaluated by DOR is $500.00 per cash device to be paid by the distributor, or if an operator is operating independently it will be paid by the operator. This must be paid in a manner prescribed by DOR, including online when such technology is available to DOR. This fee is nonrefundable.

105.01D In addition to the information on the application, a specimen device containing the game or games to be approved must be delivered to the Charitable Gaming Division or other location DOR designates, at the expense of the party seeking the approval. The details of this delivery will be arranged between DOR and the applicant after DOR has received the independent testing lab report. The device must be delivered with its settings matching the description in the independent testing lab report and all settings must be accessible to DOR. Return shipping must also be arranged and paid for by the party requesting approval and DOR will not share in the cost. DOR is not responsible for any damages to any device during shipment or delivery.

105.01E An application which does not provide all information requested by DOR on the form will be considered incomplete and may be rejected.

105.01F The time for DOR to issue a response to an application does not commence until the completed application is received by DOR.

105.01G DOR will issue a determination within 45 days after the date the completed application and device are received.

105.01G(1) If the application has been denied, DOR will state the reasons for the denial in writing and the applicant may appeal in accordance with Neb. Rev. Stat. §77-3003.01;

105.01G(2) If the application has been approved, the party seeking the decal may complete and file the form referenced in 54-105.02 for receiving a decal;

105.01G(3) Once a device has been approved, it is approved in that form until the party seeks to modify the device or it is otherwise rendered unapproved by DOR. This means a device approval will carry over year to year unless it is modified. Modifications for purposes of these regulations do not include replacements or updates to cabinetry, screen, power cords, etc.

105.01H Device approvals are specific to the party seeking to have the device approved. This means that every party seeking to have a given device approved, is required to pay the device approval application fee.

105.01I A party seeking to have a specific device approved needs only to have one prototype device approved and pay one device approval application fee. Once one prototype device has been approved, the applicant need only pay for the number of decals sought for that type of device, that are all identical with respect to systems, technical specifications, games, and functionality, regardless of where the party intends to place each device.

105.01J Upon request of DOR, the applicant must be able to articulate to DOR the skill or skills involved with each game on each device.

105.02 Decal Application and Fees

105.02A Once a device has been granted approval by DOR, an application to purchase a decal for a cash device to be placed at a licensed operator location must be completed by the licensed distributor, or if an operator is operating independently it will be completed by the licensed operator, using the form provided by DOR and as described in this section, which may include an online application when such technology is available to DOR.

105.02B The application form may include, but is not limited to the following:

105.02B(1) Name of operator;

105.02B(2) Name of distributor, if applicable;

105.02B(3) Nebraska ID Number;

105.02B(4) Federal ID Number;

105.02B(5) Name of the cash device to be placed;

105.02B(6) Names of individual games on the cash device;

105.02B(7) Serial Number for the cash device software or game board to be placed in the cabinet of the cash device and the serial number for the cabinet;

105.02B(8) Contact information for the manufacturer of the cash device;

105.02B(9) Location of retailer where the cash device will be placed;

105.02B(10) Square footage of the location where the device will be placed;

105.02B(11) How many cash devices are already placed at the location; and

105.02B(12) Laboratory testing information.

105.02C Items to be included as attachments with the application may include, but not be limited to:

105.02C(1) Proof that the device in its current form has been approved by DOR. This may include a copy of the approval letter or other sufficient proof as determined by DOR;

105.02C(2) A signed affidavit from the manufacturer of the device attesting to the fact that the device to be placed is identical in all technical respects to a previously approved device, if applicable;

105.02D An application that does not provide all information requested by DOR will be considered incomplete and will be rejected.

105.02E The application fee is $250.00 per decal to be paid by the distributor, or, if an operator is operating independently, it will be paid by the operator. This must be paid in a manner prescribed by DOR including online when such technology is available to DOR. If an application for a decal is denied, payment will be returned or refunded.

105.02F Once an application has been approved and a decal issued, the decal is only valid for the cash device and its software or game board identified by its serial number on the application. If a decal is found to be placed on a device which does not match with the serial number on file, the device is subject to seizure.

105.02G Once an application has been approved and a decal issued, the device may only be placed at the location described on the application. If a device is found to be placed at a location which is not the location described on the application, the device is subject to seizure.

105.02H Once an application has been approved and a decal issued, the device may not be moved without prior approval of DOR. The application to move a device will be made available in a format set by DOR.

105.02I If an operator owns a device outright, and transfers ownership of the business, and the new owner intends to continue to operate a cash device in the location, the new owner is required to purchase new decals. DOR may review the device and all reports prior to issuing a new decal. The requirement that a new owner-operator seek approval of the device may be waived by DOR. There is no grace period for a new owner of a business to apply for a decal. The new decals must be applied for, purchased, and placed on the device at the start of the first day of business under the new ownership.

105.02J If a distributor transfers ownership of the business or the devices individually, the new owner of the business or devices is required to purchase new decals. DOR may review the device and all reports prior to issuing a new decal. The requirement that a new distributor seek approval of the device may be waived by DOR.

105.02K Completed decal applications will be processed in the order in which they are physically received by the Division in Lincoln, Nebraska.

105.02L For decal application renewals, priority will be given to distributors with devices currently placed at an operator location. During the decal application renewal process, DOR may allow for a separate renewal period.

(Neb. Rev. Stat. §§ 77-3001, 77-3002, 77-3003.01, 77-3006. November 4, 2020.)

REG-54-106 INDEPENDENT TESTING LABORATORIES

106.01 All devices and games must be submitted to an independent testing laboratory approved by DOR to test for compliance with the regulations contained in 54-103 and 54-104.

106.02 Testing must be paid for by the individual or entity seeking to have the device approved.

106.03 The laboratory must produce a report detailing the testing performed, the analysis, and the testing results. The laboratory report includes samples of all documents required to be produced by the device as set forth in the regulations.

106.04 If a laboratory is unable to test any of the items required, then it must provide an explanation of why it was unable to do so and what the laboratory would need to complete testing of the item.

106.05 This report must be provided in full to DOR with no redactions at the time of device approval.

106.06 The laboratory is required to test the following aspects of a game in relation to skill involved:

106.06A Those listed in 54-103.02A-G. If testing reveals that any one of these seven items is present, then the game is not a skill game;

106.06B Reaction time required to complete all required tasks in order for a reasonable player to win on every single play;

106.06C Times reported for each step in completing the process to win; and

106.06D Times reported for completing each game as a whole.

106.07 The laboratory must test for the presence of those items listed in Reg-54-103.05A-D which are not by themselves sufficient indication of skill:

106.08 In the event DOR determines that a second evaluation of a device is necessary, it may seek testing from a separate qualified laboratory.

(Neb. Rev. Stat. §§ 77-3001, 77-3003.01, 77-3006. November 4, 2020.)

History

• Effective 2020-11-04

Chapter 57 Cigarette Tax Regulations

Neb. Admin. Code tit. 316, ch. 57 Cigarette Tax Regulations {#sec-316-nac-57 omnilex-key=us-ne-regs-official--title-316--316 NAC 57}

REG-57-001. DEFINITIONS .

001.01 The definitions found in Neb. Rev. Stat. §§ 59-1502, 69-2702, 69-2705, and 77-2601 apply to these regulations.

001.02 In addition to the definitions found in Neb. Rev. Stat. §§ 59-1502, 69-2702, 69-2705, and 77-2601 the following definitions apply.

001.03 Authorized tax stamps means any devices, stamps, labels, or prints manufactured, printed, or made as prescribed by the Tax Commissioner and includes decalcomania tax stamps.

001.04 Cancellation of tax stamps means affixing the stamp so that it cannot be transferred to another package. A tax stamp that has been securely attached so that it may not be removed without tearing it is considered to have been canceled.

001.05 Cigarette has the same meaning as in Neb. Rev. Stat. § 77-2601(5).

001.05(A) A tobacco product labeled as anything other than a cigarette or not bearing a label is a cigarette if the product meets two or more of the following criteria:

001.05(A)(1) A pack contains 20 to 25 sticks;

001.05(A)(2) A carton contains eight or ten packs;

001.05(A)(3) The stick length is 2¾ inches to 5 inches and stick diameter is equal or less than 8.20 millimeters;

001.05(A)(4) The product is sold in soft packs, hard packs, flip-top boxes, or clamshell packages; or

001.05(A)(5) The product is sold with a cigarette-type filter.

001.05(B) A tobacco product labeled as anything other than a cigarette, or not bearing a label, including, but not limited to certain little cigars, certain filtered and non-filtered little cigars, and certain flavored little cigars, will not be classified as a cigarette if the tobacco product labeled as anything other than a cigarette either:

001.05(B)(1) Meets the criteria that requires the manufacturer or importer to be responsible for reporting and paying the federal excise tax on the tobacco product reports in accordance with 26 U.S.C. §§ 5701(a) and 5702(a); or

001.05(B)(2) Meets all of the following criteria-

001.05(B)(2)(a) The tobacco product is wrapped in leaf tobacco, or reconstituted sheet tobacco that is approximately two thirds or more tobacco which did not in the reconstitution process lose its tobacco character (e.g., taste, aroma, identifiable chemical components) and is of a color consistent with that of the natural leaf tobaccos traditionally used as a wrapper for cigars.

001.05(B)(2)(b) The tobacco product filler is substantially of tobaccos unlike those in ordinary cigarettes, does not have any added flavorings which would cause the tobaccos to have the taste or aroma generally attributed to cigarettes, and does not contain flue-cured or aromatic (Oriental) tobaccos.

001.05(B)(2)(c) The package for a tobacco product to be offered as a cigar declares it to be a cigar (e.g., “small cigar,” “filtered cigar,” “flavored cigar,” or “little cigar”) in direct conjunction with, parallel to, and in substantially the same conspicuousness of type and background as the brand name of the tobacco product each time the brand name appears on the package, and all marketing materials and advertising clearly present the product to the consumer as a cigar without contrary representations or implications that the product is a cigarette.

001.05(C) The exception from the definition of cigarette provided in § 001.05(B) does not apply to tobacco products produced or distributed by any manufacturer or importer the Nebraska Attorney General deems to pose an elevated risk for noncompliance under Neb. Rev. Stat. § 69-2707.01(3)(a) to (h).

001.05D The required proof that the tobacco product meets the exception from the definition of cigarette in § 001.05(B) is provided in § 022.

001.06 Complete readable authorized tax stamp means a stamp that can be identified as a Nebraska cigarette stamp bearing a legible 5 digit stamp number or two thirds of the tax stamp.

001.07 DOR means the Nebraska Department of Revenue.

001.08 TTB means the United States Department of Treasury Alcohol and Tobacco Tax and Trade Bureau.

001.09 Directory means the Nebraska Directory of Certified Tobacco Product Manufacturers and Brands.

REG-57-002. APPLICATION FOR PERMIT TO AFFIX AUTHORIZED TAX STAMPS .

002.01 Application for an annual Nebraska Stamping Agent’s License will be made to DOR on forms furnished by DOR.

002.02 The person applying for a Stamping Agent’s License (applicant) will include with the application, a fee of $500 and proof that the applicant has obtained a municipal or county permit as a wholesale dealer in accordance with Neb. Rev. Stat. § 28-1420. An applicant for a Nonresident Stamping Agent’s License will also provide a letter of acceptance by a registered agent for service or process.

REG-57-003. PURCHASE AND SALE OF AUTHORIZED TAX STAMPS .

003.01 Only stamping agents holding a valid Nebraska Stamping Agent’s License may purchase and/or affix authorized tax stamps.

003.02 Stamping agents will purchase authorized tax stamps from DOR. Payment must be made at the time of purchase. Deferred payments are not permitted.

003.03 Authorized tax stamps may be purchased only in quantities as prescribed by DOR.

003.04 Stamping agents purchasing authorized tax stamps are permitted to purchase authorized tax stamps at a discount of 1.85% as a commission for affixing authorized tax stamps.

003.05 Stamping agents who violate any of the provisions of Neb. Rev. Stat. §§ 77-2601 through 77-2622 or any stamping agent who violates any provision of Neb. Rev. Stat. § 69-2708 or any rules and regulations adopted by DOR, including failure to timely file the required reports, may be subject to a penalty not to exceed $1,000 and have their license or discount privileges suspended or revoked.

003.06 Stamping agents are subject to a penalty not to exceed the greater of 500% of the retail value of the cigarettes or $5,000 for affixing an authorized tax stamp to a package of cigarettes not included in the directory.

REG-57-005. AFFIXING AUTHORIZED TAX STAMPS .

005.01 Authorized tax stamps of the proper denomination are to be affixed to each individual package of cigarettes so that they adhere securely in accordance with the instructions of the manufacturer of the stamps.

005.02 Authorized tax stamps are to be affixed as to assure the destruction of the stamp when the package is opened.

005.03 Authorized tax stamps are not to be affixed to the carton, case, or container of cigarettes, other than the individual package.

005.04 Within 48 hours after a duly licensed stamping agent opens an original, sealed, manufacturer's shipping container or case of cigarettes in order to affix Nebraska authorized tax stamps or the tax stamps or impressions of any other state, all packages of cigarettes in the container or case are to be stamped in one continuous operation.

005.05 Duly licensed stamping agents may not have in their possession packages of cigarettes, other than those in the original, sealed, manufacturer's shipping container or case to which authorized tax stamps or tax stamps or impressions of any other state have not been affixed.

005.06 Authorized tax stamps must be canceled prior to the time of sale by the stamping agent.

REG-57-006. INSPECTION OF AUTHORIZED TAX STAMPS .

006.01 When the Tax Commissioner’s authorized agents or representatives identify packages of cigarettes on which one complete readable authorized tax stamp cannot be found on each package, the stamping agent responsible for the stamping and distribution of the cigarettes must take immediate corrective action. The applicable stamping agent or retailer may be subject to appropriate penalties.

006.02 This regulation does not limit in any way the penalties provided by statute for actions by any person with intent to defraud the state or evade the provisions of the state cigarette tax laws.

REG-57-007. INSPECTION OF RETAIL AND VENDING MACHINE DISPLAYS .

007.01 All packages of cigarettes are to be arranged in display cases, display counters, or cigarette racks so as to visibly reveal the authorized tax stamp if such arrangement is feasible. Any person who owns or uses a display case, display counter, or cigarette rack that is constructed so that it is not feasible to arrange the cigarette packages in a manner to visibly reveal the authorized tax stamp, is required to unlock or open any and all such cases, counters, or racks for a complete examination and inspection of the cigarette packages upon request of an authorized DOR agent.

007.02 All packages of cigarettes are to be packed in cigarette vending machines in a manner that, if any packages are visible while in the machine, the tax stamps are clearly visible to the public.

007.03 Any person who owns or operates a cigarette vending machine that is constructed so that any packages of cigarettes it contains are not visible to the public is required to unlock and open any and all machines owned or operated for a complete examination and inspection of the cigarette packages.

007.04 If any such vending machine is located on premises not owned or controlled by the owner or operator of the vending machine located thereon, access to the interior of the machine must be provided at all reasonable times during ordinary business hours to the Tax Commissioner or his or her authorized agent for the purpose of ascertaining if the packages bear authorized tax stamps.

REG-57-008. REPORTS .

008.01 Every person, firm, or association receiving cigarettes subject to a tax from sources within or outside Nebraska, upon which the tax has not been paid, must pay the tax and make a report of the receipt of untaxed cigarettes to DOR on or before the 15th day of each month for cigarettes received during the preceding month. These reports will state the quantity of cigarettes received, listed by brand name, date, and from whom received.

008.02 Every licensed stamping agent must file monthly reports electronically in the format authorized by DOR. The reports must be filed on or before the 15th day of each month for business conducted during the preceding month and provide information as required by DOR. The report is considered timely filed if electronically submitted to DOR by 11:59 p.m. on the 15th day of each month. If the 15th day of the month falls on a Saturday, Sunday, or approved holiday, the next day not a Saturday, Sunday, or approved holiday shall be the final timely filing date.

008.03 If the tax is not paid and the required report is not received on or before the 15th day of the month following the month in which the unstamped cigarettes were received, the report is delinquent and a penalty of 25% of the tax due will be added to the tax liability, together with interest at the rate specified in Neb. Rev. Stat. § 45-104.02, from the due date of the return to the date payment is received.

008.04 Records supporting deductions claimed on the monthly reports must be retained by the stamping agent, unless required by the Tax Commissioner to attach supporting documentation to the monthly reports. These records include:

008.04(A) Copies of tax reports made to other states by a Nebraska stamping agent for cigarettes retailed outside Nebraska;

008.04(B) Invoices to manufacturers for damaged merchandise returned to the factory for credit; and

008.04(C) Memo invoices for transfers of cigarettes from one stamping agent to another, or from one stamping agent to a factory representative for transfer of unstamped cigarettes.

008.05 When sales are made for delivery into other states where there is not a state tax report to support these sales, each stamping agent must execute a standard exemption form for each such transaction which shows (a) the date of sale, (b) the name and address of the consignee, and (c) the number of cigarettes sold.

008.06 Stamping agents located outside Nebraska will be required to submit a report of Nebraska stamped cigarettes sold to Nebraska retailers. The report will include (a) the date of the sale, (b) the name and address of the retailer, and (c) the number of cigarettes sold. They may also be required, upon request, to furnish copies of tax reports made to other states that show sales made into Nebraska.

008.07 When stamped cigarettes are returned to the manufacturer, an invoice must be prepared by the stamping agent describing the product and the number of packages returned. The manufacturer must execute an affidavit that (a) indicates the number of stamped or unstamped packages received, (b) indicates the number of packages received bearing authorized tax stamps, and (c) attests that the packages were destroyed.

008.08 Any cigarette tax shortage, evidenced by the entries and calculations on each monthly cigarette tax report, must be paid for by separate electronic payment when the applicable tax report is filed. The discount as described in § 003.04 is not allowed on shortages. Any tax shortage discovered by DOR, upon audit of each tax report, will be billed currently to the stamping agent, who must electronically remit the amount of the shortage. The stamping agent is not permitted to average-out any monthly shortage with any other month that shows more authorized tax stamps were used than the number of cigarettes which were recorded as taxable.

REG-57-009. CARTAGE COST. REPEALED .

REG-57-010. PETITION FOR APPROVAL OF A LOWER COST .

010.01 Any wholesaler making wholesale sales of cigarettes to licensed Nebraska retailers or any retailer making retail sales of cigarettes in Nebraska who desires to prove that the cost of doing business in Nebraska is less than the statutory presumptive cost of doing business computed according to the Unfair Cigarette Sales Act may submit a petition for approval of a lower cost along with actual cost data to DOR. The statutory presumptive cost of doing business is used in determining cigarette sales prices until approval has been granted by the Tax Commissioner to sell at a lower cost.

010.02 The petition for approval of a lower cost must include the following cost information:

010.02(A) Any person making sales of cigarettes in Nebraska for more than a 12 month period will submit actual cost data for the 12 month period ending no more than 90 days prior to the submission of the petition, and actual cost data for each of the petitioner's locations that intend to sell cigarettes at less than the statutory presumptive cost of doing business.

010.02(B) Any person making sales of cigarettes in Nebraska for less than a 12 month period will submit actual cost data for the period beginning with the start of business and ending no more than 90 days prior to the date the petition for approval of a lower cost was submitted for each of the petitioner's locations. In addition, the petitioner will submit an explanation of any expected differences between the petitioner's actual cost data and the costs for the remaining months of the initial 12 month period of operations.

010.03 Upon receiving the petition for approval of a lower cost and actual cost data, the Tax Commissioner will do one of the following within 45 days:

010.03(A) Approve the petition;

010.03(B) Request additional cost data or an explanation of the previously submitted information;

010.03(C) Schedule the matter for hearing at least 20 days, but not more than 60 days, after the date of mailing of the hearing notice; or

010.03(D) Return as incomplete any petition for approval and actual cost data that does not contain the necessary information.

010.04 DOR must notify the petitioner of the Tax Commissioner’s determination within 45 days after the hearing. Any order of approval will include the percentage of cost of doing business as determined by DOR for the petitioner's specific location.

010.04(A) The percentage of cost of doing business must be used by the petitioner when establishing the minimum selling price for cigarettes that are to be sold at a specific location.

010.04(B) The initial order of approval will also contain an expiration date not to exceed 18 months from the date of the approval. The expiration date should coincide with the petitioner's calendar or fiscal year end. Each subsequent order of approval cannot exceed 12 additional months.

010.05 The actual cost data to be submitted shall (1) be based on cost of goods sold, (2) contain the petitioner's basic cost of cigarettes sold for the specific location, (3) set forth each specific total direct cost, overhead cost, and expense paid or incurred, and (4) set forth the basis used to allocate each overhead cost and expense item in the purchase and sale of cigarettes in Nebraska. The total dollar amount of each overhead cost and expense item to be allocated must be set forth and followed by a showing of its 100% allocation.

010.06 When submitting actual cost data, the petitioner must provide supporting documentation such as, but not limited to:

010.06(A) A written explanation of any difference between the petitioner's overall cost of doing business from his or her cigarette cost of doing business for the specific location that is engaged in the business of selling cigarettes at wholesale to licensed Nebraska retailers or making sales of cigarettes at retail in this state;

010.06(B) A copy of one cigarette purchase invoice from each cigarette manufacturer or wholesaler for every month of the period of analysis;

010.06(C) Copies of the latest filed federal income tax returns including Schedule A and all attachments;

010.06(D) Schedule K-1 (Form 1065);

010.06(E) Form 4562;

010.06(F) Latest available income statements;

010.06(G) Latest available annual reports; and

010.06(H) Any other financial statements or information necessary to substantiate the actual cost data.

REG-57-011. MEETING COMPETITION .

011.01 Prior to offering cigarettes for sale at a lower price to meet competition pursuant to Neb. Rev. Stat. § 59-1509, the wholesaler or retailer must ascertain from the Tax Commissioner whether the competitor has made a petition for approval of a lower cost in accordance with § 010.

011.02 Upon affirmation, the wholesaler or retailer may presume the validity of the competitor’s lower price until a determination otherwise has been made by the Tax Commissioner.

REG-57-012. OFFERS OF CIGARETTE SALES .

012.01 Wholesalers, retailers, and other persons are prohibited from advertising, offering to sell or selling at retail or wholesale cigarettes at less than cost to such wholesaler or retailer, or offering or giving a rebate in price or concession of any kind in connection with the sale of cigarettes unless such rebate in price or concession is given by the wholesaler or retailer in the same ratio with respect to all other merchandise as to which such rebate or concession may lawfully be given which is sold by such wholesaler or retailer in the ordinary course of his trade or business. The term "other persons" includes cigarette manufacturers. Manufacturers who, with intent to injure competition among the retailers or wholesalers of this state, offer cigarettes for sale at retail or wholesale at less than cost to such retailer or wholesaler, are in violation of the Unfair Cigarette Sales Act.

REG-57-013. INTENT TO INJURE COMPETITION .

013.01 A sale, offer of sale or advertisement by a retailer, wholesaler, or other person, of cigarettes at less than cost or an offer of a rebate or concession for the sale of cigarettes or a promotional offer made by cigarette manufacturers for any purpose which is made available to retailers or wholesalers on a localized basis, is prima facie evidence of an intent to injure competition under Neb. Rev. Stat. § 59-1503(1). Manufacturers may overcome this presumption of an intent to injure competition among retailers or wholesalers by showing to the satisfaction of the Tax Commissioner that such offer was made available to every retailer or wholesaler, whose method of making sales would allow them to participate in the promotion. Manufacturers must submit to the Tax Commissioner a written explanation of the promotion within a reasonable time prior to the promotion and agree to furnish proof that the promotion was offered to each eligible retailer or wholesaler, if the Tax Commissioner should so request. If the offer was not made available to every retailer or wholesaler within a reasonable time for the retailer or wholesaler to accept the offer, then the presumption is that the manufacturer attempted to injure competition among retailers or wholesalers by only presenting the offer to some of the retailers or wholesalers and such offer is prohibited. All promotions must be offered on a state-wide basis and must have the Tax Commissioner‘s approval prior to being offered.

REG-57-014. OFFERS OF MERCHANDISE COMBINED WITH CIGARETTES .

014.01 No wholesaler, retailer, or other person may offer, with intent to injure competition among the wholesalers or retailers of this state, a combined package of cigarettes and other merchandise including cigarettes, at a price less than the combined costs of the cigarettes and merchandise. The wholesale or retail selling price of such combined package must equal or exceed the total of the invoiced cost of the cigarettes, including the cost of doing business, all applicable cigarette taxes, and the invoiced cost of the merchandise including the cost of doing business in relation to that merchandise. None of these three factors may be reduced by any payment by another person, a refund, or a credit memo.

014.02 A manufacturer may offer combined packages of cigarettes and merchandise, including cigarettes, at a reduced invoice price by overcoming the presumption of intent to injure competition between retailers or wholesalers in this state. If the manufacturer shows, under § 013, that the combination offer is made available to all the retailers or wholesalers in the state, then the presumption is overcome.

REG-57-015. OFFERS OF PREMIUM COUPONS .

015.01 A premium coupon attached by a wholesaler or retailer to cartons or packages of cigarettes is a concession given for the purchase of cigarettes and is prohibited by Section Neb. Rev. Stat. § 59-1503. A premium coupon is a coupon which is redeemable by the purchaser for merchandise, cash, trading stamps, or anything of value.

015.02 Premium coupons may be attached by manufacturers to cigarette cartons or packages if such cartons and packages are made available to all retailers and wholesalers in the state without preference. If a manufacturer does not make such premium coupons available to all wholesalers or retailers, then the manufacturer has not overcome the presumption of intent to injure competition among the retailers and wholesalers of this state.

REG-57-016. COUPONS FOR A REDUCTION IN PRICE .

016.01 Coupons may not reduce the selling price of cigarettes to below the retailer's cost as computed in Neb. Rev. Stat. § 59-1504. A retail store coupon is a coupon offered by a retailer by which the price of any container of cigarettes is reduced by presenting the coupon to the retailer who has issued it. A retail store coupon is in effect a discount by the store and reduces the selling price to the purchaser of the cigarettes. If the price is reduced below the retailer's cost by the coupon, then the coupon offer is prohibited. If the coupon is given by a retailer upon the purchase of cigarettes and later redeemed by the retailer, such redemption is a concession or rebate and is prohibited.

016.02 A manufacturer's coupon is a coupon offered by the manufacturer to the public by which the price of any container of cigarettes is reduced by presentation of the coupon. A manufacturer's coupon is a separately negotiable document. Price reduction stickers or coupons that are not redeemable by the participating retailer are prohibited. Such coupons which reduce the selling price of cigarettes below the retailer's cost or which are a rebate or concession for the purchase of the cigarettes are prohibited if such coupon is offered with the intent to injure competition among the retailers and wholesalers of this state. The manufacturer may overcome the presumption of intent to injure competition if the manufacturer fulfills the requirements of § 013 and shows that the coupon is redeemable by all retailers choosing to participate in the offer, that the manufacturer will give the same rebate or concession regardless from which retailer the cigarettes were obtained, and that the coupon will be invalid if used by the retailer in the retailer's advertising.

016.03 Any retailer participating in a buy-down promotion may use promotional signs and displays to advertise the value of a cigarette manufacturer's buy-down amount or the selling price of the cigarettes after allowance for the buy-down amount, provided the promotional signs and displays identify the full retail selling price prior to the buy-down amount. The promotional signs and displays must also state that the sales tax is computed on the full retail selling price prior to the allowance for the buy-down amount. Advertising the selling price net of the buy-down amount is permissible even when the buy-down amount reduces the sales price below the minimum retail selling price.

016.04 Retailers accepting a manufacturer's coupon as part of the selling price of a package of cigarettes must compute the applicable sales tax on the full selling price before deduction for the coupon.

REG-57-017. CASE DISCOUNTS GIVEN TO WHOLESALES OR RETAILERS. REPEALED .

REG-57-018. SHELF PAYMENTS TO RETAILERS BY MANUFACTURERS .

018.01 Payments made or credits given to a retailer for promotional purposes including shelf payments are not to be considered in determining the cost of cigarettes to the retailer, nor can such payments or credits be used to increase the approved buy-down promotion or to extend a designated promotion period.

REG-57-019. EXEMPTION FOR NATIVE AMERICAN INDIANS .

019.01 Any sale of cigarettes to a Native American Indian where title and possession are taken within the Indian country of the tribe of which the Native American Indian is an enrolled member is exempt from tax.

019.02 Retailers making exempt sales of cigarettes may receive a credit for the cigarette tax by filing a Nebraska Credit Computation for Cigarettes Sold to Native American Indian Tribal Members in Indian Country, Form 68. To support the credit, the retailer must distinguish on its cigarette sales records the exempt sales to Native American Indians from the nonexempt sales.

019.03 A claim for credit of cigarette tax must be made to the licensed wholesale distributor on the Form 68.

019.04 If a licensed wholesale dealer is not licensed as a stamping agent and receives a Form 68 from a retail customer, the wholesale dealer may submit the Form 68 to the licensed stamping agent from which it purchases stamped cigarettes.

019.05 Licensed stamping agents receive credit for the cigarette tax paid by submitting the completed Form 68 with a subsequent Nebraska Cigarette Purchase Order for Stamps and Impressions.

REG-57-020. MINIMUM SELLING PRICE .

020.01 A change in the list price of cigarettes by a manufacturer or a change in the Nebraska cigarette tax rate must be followed by a change in the minimum selling price charged by wholesalers and retailers.

020.02 Any change in the minimum selling price of cigarettes becomes effective the same date as the manufacturer’s change or the Nebraska cigarette tax rate change.

020.03 Each step in the minimum pricing calculation must be computed to the tenth of a cent and the result rounded to the next higher cent.

REG-57-021. TOBACCO PRODUCT MANUFACTURERS; REQUIREMENT OF QUARTERLY PAYMENTS .

021.01 Nonparticipating manufacturers must make escrow payments owed under Neb. Rev. Stat. § 69-2703(2) in quarterly installments.

021.02 Nonparticipating manufacturers must submit written proof of the deposit, such as a copy of the bank deposit slip or bank account statement, to the Attorney General’s office within 10 days after the quarterly deposit deadline.

021.03 Upon the request of the Tax Commissioner, nonparticipating manufacturers must submit proof of the number of units sold in Nebraska during the calendar quarter at issue and such other information as may be required to determine the adequacy of the amount of the quarterly payment.

021.04 A nonparticipating manufacturer that fails to fully and timely make the required quarterly payment will be removed from the directory.

REG-57-022. PROVING AN EXCEPTION FROM THE CIGARETTE DEFINITION .

022.01 Proof that a tobacco product meets the exception from the definition of cigarette provided in § 001.05(B)(1) is required and may be provided by submitting the following to both the Nebraska Attorney General and DOR:

022.01(A) Copies of applicable tax forms submitted to the TTB; or

022.01(B) An affidavit from an executive officer of the manufacturer or importer attesting that the manufacturer or importer reports and pays the tax in accordance with 26 U.S.C. §§ 5701(a) and 5702(a).

022.02 Proof that a tobacco product meets the exception from the definition of cigarette provided in § 001.05(B)(2) is required and may be provided by submitting the following to both the Nebraska Attorney General and DOR:

022.02(A) Advance rulings on the tax status of the tobacco product issued by TTB; or

022.02(B) Where an advance ruling from TTB has not been issued, the manufacturer or importer may submit an affidavit from one of its executive officers attesting the tobacco product meets all of the criteria of § 001.05(B)(2).

022.03 Tobacco products that meet the exception from the definition of cigarette provided in § 001.05(B) will, within five business days of submission of the documentation described in § 022.01 or § 022.02, be affirmatively placed on a publicly available list maintained by DOR designating them as little cigars. As a consequence of this designation, these tobacco products may be legally sold in Nebraska without having to be:

022.03(A) Listed on the Directory;

022.03(B) Affixed with an authorized tax stamp; or

022.03(C) Designated as fire safe compliant.

022.04 Evidence submitted regarding a tobacco product to satisfy the exception from the definition of cigarette provided in § 001.05(B) will be prima facie evidence that such product qualifies to be listed as a cigar.

022.05 Regardless of whether the tobacco product has been placed on the publicly available list maintained by DOR of products determined to be classified as cigarettes, a manufacturer or importer may submit an application to the Nebraska Attorney General and DOR for a determination that the designated tobacco product is not required to be in compliance with either Neb. Rev. Stat. §§ 69-501 to 69-511 or 69-2701 to 69-2711.

History

• Effective 2022-03-21

Chapter 68 Lodging Tax

Neb. Admin. Code tit. 316, ch. 68 Lodging Tax {#sec-316-nac-68 omnilex-key=us-ne-regs-official--title-316--316 NAC 68}

REG-68-001 NATURE OF THE LODGING TAX

001.01 The Nebraska Visitors' Development Act authorizes the collection of a lodging tax to be administered by the Nebraska Department of Revenue. The lodging tax is a sales tax imposed upon the total gross receipts charged for the occupancy of any space furnished by a hotel in this state. The lodging tax is in addition to the sales and use tax imposed under the Nebraska Revenue Act of 1967, as amended.

(Sections 81-1245 through 81-1263, R.S.Supp., 1980. August 4, 1980)

REG-68-002 DEFINITIONS

002.01 "Consideration" means the total amount charged, valued in money, by hotel operators for the use of space in a hotel only if the space is ordinarily used for accommodations. It does not include a charge for any food or beverage served or personal services rendered to the occupant of such space.

002.02 "Gross Receipts" means the total amount of consideration, valued in money, arising or accruing from charges for hotel occupancies without any deduction for the amount paid for any occupation taxes.

002.03 "Hotel" means any commercial, nonprofit, or state-owned facility in which the public may, for a consideration, obtain sleeping accommodations. It includes any hotel, motel, tourist home, campground, court, lodging house, or inn. The term "hotel" does not include any hospital, sanitarium, nursing home, chronic care center, rooming or boarding house, or dormitory or facility regularly used to house students in a facility operated by an educational institution established under sections 79-1601 to 79-1607 or 85-1101 to 85-1111 of the Nebraska Revised Statutes.

002.04 "Hotel Operator" means any person who is engaged in the business of operating a hotel in this state.

002.05 "Occupancy" means the use or possession, or the right to the use or possession, of any space in a hotel if the space is ordinarily used for accommodations and if the occupant's use, possession, or right to the use or possession of such space does not exceed a period of thirty days. It does not include a function room such as a ballroom, banquet room, reception room, or meeting room, provided it is not used as temporary sleeping accommodations.

002.06 "Occupant" means any person or organization who, for a consideration, uses, possesses, or has a right to use or possess any space in a hotel if the space is ordinarily used for accommodations.

002.07 "Rooming or boarding house" means a quasi-public house held out by the owner or keeper as a place where roomers or boarders generally and habitually are kept. A "rooming house" differs from a "boarding house" only in that the latter furnishes meals.

(Sections 81-1246 through 81-1250, R.R.S. 1999. March 7, 2006.)

REG-68-003 THE LODGING TAX RETURN

003.01 A return is required for each period or portion of a period in which a lodging tax permit is active. The return must be filed for every tax period even though there have been no gross receipts from charges for hotel occupancies.

003.02 Lodging tax permitholders must report and account for all gross receipts from charges for hotel occupancies. If the return is filed within twenty-five days following the preceding tax period, the permitholder is entitled to deduct and withhold from the amount of lodging tax which otherwise would be due, a collection fee to reimburse himself or herself for the cost of collection.

003.03 Returns shall be signed by the person required to file the return or by his or her duly authorized agent.

003.04 Returns properly signed and accompanied by remittance will be considered timely filed if actually received or if mailed, postage prepaid, on or before the twenty-fifth day of the month following the close of the reporting period. When the twenty-fifth day falls on a Saturday, Sunday, or an approved holiday, the return shall be considered timely filed if actually received or if mailed, postage prepaid, on the next succeeding day which is not a Saturday, Sunday, or an approved holiday. A United States Postal Service postmark will be conclusive evidence of the date of mailing for the purpose of timely filing a return. When there is a private postage meter mark and there is no United States Postal Service postmark, the return is deemed filed on the date received. Failure to file the return or to remit the tax due by the due date will subject the person required to file a return to a penalty in the amount of the larger of twenty-five dollars ($25.00) or ten percent of the tax due. In addition, interest will be imposed at the rate specified in section 45-104.01 of the Nebraska Revised Statutes from the due date to the date payment is received.

003.05 Remittance made payable to the Nebraska Department of Revenue must accompany the return and be in the form of a check, draft, money order, or other payment method as approved by the Tax Commissioner . Cash, post-dated checks, or postage stamps should not be sent as payment. Cash may be used when payment is made in person at an office of the Department of Revenue.

(Section 81-1260, R.R.S. 1999. March 7, 2006.)

REG-68-004 EXEMPTIONS

004.01 Occupants granted an exemption from the lodging tax are the same entities which are exempt from the sales and use tax under the Nebraska Revenue Act of 1967, as amended. See Sales and Use Tax Regs-1-090, 1-091, and 1-092 for a list of those organizations and educational institutions that are exempt from the payment of lodging tax provided they have received a certificate of exemption.

004.02 The federal government is exempt from the lodging tax. The state; any county, city, township, or village, except for purchases used in the business of furnishing gas, water, electricity, or heat; any rural or suburban fire protection district; and any irrigation or reclamation district or the irrigation division of a public power and irrigation district are exempt from the lodging tax.

004.03 An exempt sale certificate or other adequate proof is to be requested by the permitholder from the exempt organization or governmental unit described above in order to support deductions from gross receipts claimed by the permitholder on the lodging tax return. See Reg-68-005, Exempt Sale Certificates.

004.04 Employees of exempt organizations or exempt governmental entities are taxable when they personally pay for accommodations, even if the employee is on travel orders and will be reimbursed for expenses incurred by the exempt organization or governmental entity.

(Section 81-1260, R.R.S. 1999. March 7, 2006.)

REG-68-005 EXEMPT SALE CERTIFICATES

005.01 The burden of proving that any charge for a hotel occupancy is not subject to the lodging tax is upon the permitholder and he or she must keep sufficient records which reveal the nature of each exempt charge. A permitholder is required to obtain an exempt sale certificate from the organization or person in support of the claim that the charge is exempt. The exempt sale certificate constitutes a part of the permitholder's records and is to be retained in the same manner as other lodging tax records.

005.02 The Nebraska Department of Revenue will recognize only the Nebraska Resale or Exempt Sale Certificate, Form 13, a previously approved paper or electronic substitute, or a certificate of exemption authorized by the Streamlined Sales Tax Agreement for all sales except sales to the federal government. Regular federal certificate of exemption forms will also be accepted in lieu of the above forms when presented by an officer or an authorized employee of the United States government, its agencies, or corporations wholly owned by the United States government. The exempt sale certificate should include a statement as to the nature of the exempt charge and the sales and use tax exemption number of the occupant if such number is required.

005.03 Exemption numbers, in the form of sales and use tax numbered certificates of exemption, are issued by the Nebraska Department of Revenue and are required for nonprofit organizations, and public schools. (Reg-68-004, Exemptions.)

005.04 The exempt sale certificate may appear as part of the invoice or billing for the occupancy; provided, that all requirements of the exemption certificate(s) identified in Reg-68-005.02 are met, and that the permitholder cross-references such invoices or billings to memoranda created at the time of the charge.

005.05 If a certificate or satisfactory evidence cannot be produced on demand of the Nebraska Department of Revenue in support of a claim that a charge is exempt, the tax is payable by the permitholder furnishing the hotel occupancy. If the Nebraska Department of Revenue determines that the permitholder knew or should have known that the charge for which a certificate was given was not exempt, the permitholder will be responsible for the tax.

005.06 The permitholder holding a properly completed exempt sale certificate is relieved from liability for tax, penalty, and interest. However, this does not apply to permitholders who frauduently fail to collect tax or who solicit purchasers to participate in unlawful claims of exemption.

005.07 A permitholder repeatedly providing exempt hotel occupancies to the same occupant is not required to take a separate exempt sale certificate for each hotel occupancy but may take a blanket certificate covering future charges for hotel occupancies.

005.08 Any person who gives a Nebraska Resale or Exempt Sale Certificate, Form 13, to a permitholder for any purchase which is not exempted from the lodging tax shall be subject to a penalty of $100.00 or ten times the tax, whichever amount is larger, for each instance of presentation and misuse. With regard to a blanket certificate, the penalty shall apply to each purchase made during the period the blanket certificate is in effect. Any person who fraudulently signs a Form 13 with the intention to avoid payment of the tax may, in addition to the aforementioned penalty, be found guilty of a Class IV misdemeanor.

005.09 The Nebraska Department of Revenue may make and retain copies of any exempt sale certificate.

(Section 81-1260, R.R.S.1999. March 7, 2006.)

REG-68-006 PERMITS

006.01 Every person engaged in the business of operating a hotel in this state where the public may, for a consideration, obtain sleeping accommodations, must file an application with the Nebraska Department of Revenue for a Nebraska lodging tax permit.

006.02 A separate application for a lodging tax permit is required for each hotel as defined in Reg-68-002.03 that is located in this state. The owner of a hotel whose accommodations are located in different counties is deemed to be operating a hotel in each of the counties and is required to obtain a separate permit for each hotel.

006.03 Upon examination and approval of the application, the Nebraska Department of Revenue shall issue to the hotel operator a permit for the specific hotel for which the application was filed. The permit is not assignable, and will be valid only for the hotel operator in whose name it is issued and for the transaction of business at the location of the hotel designated thereon. The permit must be conspicuously displayed at the place of business.

006.04 Upon violation of any of the lodging tax statutes or regulations, the Nebraska Department of Revenue may revoke or suspend the permit or permits of the violator. The procedures as to revocation hearings are contained in Practice and Procedure Regulation 33-008.

006.05 A person whose permit has been previously suspended or revoked shall pay the Nebraska Department of Revenue a fee of twenty-five dollars ($25.00) for the renewal or issuance of a permit in the event of a first revocation, and fifty dollars ($50.00) for each successive revocation. A new permit will not be issued to the same person until the Nebraska Department of Revenue is satisfied that such person will comply with the lodging tax statutes and regulations issued thereunder.

006.06 A person who engages in the business of operating a hotel in this state without a permit or permits or after a permit has been suspended, and each officer of any corporation which so engages in business, shall be guilty of a misdemeanor. Upon conviction thereof, such person and each such officer shall be fined an amount not to exceed five hundred dollars ($500.00) per each day of operation.

(Section 81-1260, R.R.S. 1999. March 7, 2006.)

REG-68-007 RECORDS

007.01 Every permitholder is required to keep records in order to determine the amount of tax due. These records must include the normal books of account ordinarily maintained by the average prudent businessman engaged in a similar activity, together with all documents supporting entries in the books of account. Schedules and working papers used in the preparation of the tax returns and all sales and use tax exemption certificates must be retained.

007.02 The permitholder may collect the lodging tax concurrently with and in the same manner as the sales tax is collected. Separate records to reflect the lodging tax and sales tax collected must be maintained so that the amount of each tax due can be determined.

007.03 The records created at the time a charge for a hotel occupancy is made may take the form of sales invoices, guest checks, tally sheets, itemized lists or other memoranda. A cash register tape may be acceptable if it preserves sufficient information.

007.04 The State Tax Commissioner or any person authorized in writing by him may examine the books, papers, records, and equipment of any person to ascertain or verify the accuracy of any return filed, or, if no return is filed by the person, to ascertain and determine the amount to be paid. Records must be retained for a period not less than three years after the return is filed, unless the Nebraska Department of Revenue, in writing, authorizes their destruction at an earlier date. However, the Nebraska Department of Revenue may issue a deficiency determination within five years after any amount of tax is determined due and payable when a return has not been filed.

(Section 81-1260, R.S.Supp., 1980. August 4, 1980.)

REG-68-008 CONFIDENTIAL INFORMATION

008.01 It shall be a misdemeanor for the State Tax Commissioner, his or her employees, legal representatives or agents, any employees of the State Treasurer or the Department of Administrative Services, or any person receiving information from them to divulge or to make known in any manner, the business affairs, operations, or information obtained by an investigation of records and equipment of any person visited or examined in the discharge of official duty, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any return, or to permit any return, copy of a return, or any book containing any abstract or particulars of a return to be seen or examined by any person not connected with the Tax Commissioner. The preceding shall not be construed:

008.01A To prohibit the delivery to a taxpayer, his or her duly authorized representative, or his or her successors, receivers, trustees, executors, administrators, assignees, or grantors, of a certified copy of any return or report.

008.01B To prohibit the publication of statistics.

008.01C To prohibit the inspection by the Attorney General or other legal representative of the State of Nebraska of reports or returns of any taxpayer when information on the reports or returns is considered, by the Attorney General, to be relevant to any action or proceeding instituted by the taxpayer or against whom an action or proceeding is being considered or has been commenced by any state agency.

008.01D To prohibit the furnishing of information to the Treasury Department of the United States, Postal Inspectors of the United States Postal Service, or to tax officials of other states allowing similar privileges to the State Tax Commissioner and the Nebraska Department of Revenue.

008.02 Information as to whether or not a taxpayer has a lodging tax permit may be released upon request. This exception is due to the requirement that the permit of the taxpayer shall be conspicuously posted in the place of business of the taxpayer at all times.

Section 81-1260, R.R.S. 1999. March 7, 2006.)

REG-68-009 COUNTY LODGING TAX

009.01 Any county may authorize and impose a county lodging tax which will be collected and administered by the Nebraska Department of Revenue and remitted to the adopting county. Such tax shall be at the rate of one-half percent, one percent, one and one-half percent, or two percent of the gross receipts charged for hotel occupancies.

009.02 A county may impose a lodging tax after its governing body has held a public hearing and adopted resolutions to impose the tax and establish both a County Visitors' Promotion Fund and a visitors' committee which shall advise the county board in administering the proceeds from the tax. Implementation of the county lodging tax so imposed will not begin until the first day of the next calendar quarter following receipt by the Nebraska Department of Revenue of certified copies of the adopting resolutions prescribed above; provided, the certified copies are received 120 days prior to the start of the next calendar quarter.

009.03 A county may authorize and impose an additional county lodging tax which will be collected and administered by the Nebraska Department of Revenue and remitted to the adopting county. Such tax shall be in addition to the tax described in Reg-68-009.01 and shall be at the rate of one-half percent, one percent, one and one-half percent, or two percent of the gross receipts charged for hotel occupancies.

A county may impose this additional county lodging tax after its governing body has held a public hearing and adopted resolutions to impose the tax and establish a County Visitors Improvement Fund. Implementation of this additional county lodging tax will be accomplished as described in Reg-68-009.02.

009.04 If any county repeals or changes the rate of either of the county lodging taxes the effective date shall be the first day of the next calendar quarter following receipt by the Nebraska Department of Revenue of a certified copy of the adopting resolution making the change; provided, the adopting resolution is received 120 days prior to the start of the next calendar quarter.

009.05 The Nebraska Department of Revenue shall collect any lodging tax or additional lodging tax imposed by any county concurrently with the collection of the state lodging tax and in the same manner as the state lodging tax is collected. Lodging tax permits, exempt sale certificates, and certificates of exemption issued to exempt organizations which are authorized or required for state lodging tax purposes will satisfy the requirements of the county lodging tax.

009.06 Gross receipts which are subject to the state lodging tax shall also be subject to the county lodging tax in counties which have authorized such a tax. The county lodging tax must be collected at the location of the hotel as defined in Reg-68-002.03.

009.07 Persons responsible for collecting and reporting the county lodging tax or the additional county lodging tax shall report such taxes on forms provided by the Nebraska Department of Revenue. Such forms shall contain such information as the Nebraska Department of Revenue deems necessary for the proper and efficient administration of the county lodging taxes.

009.08 Every person liable for the collection of the county lodging tax shall keep receipts, invoices, guest checks, and other such records as are necessary to establish the amount of tax for which he or she is liable.

(Sections 81-1251, 81-1253 and 81-1260, R.R.S. 1999, and sections 81-1254 and 81-1255, R.S.Supp., 2004. March 7, 2006.)

REG-68-010 OPTIONAL SERVICES

010.01 Charges by a hotel for optional services rendered to occupants are exempt from the lodging tax. The charges for the optional services must be stated separate from the charges for hotel occupancies, and the optional services cannot relate to provision of accommodations, such as additional beds or bedding.

010.02 Optional services include room service, porter or bellboy services, valet services, pay-for-view movies, wake-up calls, and charges for phone service.

010.03 The lodging tax is not the same as the sales tax on these items. Some of these items may be subject to the sales tax without being subject to the lodging tax.

(Section 81-1248, R.S.S., 1943. April 11, 1993.)

History

• Effective 2006-03-07

Chapter 73 Fuels Tax Regulations

Neb. Admin. Code tit. 316, ch. 73 Fuels Tax Regulations {#sec-316-nac-73 omnilex-key=us-ne-regs-official--title-316--316 NAC 73}

REG-73-001 NATURE OF THE NEBRASKA FUELS TAX

001.01 The Nebraska fuels tax is an excise tax imposed upon the ultimate consumer of fuels used, distributed, sold or delivered in Nebraska. The tax is precollected from licensed producers, suppliers, distributors, wholesalers, and importers of fuels as agents of the state based on the number of gallons of fuels purchased in Nebraska, imported, produced, refined, manufactured, compounded, or blended each month. Fuels can be sold exempt from tax only under the situations reflected in Reg-73-003 or as indicated in Reg-73-001.04 below.

001.01A When dealing with compressed fuels, the Nebraska fuels tax is an excise tax imposed upon the ultimate consumer of compressed fuel distributed, sold, delivered or used in motor vehicles registered or required to be registered. The tax is precollected from licensed compressed fuel retailers as agents of the state based on the number of gallons or gallon equivalents of compressed fuel sold each period depending upon the retailers’ filing requirements.

001.02 In the case of a licensed producer of ethanol, there is an excise tax of two and one-half cents per gallon imposed upon the producer based on the purchase of natural gasoline used as a denaturant by the producer at an ethanol facility. This rate of tax is in effect through December 31, 2009. On January 1, 2010, the rate changes to one and one-quarter cents per gallon.

001.03 The Petroleum Release Remedial Action Fee is imposed upon the producer, refiner, importer, distributor, wholesaler or supplier who engages in the sale, distribution, delivery and use of petroleum in Nebraska and is administered in a manner similar to the motor fuels tax discussed in Reg-73-001.01.

001.04 A licensed producer or supplier may maintain tax-free storage of fuels in a Nebraska barge line or pipeline terminal storage facility or in an ethanol or biodiesel facility. The producer or supplier may sell fuels from these facilities tax free to a licensed fuels distributor or exporter. The first distributor or importer of fuels in Nebraska may transfer the tax liability to the first purchaser of such fuel if the purchaser is a licensed fuels distributor or wholesaler. The tax liability may only be transferred one time.

(Sections 3-148 through 3-152, R.R.S. 1997, 66-669, 66-6,109 and 66-6,113, R.R.S. 2003, 66-486, 66-496, 66-4,105, 66-4,140, 66-4,145, 66-4,146, 66-698, 66-6,100, 66-6,107 and 66-1521, R.S.Supp. 2004, 66-482, 66-6,103 and 66-1510, R.S.Supp. 2005, 66-489, Laws 2006, LB 1003. January 8, 2007.)

REG-73-002 DEFINITIONS

002.01 Agricultural ethyl alcohol shall mean ethyl alcohol manufactured to a finished product within the continental United States from agricultural products produced wholly within the continental United States. Agricultural ethyl alcohol is commercially known as ethanol.

002.02 Gasohol shall mean gasoline which contains a minimum of ten percent blend of an agricultural ethyl alcohol whose purity shall be at least ninety-nine percent alcohol, excluding denaturant, produced from cereal grains or domestic agricultural commodities.

002.03 Motor vehicle fuels include all products commonly or commercially known as gasoline, including gasohol and casing head or natural gasoline. Agricultural ethyl alcohol produced for use as a motor vehicle fuel shall be considered motor vehicle fuel.

002.04 Supplier shall mean any person who owns fuels imported by barge, barge line, or pipeline and stored at a barge, barge line, or pipeline terminal in this state.

002.05 Distributor shall mean any person who acquires ownership of fuels directly from a producer or supplier at or from a barge, barge line, or pipeline terminal or ethanol or biodiesel facility in this state.

002.06 Importer shall mean any person who owns fuels at the time such fuels enter the State of Nebraska by any means other than barge, barge line, or pipeline. Importer shall not include a person who imports fuels in a tank directly connected to the engine of a motor vehicle, train, watercraft, or airplane for purposes of providing fuel to the engine to which the tank is connected.

002.07 Wholesaler shall mean any person, other than a producer, supplier, distributor, or importer, who acquires fuels for resale.

002.08 Exporter shall mean any person who acquires ownership of fuels from any licensed producer, supplier, distributor, wholesaler, or importer exclusively for use or resale in another state.

002.09 Retailer shall mean any person who acquires fuels from a producer, supplier, distributor, wholesaler, or importer for resale to consumers of such fuels.

002.09A Compressed fuels retailer shall mean any person engaged in the business of selling or otherwise providing compressed fuel to consumers of the fuel for use in motor vehicles. Compressed fuels retailer also includes any person, other than a consumer of compressed fuel, who has equipment capable of dispensing compressed fuel into a motor vehicle.

002.10 Security shall mean a surety bond executed by a surety company duly licensed and authorized to do business within this state in the amount specified by the department.

002.11 Department shall mean the Motor Fuel Tax Enforcement and Collection Division of the Nebraska Department of Revenue.

002.12 Gross gallons shall mean measured gallons without adjustment or correction for temperature or barometric pressure.

002.13 Net gallons shall mean measured gallons by proved meters, corrected to a temperature of sixty degrees Fahrenheit (fifteen degrees Celsius) and to a pressure of fourteen and seven tenths pounds per pressure (psi).

002.14 Person shall mean any individual, firm, partnership, limited liability company, company, agency, association, corporation, state, county, municipality, or other political subdivision. Whenever a fine or imprisonment is prescribed or imposed in sections 66-482 to 66-4,149, the word person as applied to a partnership, a limited liability company, or an association shall mean the partners or members thereof.

002.15 Aircraft fuels includes aviation gasoline (e.g., gasoline and gasohol) which meets the specifications established for motor vehicle fuel under section 66-482(2), aviation jet fuel (e.g., kerosene), and any other fuel used and consumed exclusively for the purpose of propelling aircraft.

002.16 Aircraft means any contrivance now known, or hereafter invented, used, or designed for navigation or flight in the air.

002.17 Diesel fuel shall mean all combustible liquids and biodiesel suitable for the generation of power for diesel-powered vehicles except that diesel fuel shall not include kerosene.

002.18 Kerosene shall mean kerosene meeting the specifications as found in the American Society for Testing and Materials publication D3699 entitled Standard Specifications for Kerosene.

002.19 Motor vehicle shall have the same definition as in section 60-301.

002.20 A motor vehicle supply tank means a tank which is connected to the fuel system of the engine of the motor vehicle.

002.21 Use means the purchase or consumption of fuels in this state.

002.22 Compressed fuel means compressed natural gas, liquified petroleum gas, liquified natural gas, butane, and any other type of compressed gas or compressed liquid suitable for fueling a motor vehicle. Compressed fuel does not include motor vehicle fuel or diesel fuel as defined in section 66-482.

002.23 Gallon equivalent means the amount of any nonliquid compressed fuel that is deemed to be the equivalent of a gallon of gasoline according to the National Institute of Standards and Technology Handbook 130 entitled Method of Sale of Commodities Regulation, Paragraph 2.27.1.3.

002.24 Fuels shall mean any or all of the following programs administered by the Department: the motor vehicle fuels program, the diesel fuel program, the aircraft fuels program or the compressed fuel program.

002.25 Producer shall mean any person who manufactures agricultural ethyl alcohol or biodiesel at an ethanol or biodiesel facility in this state.

002.26 Highway shall mean every way or place generally open to the use of the public for the purpose of vehicular travel, even though such way or place may be temporarily closed or travel thereon restricted for the purpose of construction, maintenance, repair, or reconstruction.

002.27 Biodiesel shall mean mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats which conform to American Society for Testing and Materials D6751 specifications for use in diesel engines. Biodiesel refers to the pure fuel before blending with diesel fuel.

002.28 Ethanol facility shall mean a plant which produces agricultural ethyl alcohol.

002.29 Biodiesel facility shall mean a plant which produces biodiesel.

002.30 Petroleum shall mean (1) motor vehicle fuel as defined in this regulation except natural gasoline used as a denaturant by an ethanol facility as defined in section 66-1333 and (2) diesel fuel as defined in this regulation including kerosene which has been blended for use as a motor fuel.

(Sections 3-101(3) and 3-148, R.R.S. 1997, 66-6,102, 66-6,105 and 66-821, R.R.S. 2003, 66-483, 66-485 and 66-6,100, R.S.Supp. 2004, 66-482, 66-6,103 and 66-1510, R.S.Supp. 2005. January 8, 2007.)

REG-73-003 EXEMPTIONS

003.01 Fuels transported into Nebraska which meet the following requirements are exempt from the fuels tax:

003.01A Fuels sold to the United States Government, its agencies, and federal corporations wholly owned by the United States Government (i.e., Federal Land Banks, Federal Land Bank Association, the American National Red Cross and its local chapters). U.S. Tax Exemption Certificates, Federal Form 1094, received by the seller, or other evidence of sale to the federal government must be retained; or

003.01B Fuels sold to a metropolitan transit authority established under section 14-1810 of the Nebraska Revised Statutes. The metropolitan transit authority must provide at the time of payment for the fuel a statement to the seller that such fuel was purchased by and used in the operation of a metropolitan transit authority. The statement must be retained in the seller’s records to support the tax exempt nature of the sale; or

003.01C Fuels delivered for use in a state other than Nebraska. Bills of lading or other documentation must be retained by suppliers, distributors, importers, wholesalers, and exporters of fuels for substantiation; or

003.01D Methanol, benzine, benzol, naphtha, kerosene and any other volatile, flammable, or combustible liquid suitable for use as a fuel blending agent or fuel expander shall be exempt from the taxes imposed under the fuels statutes unless and until such methanol, benzine, benzol, naphtha, kerosene or other blending agent or fuel expander is blended with fuel or placed directly into the supply tank of a licensed motor vehicle. Methanol, benzine, benzol, naphtha, kerosene or other blending agent or fuel expander which is blended with fuel shall become subject to the fuels tax at the same time as the fuel with which it is blended becomes subject to tax or upon blending if tax has already been paid on the fuel. Fuel taxes shall not apply to fuel additives which are used to enhance engine performance or prevent fuel line freezing or clogging when placed directly into the supply tank of a motor vehicle in quantities of one quart or less; or

003.01E Natural gasoline purchased for use as a denaturant by a producer at an ethanol facility.

003.02 Unless otherwise provided by an agreement between the State of Nebraska and a federally recognized Indian tribe within the state, Native Americans may purchase fuels tax free if the purchaser is a resident of a Nebraska Indian Reservation and the purchase is made on the Nebraska Indian Reservation. This provision also applies to any purchase made on a Nebraska Indian Reservation by a business which is wholly owned by Native Americans. The purchaser must provide the seller documentation that the business is owned by Native Americans. The seller must keep records, which include the following information, to support each tax-free sale: a copy of the documentation that the business is owned by Native Americans or that the purchaser is a Native American; the name and address of the purchaser; the date of purchase; the type of fuel sold; the total gallons sold; the total sale price; and the signature of the purchaser.

003.03 Except as provided in Reg-73-003.03B, diesel fuel dyed in accordance with regulations issued by the Secretary of the Treasury of the United States under 26 U.S.C. 4082 shall be exempt from the diesel fuel tax and may not be placed into the supply tank of any motor vehicle registered or required to be registered for operation upon the highways of this state. Also, diesel fuel which contains a concentration of sulphur in excess of five-hundredths percent by weight or which fails to meet a cetane index minimum of forty and has been indelibly dyed in accordance with regulations promulgated by the Administrator of the Environmental Protection Agency pursuant to 42 U.S.C. 7545 shall be exempt from the tax. However, dyed diesel fuel shall not be exempt from the Petroleum Release Remedial Action Fee.

003.03A Any person who unlawfully uses dyed diesel fuel in the supply tank of a motor vehicle registered or required to be registered for operation upon the highways of this state shall be subject to an administrative penalty of $250 for the first such violation. If the person had another violation under this section within the last five years, the person shall be subject to an administrative penalty of $1,000 for the current violation. If the person had two or more violations under this section within the last five years, the person shall be subject to an administrative penalty of $2,500 for the current violation. These penalties are assessed against the owner of the vehicle as of the date of the violation.

003.03B Any motor vehicle owned or leased by any state, county, municipality, or other political subdivision may be operated on the highways of this state with dyed diesel fuel (except high sulphur diesel fuel dyed in accordance with regulations promulgated by the Administrator of the Environmental Protection Agency pursuant to 42 U.S.C. 7545) if the diesel fuel tax is paid. Such fuel tax shall be paid directly to the department on the Nebraska Motor Fuels Consumer’s Use Tax Return, Form 74, as set forth in Reg-73-010.

003.03C Any person who unlawfully uses compressed fuel in the supply tank of a motor vehicle registered or required to be registered for operation upon the highways of this state without paying the compressed fuel taxes to the retailer at the time of purchase shall be subject to an administrative penalty of $1,000 for each violation. This penalty is assessed against the owner of the vehicle as of the date of the violation.

003.04 Undyed diesel fuel used for agricultural, quarrying, industrial, or other nonhighway purposes is exempt from the diesel fuel tax. Except as provided in Reg-73-003.01A, Reg-73-003.02, and Reg-73-003.05, all undyed diesel fuel must be purchased tax paid and the purchaser must apply for a refund of the diesel fuel tax paid on fuel used for an exempt purpose.

003.04A Undyed diesel fuel used in clearing or flushing dyed diesel fuel from delivery lines is not considered to be a nonhighway use or purpose and is consequently subject to the diesel fuel tax and to the Petroleum Release Remedial Action Fee.

003.05 A purchaser of diesel fuel that has not been indelibly dyed may present an exemption certificate to the seller when not more than fifty gallons of such fuel is placed directly into the supply tank of a temperature control unit or power take-off unit. To qualify for this exemption, the supply tank of the temperature control unit or power take-off unit cannot be connected to the engine which provides motive power to a motor vehicle or connected to any fuel supply tank connected to the engine of a motor vehicle.

003.05A Temperature control units shall mean reefers.

003.05B Power take-off unit shall mean any piece of diesel-powered equipment used exclusively for operating another piece of equipment by means of a pulley or shaft-driven transfer of power, such as irrigation pump motors and certain agricultural equipment, but does not include any operation that is powered by the main engine of a motor vehicle.

003.05C Agricultural equipment which qualifies as power take-off units includes, but is not limited to, utility tractors that are used exclusively for operating feed grinders, augers, irrigation pumps or other predominantly stationary operations. Incidental use of the equipment, such as moving it from location to location, will not disqualify it from the exemption.

003.05D The exemption certificate presented by the purchaser to the seller must either be a Nebraska Tax Exempt Certificate for Purchase of Diesel Fuel, Form 91EX, or a substitute exemption certificate or invoice which contains the following information:

003.05D(1) Name and address of the seller;

003.05D(2) Name and address of the purchaser;

003.05D(3) Date of the sale;

003.05D(4) Name of the product;

003.05D(5) Number of gallons purchased;

003.05D(6) Price per gallon;

003.05D(7) Total sales price;

003.05D(8) A statement to the effect: “The undyed diesel fuel indicated on this invoice is being sold tax free for use in a temperature control unit or power take-off unit and was placed directly into the supply tank of the temperature control unit or power take-off unit. Placement of the tax-free, undyed diesel fuel into the supply tank of a motor vehicle will subject the purchaser to tax, interest, and a $1,000 penalty”; and

003.05D(9) Signature of the purchaser.

003.05E Any person who unlawfully issues a Nebraska Tax Exempt Certificate for Purchase of Diesel Fuel, Form 91EX, or a substitute exemption certificate or invoice shall be liable for the tax on the diesel fuel and shall be subject to an administrative penalty of $1,000.

003.06 If the seller of tax-free undyed diesel fuel is a licensed supplier, distributor, wholesaler, or importer, the seller may deduct the number of gallons sold without the tax from the return for the period during which the fuel was sold or for a subsequent period. If the seller is a licensed retailer, the seller may provide a Nebraska Retailer’s Claim for Exempt Sales of Motor Fuels, Form RC73 to the distributor, wholesaler, importer or other supplier of the taxed diesel fuel for the total number of gallons of undyed diesel fuel sold without tax during the prior month.

003.07 Fuels transported into Nebraska which meet the following requirements are exempt from the Petroleum Release Remedial Action Fee:

003.07A Fuels sold to the United States Government, its agencies, and federal corporations wholly owned by the United States Government (i.e., Federal Land Banks, Federal Land Bank Association, the American National Red Cross and its local chapters). U.S. Tax Exemption Certificates, Federal Form 1094, received by the seller, or other evidence of sale to the federal government must be retained; or

003.07B Fuels delivered for use in a state other than Nebraska. Bills of lading or other documentation must be retained by suppliers, distributors, importers, wholesalers, and exporters of fuels for substantiation; or

003.07C Natural gasoline purchased for use as a denaturant by a producer at an ethanol facility.

(Sections 66-6,115 and 66-741, R.R.S. 2003, 14-1810, 66-489.01, 66-495, 66-495.01, 66-726 and 66-1521, R.S.Supp. 2004, 66-489, Laws 2006, LB 1003. January 8, 2007.)

REG-73-004 LICENSES

004.01 Every person engaged in the business of buying, selling or transporting fuels in the State of Nebraska must obtain a license. A license may be obtained by filing a Nebraska Motor Fuels License Application, Form 20MF, and the security required by Reg-73-005.

004.02 Upon approval of the application, the department shall issue a license in the name and address of the producer, supplier, distributor, wholesaler, importer or exporter of fuels. The license is not assignable and is valid only for the producer, supplier, distributor, wholesaler, importer, or exporter of fuels in whose name it is issued. The license shall take the form of a letter issued by the department which informs the licensee of its status.

004.02A Upon approval of the application, the department shall issue a license in the name and address of the retailer of fuels or the liquid fuel carrier. The license is not assignable and is valid only for the retailer of fuels or liquid fuel carrier in whose name it is issued. Once issued, the license must be conspicuously displayed. In the case of a retailer, it shall be displayed at their retail location. In the case of a liquid fuel carrier, a copy of the license shall be carried in each vehicle transporting fuels.

004.03 A fuels license is permanent and need not be renewed annually. The department must be notified by every licenseholder who desires to terminate its license. The department must also be notified of any change of address or change of type of ownership. If a change of type of ownership occurs, the licensee must file an application for a new license.

004.04 Any violation of the fuels statutes or regulations may result in the suspension or revocation of the license.

004.04A The licensee may, within thirty days after the mailing of the notice of suspension, petition the department in writing for a hearing and reconsideration of such suspension as provided under section 66-720.

004.04B All notices by the department shall be mailed by registered or certified mail, return receipt requested, to the address of the licensee as shown by the records of the department.

004.05 The department will not issue a new license to the same person for one year from the date of revocation. Any reissuance of a license to the same person within three years from the date of revocation shall require a reinstatement fee of one hundred dollars.

(Sections 3-149, R.R.S. 1997, 66-503 and 66-721, R.R.S. 2003, 66-483, 66-484, 66-502, 66-6,106, 66-713, 66-720 and 66-1521, R.S.Supp. 2004, 66-482, R.S.Supp. 2005. January 8, 2007.)

REG-73-005 SECURITY - CASH BOND TRUST FUND

005.01 An applicant for a fuels producer, supplier, distributor, wholesaler, exporter or importer or compressed fuel retailer license may be required to furnish and maintain security as defined in Reg-73-002.10 for the first year of the new license to assure the required reporting and payment of tax, interest, or penalties. Security may also be required from a licensed producer, supplier, distributor, wholesaler, exporter, importer or compressed fuel retailer when necessary to ensure compliance with Nebraska fuels tax laws.

005.02 For a producer, supplier, distributor, wholesaler, importer or compressed fuel retailer, security, when required, is computed in an amount approximating three times the monthly tax liability of the licensee rounded to the next higher multiple of $1,000. In the case of an exporter, the amount and duration of the security shall be fixed by the department. The security requirement for all licensees cannot be less than the amounts shown below:

005.02A For licensees of motor vehicle fuels, diesel fuels or both – $20,000;

005.02B For licensees of aircraft fuels – $10,000;

005.02C For a compressed fuel retailer – $1,000. Furthermore, security, when required, is computed in an amount approximating two times the estimated average quarterly tax liability payable by such retailer pursuant to the act.

005.02D There shall be no security requirement for licensees in the Petroleum Release Remedial Action Fee program, for licensees in the liquid fuel carriers program or for licensees participating in the tax program discussed in Reg-73-001.02.

005.02E For any producer who reasonably estimates its annual production of fuels to be less than 20,000 gallons, the amount and duration of the security shall be fixed by the department.

005.03 Security in the form of a surety bond may be executed by filing a properly completed Nebraska Motor Fuels Tax Bond, Form 70.

005.04 A license is not valid unless security in the proper amount is on file when required by the department.

005.05 In the event the department determines that the licensee is likely to default in the payment of taxes or fails to increase the amount of security as required, the license may be suspended or revoked.

005.06 A fuels licensee who holds additional licenses or permits for any other fuels program requiring security may make application to the department on a Form 70 for filing and maintaining a combined security. The amount of such security shall not be less than the cumulative total which would be required for the individual securities.

005.07 All licensed fuels producers, suppliers, distributors, wholesalers, importers and compressed fuel retailers shall jointly furnish a cash bond to the state to secure payment of all fuel taxes. The contributions for the cash bond shall be collected each tax period with the tax return. The contributions are deemed to be tax for the purpose of collection or refund.

005.08 The contribution for each tax period is that portion of the commission allowed which equals 1/4 of one percent of the total tax due. The contributions to the cash bond trust fund continue until the amount in the trust fund, including interest earned, is equal to one percent of the total fuels tax collected during the preceding year. Contributions resume whenever the amount in the trust fund is less than ½ of one percent of the total fuels taxes collected during the preceding year. The State Tax Commissioner shall notify the fuels producers, suppliers, distributors, wholesalers, importers and compressed fuel retailers whenever it is necessary for the contributions to the trust fund to resume. Contributions begin with the first tax return that is due at least thirty days after notice is provided by the State Tax Commissioner.

(Sections 3-148, R.R.S. 1997, 66-483, 66-485, 66-6,106, 66-733 and 66-734, R.S.Supp. 2004, 66-482, R.S.Supp. 2005. January 8, 2007.)

REG-73-006 NEBRASKA MOTOR FUELS TAX RETURNS

006.01 A return is required for each month or part of a month in which a motor fuels license is active. A return is required even if there is no activity to report.

006.01A A licensed supplier, distributor, wholesaler, importer, or exporter must file a Nebraska Monthly Fuels Tax Return, Form 73. The return consists of: the Form 73; the Nebraska Multiple Schedule of Receipts, Form 73 MFR; and the Nebraska Multiple Schedule of Disbursements, Form 73 MFD.

006.01B A licensed producer must file a monthly Nebraska Ethanol and Biodiesel Producer’s Return, Form 83. The return consists of: the Form 83; the Nebraska Producer’s Schedule of Receipts, Form 83 MFR; and the Nebraska Producer’s Schedule of Disbursements, Form 83 MFD.

006.01C A licensed compressed fuel retailer must file a Nebraska Compressed Fuel Retailer Return, Form 86, unless a Nebraska Monthly Fuels Tax Return, Form 73, is filed.

006.01C(1) If the retailer’s compressed fuel tax liability for the calendar year is $6,000 or more, the retailer must file monthly returns.

006.01C(2) If the calendar year tax liability is at least $250, but less than $6,000, returns must be filed at least quarterly or may be filed monthly.

006.01C(3) If the calendar year tax liability is less than $250, returns must be filed at least annually or may be filed quarterly or monthly.

006.01D A licensed terminal operator must file a monthly Nebraska Motor Fuels Terminal Operator Report, Form 87. The return consists of: the Form 87; the Nebraska Motor Fuels Terminal Operator Schedule of Receipts, Form 87; and the Nebraska Motor Fuels Terminal Operator Schedule of Disbursements, Form 87.

006.01E The Department has the statutory authority to require licensed liquid fuel carriers to file a monthly Nebraska Motor Fuels Carrier Report, Form 80.

006.02 The total number of gross gallons of motor vehicle fuels, aircraft fuels, or diesel fuels purchased in Nebraska, imported, produced, blended, or exported must be reported. Motor vehicle fuels, aircraft fuels, or diesel fuel can be sold without motor fuels tax or the Petroleum Release Remedial Action Fee only under the situations described in Reg-73-003.

006.02A The total number of gallons or gallon equivalents, based on net gallons, of compressed fuel sold for use in registered motor vehicles must be reported. Exemptions are described in Reg-73-003.

006.02B The standard miles-per-gallon rating for compressed fuel transport and delivery vehicles, which are not equipped with a separate fuel supply tank, is 10 miles per gallon. This standard must be used to calculate the amount of Nebraska motor fuels tax on the fuel used from the vehicle’s cargo tank to power the vehicle.

006.03 A producer, supplier, distributor, wholesaler, or importer of motor fuels or a retailer of compressed fuels may deduct from the tax amount due a commission as reimbursement for the expenses of collecting and remitting the tax described in Reg-73-001.01 and providing the surety bond as required by Neb. Rev. Stat. §§ 66-485 and 66-6,106.

006.03A For motor vehicle fuels or aircraft fuels, the commission is 5% of the first $5,000 tax and 2.5% of all amounts over $5,000, unless adjusted by Neb. Rev. Stat. § 66-734.

006.03B For diesel fuels or compressed fuel, the commission is 2% of the first $5,000 tax, and 0.5% of all amounts over $5,000, unless adjusted by Neb. Rev. Stat. § 66-734.

006.03C The commissions described in this section will not be allowed on underreported tax assessed on an audit. If an audit determines that tax was overreported, the commission previously claimed on the overreported tax will be deducted from the audit credit.

006.04 All gallons, gallon equivalents, and dollars must be rounded to the nearest whole number on the returns and reports. Amounts ending in .49 or less must be rounded down to the closest whole gallon, gallon equivalent, or dollar. Amounts ending in .50 or more must be rounded up to the next whole gallon, gallon equivalent, or dollar.

006.05 Returns must be signed by the person required to file the return or by his or her duly authorized agent. An authorized signature on a Nebraska Motor Fuels License Application, Form 20MF, will satisfy the signature requirement for filing fuels tax returns electronically.

006.06 Returns, with schedules and payment, are considered timely filed if signed and submitted in the format required by the Department on or before the 20th day of the month following the end of the reporting period. When the 20th falls on a Saturday, Sunday, or legal holiday, the return is timely filed if submitted in the format required by the Department on or before the next business day following the 20th.

006.06A If payment is not made by the due date of the return, interest will be assessed at the rate provided in Neb. Rev. Stat. § 45-104.02, from the due date until the date payment is received.

006.06B If the return is not filed or payment is not made by the due date, penalties will be assessed as described in Neb. Rev. Stat. § 66-719.

006.07 Payment must be in the form of a check, draft, money order, or electronic funds transfer (EFT) made payable to the Department on or before the due date of the return. The Tax Commissioner may require EFT payments of motor fuels taxes by any taxpayer who made payments over $5,000 for motor fuels tax programs in the prior year. Any taxpayer who is required to make payments by EFT and who fails to make a payment by EFT is subject to a penalty of $100 for each payment that was not made by EFT. This penalty is in addition to other penalties and applies even if timely payment is made by some other method.

006.08 The Tax Commissioner may require the reports, returns, and other filings from any motor fuels licensees to be filed electronically.

(Neb. Rev. Stat. §§ 3-148 and 3-149, 66-482, 66-486, 6-488, 66-496, 66-525, 66-6,110, 66-6,113, 66-6,115, 66-718, 66-719, 66-724, 66-733, 66-734, 66-1521, 77-3,117 and 77-1784. December 27, 2015.)

REG-73-007 RECORDS

007.01 Every producer, supplier, distributor, wholesaler, importer, and exporter of fuels or retailer of compressed fuel is required to maintain records. These records must include the normal books of account ordinarily maintained by the average business engaged in a similar activity together with all documents supporting entries in the books of account. For each separate act of importing, producing, refining, manufacturing, compounding, or blending of fuels into or within the State of Nebraska, and for each separate act of exporting fuels from Nebraska, a licensee must record and retain the following information:

007.01A Name and address from whom obtained;

007.01B Date of importing, refining, manufacturing, producing, compounding, blending, or exporting;

007.01C Point of origin of shipment of fuels;

007.01D Point of delivery of shipment of fuels;

007.01E Method of shipment of fuels;

007.01F Number of gallons of fuel based on gross gallons;

007.01G Federal exemption certificates, Federal Form 1094, or other evidence of sale to the federal government;

007.01H Properly completed Nebraska Tax Exempt Certificate for Purchase of Diesel Fuel, Form 91EX, and Nebraska Retailer’s Claim for Exempt Sales of Motor Fuels, Form RC73; and

007.01I Work papers and taxpayer’s copy of schedules used in the preparation of the tax return must be retained as provided in Reg-73-007.06.

007.02 Invoices, meter readings, pipeline terminal and refinery bills of lading, inventory records, including inventory control records maintained for the State Fire Marshal, and other memorandum must be retained in addition to the information required above. The maintenance of this information in a provable computer format or on microfilm is acceptable in lieu of retention of the original documents.

007.03 Every retailer of fuels is required to maintain complete and accurate records. These records must include the normal books of account ordinarily maintained by the average business engaged in a similar activity together with all documents supporting entries in the books of account. The records shall be based on gross gallons and shall show for all those gallons received, purchased or obtained the following:

007.03A Name and address from whom obtained;

007.03B Point of origin of shipment of fuels;

007.03C Point of delivery of shipment of fuels;

007.03D Method of shipment of fuels;

007.03E Number of gallons of fuel delivered;

007.03F Total amount of motor fuels sold at retail during the month;

007.03G In the case of exempt sales of motor fuels: the date sold, the quantity sold and the identity of the purchaser;

007.03H Federal exemption certificates, Federal Form 1094, or other evidence of sale to the federal government;

007.03I Properly completed Nebraska Tax Exempt Certificate for Purchase of Diesel Fuel, Form 91EX, and Nebraska Retailer’s Claim for Exempt Sales of Motor Fuels, Form RC73.

007.04 Any person making sales of fuels within the State of Nebraska to users of the fuels must give, upon the request of such users, an invoice covering the transaction. Invoices shall contain the following information:

007.04A Date of purchase;

007.04B Name and address of seller;

007.04C Name and address of purchaser;

007.04D Name of product;

007.04E Number of gallons;

007.04F Price per gallon;

007.04G Total sales price; and

007.04H If motor fuels are placed directly into the supply tank of a nonhighway use vehicle or equipment, a general description of the type of vehicle or equipment in which the motor fuels were placed.

007.05 Credit card invoices are accepted for bona fide credit sales. Credit card invoices are also accepted for cash sales of fuel purchases. Cash invoices must have the words "cash sale" and "paid" written visibly on the face.

007.06 The department may examine the books, schedules, work papers, and records required by these regulations of licensees to verify the accuracy of any report or return filed or, if no report or return is filed by the licensee, to determine the amount of tax, interest, and penalties required to be paid. Records must be retained for a period of not less than three years after the report or return is filed or for a period of five years if the required reports or returns are not filed.

007.06A In the case of motor vehicle fuels retailers, aircraft fuels retailers and diesel fuel retailers, records shall be retained for three years.

(Sections 66-6,114, 66-725 and 66-731, R.R.S. 2003, 66-483, 66-487, 66-495, 66-4,149, and 66-713, R.S.Supp. 2004, 66-482, R.S.Supp. 2005. January 8, 2007.)

REG-73-008 REFUNDS

008.01 A claim for refund of fuels taxes must be filed with the Department using a Nebraska Non-Ag Use Motor Fuels Tax Refund Claim, Form 84, or a Nebraska Ag Use Motor Fuels Tax Refund Claim, Form 84AG, within three years after the date of payment of the tax. The claim will be allowed upon sufficient showing that the tax was paid to Nebraska on:

008.01A Motor fuels that were destroyed. Claims filed under this subsection must be in writing and include sufficient documentation to substantiate the cause of loss and the number of gallons of motor fuels destroyed. Newspaper accounts, copies of original records, or insurance claims may be submitted for this purpose.;

008.01B Motor fuels purchased by someone other than a licensed producer, supplier, distributor, wholesaler, or importer, or exporter in this state and sold in a state other than Nebraska.;

008.01C Motor fuels purchased on a Nebraska Indian reservation if the purchaser is a Native American who resides on the Nebraska Indian reservation, unless otherwise an agreement between the State of Nebraska and a federally-recognized Indian tribe within the state applies;

008.01D Motor fuels, methanol, and all blending agents or fuel expanders if the motor fuels are used for buses equipped to carry more than seven persons for hire, which are engaged entirely in the transportation of passengers for hire within municipalities or within a radius of six miles of those municipalities. In lieu of the excise taxes, the owner or agent of the buses must pay an equalization fee equal to twice the amount of the registration fee as required under Nebraska law. The equalization fee must be paid to the county treasurer of the county where the owner resides in the same manner as the registration fee;

008.01E Motor fuels used for agricultural, quarrying, industrial, or other nonhighway purposes. No part of any motor fuels for which a claim for refund of tax paid is filed under this subsection can be used for propelling licensed motor vehicles.; and

008.01E(1) A claim for refund under this subsection must include:

008.01E(1)(i) The name of the claimant;

008.01E(1)(ii) The make, horsepower, and other mechanical description of machinery in which the motor fuels were used;

008.01E(1)(iii) The source or place of business where the motor fuels used solely for agricultural, quarrying, industrial, or other nonhighway uses, were acquired;

008.01E(1)(iv) Statements that no part of the motor fuels were used in propelling licensed motor vehicles and that the motor fuels for which the refund of the tax is claimed were used solely for agricultural, quarrying, industrial, or other nonhighway purposes;

008.01E(1)(v) Legible copies of motor fuels purchase invoices, withdrawal logs, and fuel storage information; and

008.01E(1)(vi) Any other information deemed necessary by the Department.

008.01E(2) The Department will deduct from a claim for refund under this subsection:

008.01E(2)(i) Two and one-quarter cents per gallon of the tax paid for purchases of motor vehicle fuels; and

008.01E(2)(iii) One cent per gallon of the tax paid for purchases of diesel fuels.

008.01F Motor Fuels purchased for use by the U.S. government, its agencies, or instrumentalities.

008.02 A claim for refund of the Petroleum Release Remedial Action Fee must be filed using a Form 84 within three years after the date of payment of the fee. The claim will be allowed upon sufficient showing that the fee was paid to Nebraska on:

008.02A Motor fuels destroyed. Claims must be in writing and include sufficient documentation to substantiate the cause of loss and the number of gallons of motor fuels destroyed. Newspaper accounts, copies of original records, or insurance claims may be submitted for this purpose;

008.02B Motor fuels purchased by someone other than a licensed producer, supplier, distributor, wholesaler, importer, or exporter in this state and sold in a state other than Nebraska; or

008.02C Motor fuels purchased for use by the U.S. governments, it agencies or instrumentalities.

008.03 A claim for refund of aircraft fuels tax for the full amount of tax paid will be approved if the aircraft fuels were purchased and consumed in connection with flying instruction conducted by an air school approved by the Federal Aviation Administration (FAA). Any claim must be filed using Form 84 within seven months after the date of purchase or invoice.

008.04 Any person purchasing motor vehicle fuels (for example, gasoline) for use in an aircraft converted to run on motor vehicle fuels may obtain a refund of any motor vehicle fuels tax paid which exceeds what the purchaser’s aircraft fuels tax liability would have been. Any claim must be filed using Form 84. The purchaser must also submit a copy of the FAA certificate establishing that the purchaser’s aircraft has been converted to run on motor vehicle fuels and any other documentation as the Department deems necessary to support the purchaser’s claim for refund.

008.05 Credit for taxes paid on motor fuels which are exempt from tax under Reg-73-003 must be taken on the licensee’s appropriate Nebraska motor fuels tax return.

008.06 No claim for refund of motor fuels tax paid under any one program may be made for less than $25 in any calendar year, except that no claim for refund of the Petroleum Release Remedial Action fee may be made for less than $10 in any calendar year.

008.07 Refund claims may only be filed once per month.

008.08 Interest does not accrue on refund claims or other overpayments of tax.

008.09 All refunds of motor fuels tax may be paid electronically.

(Neb. Rev. Stat. §§ 3-150, 3-151, 66-482, 66-483, 66-489, 66-6,109.01, 66-726, 66-741, 66-1521, and 77-2734.03. December 27, 2015.)

REG-73-009 LIQUID FUEL CARRIERS

009.01 Any person transporting motor vehicle fuels, aircraft fuels or diesel fuel in a transport vehicle (such as a tanker or tankwagon) into, within or out of Nebraska must obtain a liquid fuel carrier license as discussed more fully in Reg-73-004. In addition, a copy of the bill of lading, manifest, bill of sale, purchase order, sales invoice, delivery ticket or similar documentation must be carried in the transport vehicle whenever transporting motor vehicle fuels, aircraft fuels or diesel fuel in Nebraska.

009.01A A liquid fuel carrier license is not required for persons transporting motor vehicle fuels, aircraft fuels or diesel fuel within the state for their own exempt use. It is also not required for the transportation of leaded racing fuels or for compressed fuels such as propane or compressed natural gas regardless of its ownership or use.

009.02 A diverted load occurs whenever the bill of lading or other transportation document for the fuel indicates a destination state other than the state to which the fuel is actually delivered.

009.02A Whenever the bill of lading or other transportation document indicates a destination state other than Nebraska and the fuel is subsequently delivered to Nebraska, the liquid fuel carrier must register the diverted load and obtain a delivery permit number for the resulting diverted load prior to delivering the fuel.

009.03 Any common or contract carrier transporting motor vehicle fuels, aircraft fuels or diesel fuel in a transport vehicle such as a tanker or tankwagon into, within or out of Nebraska must also file a Nebraska Motor Fuels Carrier Report, Form 80, as discussed more fully in Reg-73-006.

009.04 All vehicles used to transport motor vehicle fuels or diesel fuel are required to have the name and address of the owner of the vehicle displayed in the form and manner required by federal regulations.

009.05 In addition to other remedies available to the department, any person who fails to obtain from the department prior to delivering fuel a delivery permit number for a diverted load shall be subject to an administrative penalty of $1,000 for each such violation. These penalties shall be assessed against the owner of the vehicle as of the date of the violation.

(Sections 66-501, 66-503, 66-505, 66-527 and 66-738, R.R.S. 2003, 66-502 and 66-525, R.S.Supp. 2004. January 8, 2007.)

REG-73-010 NEBRASKA FUELS CONSUMER’S USE TAX

010.01 Every person using diesel fuel subject to tax as provided in Reg-73-003.03B shall become licensed and shall make a report of such use on the Nebraska Motor Fuels Consumer’s Use Tax Return, Form 74, unless such person is a licensed diesel fuel supplier, distributor, importer, or wholesaler.

010.02 Every person who incurs gains from sales of fuels resulting from an inventory/sales variance shall become licensed and shall make a report of such use on the Nebraska Motor Fuels Consumer’s Use Tax Return, Form 74.

010.02A Gains resulting from an inventory/sales variance occur whenever the person’s gallons of sales per sales records exceeds the person’s gallons of sales per change in inventory.

010.02B The gallons of sales per sales records is determined by examining the person’s total fuels sales per sales records.

010.02C The gallons of sales per change in inventory is determined by adding the person’s gallons of fuels purchased during the tax period to the gallons of fuels present at the beginning of the tax period and then subtracting the gallons of fuels present at the end of the tax period.

010.03 If kerosene or other blending agents or fuel expanders are blended with fuels and used in a licensed motor vehicle, a motor fuels consumer’s use tax liability is incurred. This is reported and remitted on the Nebraska Motor Fuels Consumer’s Use Tax Return, Form 74.

010.04 A Nebraska Motor Fuels Consumer’s Use Tax Return, Form 74, shall be submitted in such format as prescribed by the department on or before the 25th day of the month following the close of the quarterly reporting period.

010.05 The Nebraska Motor Fuels Consumer’s Use Tax Return shall be filed in conformity with and subject to the requirements of Reg-73-006.04, Reg-73-006.05 and Reg-73-006.06.

010.06 Except for licensed motor fuels retailers, all Nebraska Motor Fuels Consumer’s Use Tax licensees must keep adequate records for a period of at least three years, or five years if the required returns are not filed. The records must substantiate the following:

010.06A Invoices indicating tax-free and tax-paid purchases;

010.06B Type of equipment in which the fuel was used; and

010.06C A list of each exempt use showing the date and number of gallons per use.

010.07 Licensed motor fuels retailers must keep adequate records for a period of three years. The records must comply with the requirements of Reg-73-007.03.

010.08 All reports, returns and other filings submitted by all licenseholders shall be made by rounding the amount of gallons or dollars to the closest whole gallon or dollar, respectively. For those amounts ending in .49 or lower, the amount shall be rounded down to the closest whole gallon or dollar. For those amounts ending in .50 or higher, the amount shall be rounded up to the closest whole gallon or dollar.

(Sections 77-3,117 and 77-1784, R.R.S. 2003, 66-488, 66-489.01, 66-4,105 and 66-713, R.S.Supp. 2004, 66-482,R.S.Supp. 2005, 66-489, Laws 2006, LB 1003. January 8, 2007.)

History

• Effective 2015-12-27

Chapter 94 Marijuana and Controlled Substances Tax

Neb. Admin. Code tit. 316, ch. 94 Marijuana and Controlled Substances Tax {#sec-316-nac-94 omnilex-key=us-ne-regs-official--title-316--316 NAC 94}

REG-94-001 SCOPE

001.01 These regulations govern the enforcement of the Nebraska Marijuana and Controlled Substances Tax, codified at Neb. Rev. Stat. Chapter 77, article 43, as amended.

(Sections 77-4301 through 77-4316, R.S.Supp., 1991. February 2, 1992.)

REG-94-002 DEFINITIONS

002.01 For the purposes of these regulations, described terms have the following meanings unless otherwise clearly intended in the context of the regulation or required by law:

002.01A "Department" or "Department of Revenue" means the Nebraska Department of Revenue.

002.01B "Commissioner" or "Tax Commissioner" means the Nebraska State Tax Commissioner or his or her designee.

002.01C "Controlled substance" means any substance described in section 28-405 Neb. Rev. Stat. (Reissue 1989) as amended, or any imitation controlled substance.

002.01D "Imitation controlled substance" shall have the meaning as provided in section 28-401 Neb. Rev. Stat. (Reissue 1989).

002.01E "Drug" or "taxable drug" means any item, plant or thing identified as a controlled substance in section 28-405 Neb. Rev. Stat., as amended, any imitation controlled substance, or marijuana.

002.01F "Like drug" means any controlled substance derived directly from the processing of another controlled substance or marijuana, which processing does not alter the chemical structure of the first substance so as to create a different, federally-defined analog controlled substance, as described in the Federal Drug Abuse Prevention Act, 21 U.S.C. section 801, et. seq.

002.01G "Marijuana" means any plant identified in section 28-401 Neb. Rev. Stat. (Reissue 1989).

002.01H "Law enforcement agent" means any individual or agency authorized by Nebraska statutes to effect the arrest of any person suspected of a law violation.

002.01I "Dealer" means any individual possessing marijuana or controlled substances in an amount sufficient to trigger the provisions of Neb. Rev. Stat. sections 77-4301, i.e., any person who acquires or possesses six or more ounces of marijuana, seven or more grams of any controlled substance which is sold by weight, or ten or more dosage units of any controlled substance which is not sold by weight.

002.01J "Taxpayer" or "purchaser" means any person buying drug tax stamps from the Department of Revenue or any person who has had all or part of a drug tax assessment collected from him or her.

002.01K "Assessee" means any person against whom the Department has issued or is able to issue an assessment for drug taxes, penalties and interest owed to the State.

002.01L "Stamp" or "drug stamp" means an official, numerically-sequenced and dated drug stamp issued by the Nebraska Department of Revenue.

002.01M "Weight" means the weight of marijuana or any controlled substance as measured or estimated by the Department of Revenue, a law enforcement agent or other entity approved by the Department of Revenue. When possible to determine, weight shall not include the weight of the container (if any) in which the substance was found.

002.01N "Threshold amount" means the minimum amount of marijuana or a controlled substance required in order to qualify as a "dealer" as defined at Neb. Rev. Stat. section 77-4301(2).

002.01O "Container" means anything which holds or encompasses marijuana or controlled substances and which is customarily or reasonably transferred with the marijuana or controlled substance at the time of sale or delivery.

002.01P "Dosage unit" means the medically-approved minimum dosage of a controlled substance to achieve the purpose and effect of the drug. For marijuana and its derivatives, for controlled substances for which there is no medically- approved purpose, or for substances for which no medically-approved minimum dosage can be determined, dosage unit means the street dosage unit as obtained from a qualified law enforcement agent.

(Sections 28-401 and 28-405, sections 77-4301, 77-4303, 77-4305, 77-4306, 77-4307, 77-4309, and 77-4310. February 2, 1992.)

REG-94-003 DRUG TAX STAMPS

003.01 Drug tax stamps shall be sold at all Department of Revenue offices for face value in denominations authorized by the Tax Commissioner.

003.02 When required; restrictions on use.

003.02A Drug stamps must be affixed to a container holding threshold amounts of marijuana or controlled substances immediately upon possession of the drug(s) in the State of Nebraska or immediately upon the expiration of previously issued stamps.

003.02A(1) Drug stamps may be purchased by a taxpayer in anticipation of the possession of taxable drugs, but the date of expiration for the stamps shall be calculated from the day of purchase, regardless of the day the drug(s) were actually possessed.

003.02B Drug stamps may be purchased by any person of any age and may be purchased for purposes other than for affixing to containers holding taxable drugs.

003.03 How purchased.

003.03A No person will be required to provide the Department any identifying information in connection with a purchase of drug tax stamps.

003.03A(1) The Department shall not release to any outside person or agency information concerning any purchaser or purchase. However, the Department may periodically release statistical information that informs the public or other agencies of the Drug Tax Program‘s progress.

003.03B Drug tax stamps may be purchased only with a money order, cashier’s check, or cash. However, the Department will not accept cash payments in amounts equal to or greater than $10,000.

003.03C Drug tax stamps may be purchased by mail using any approved method of payment except cash.

003.03C(1) If the taxpayer chooses to purchase drug tax stamps by mail, the taxpayer assumes the risk of non-delivery or tardy delivery by the postal service. Mail-order purchasers are responsible for ordering stamps sufficiently in advance of need so that the stamps will arrive at or before the time of drug possession. In determining the probable arrival time of mail-order stamps, taxpayers should allow the Department three working days following receipt of the order to process the order and deposit a response with the postal service.

003.03C(1)(a) The Department shall mail all drug tax stamps via first class mail with a certificate of mailing. Failure of the stamps to arrive attributable to postal service error shall not be a legitimate excuse for drug tax stamps not being affixed to a container of taxable drugs.

003.03C(2) If an assessee who has purchased drug tax stamps through the mail can prove that the only reason the stamps were not affixed to a container of drugs was that the Department unreasonably delayed delivering the stamps, the assessee shall be entitled to elimination of the assessment, interest and abatement of the penalty.

003.03C(2)(a) For the purposes of this section, the Department shall be presumed to have unreasonably delayed delivery of drug stamps if it fails to send the stamps via first class mail within three working days of receiving an order. The Department may rebut this presumption by presenting evidence of the time of mailing.

003.03D Department employees will provide to any person interested in purchasing drug tax stamps a worksheet upon which the taxpayer may determine the amount of stamps he or she requires. Upon request, Department employees may explain the form and may assist the taxpayer in calculating the actual amount of tax due.

003.03E All drug tax stamps shall expire at midnight 180 days from the date of purchase.

003.03F No drug tax stamp may be reused, altered, transferred to a second container, or otherwise tampered with to avoid the purchase of another stamp.

003.04 Refunds; rate changes.

003.04A Once dated and issued, no refund will be granted on any drug tax stamp unless the refund request is based on a Department error. An error by a Department employee in assisting a taxpayer to determine the amount of tax owed shall not be cause for issuing a refund.

003.04B If the Legislature increases the tax rate for a particular drug or substance, it is the responsibility of the taxpayer to purchase additional stamps no later than the effective date of the price increase.

003.04C If the Legislature decreases the tax rate for a particular drug or substance, no refund will be issued for taxpayers who initially purchased stamps at the higher rate.

003.05 Travel or temporary residence in Nebraska; foreign stamps.

003.05A Drug stamps must be affixed to taxable drugs immediately upon crossing Nebraska state borders, without regard to the amount of time the drugs are expected to remain in the state.

003.05B Drug stamps from another state shall not be honored in Nebraska, and affixing them to a container of taxable drugs found in this State shall have no effect on the amount of tax, penalty and interest owed in Nebraska.

(Sections 77-4304(1), 77-4304(2), 77-4305, 77-4306, 77-4307, 77-4310.02(1), and 77-4315. February 2, 1992.)

REG-94-004 TAXABLE DRUGS; PRESUMPTIONS AND EXEMPTIONS

004.01 Unless evidence to the contrary is presented to the Department, drugs confiscated by law enforcement agents shall be presumed to be unlawfully possessed and subject to taxation.

004.02 Any person or entity legally in possession of marijuana or controlled substances that would otherwise be taxable under the provisions of these regulations and the Marijuana and Controlled Substances Tax Act shall be exempt from taxation.

(Section 77-4303(3). February 2, 1992.)

REG-94-005 DRUG TAX STAMPS; USE

005.01 Except as otherwise provided in this rule, drug tax stamps must be physically affixed, using their adhesive backing, to a container holding the taxable drugs. Except as herein provided, any other use or method of affixing the stamps shall render the stamps invalid for the purpose of satisfying the tax liability for confiscated, otherwise untaxed drugs. No stamp shall be considered valid for the purpose of satisfying tax liability if it is not affixed using its adhesive backing.

005.02 In the case of marijuana or other drug plant fields where physically affixing drug stamps to a container is not possible, a taxpayer may purchase an appropriate amount of stamps and affix them to a letter. The letter must be dated and contain a legible handwritten description of the field, its contents and location sufficiently detailed so as to permit agents of the Department or law enforcement agencies to determine whether sufficient taxes on the field have been paid.

005.02A Any letter used in lieu of a container for the purposes of these regulations must be produced upon the request of an agent of the Department or law enforcement agency.

005.02B Employees of the Department are not obliged to provide an estimate to a taxpayer of the probable tax liability on a particular field of plants. In the event such an estimate is provided, sole responsibility for its accuracy shall remain with the taxpayer and the Department shall neither be bound by the estimate nor precluded from assessing additional tax, penalties and interest if appropriate.

005.03 In the case of drugs not ordinarily stored or transported in containers, or for which affixing stamps is difficult or not covered by these regulations, a taxpayer may either contact the Department‘s Drug Tax Agent for instructions on how to affix the stamps or affix stamps to those drugs in any manner he or she deems appropriate. However, if a taxpayer elects not to contact the Department’s Drug Tax Agent and a doubt subsequently exists regarding whether drug tax stamps properly were affixed, the Department shall determine whether there was any practical way in which the stamps could have been affixed permanently to a container. If the Department concludes that affixing the stamps to a container was practical but not effected, the stamps shall be invalid for the purpose of satisfying the tax liability, and tax, penalties and interest may be assessed as if the stamps had never been purchased.

(Sections 77-4306 and 77-4307. February 2, 1992.)

REG-94-006 DRUG TAX STAMPS; AMOUNT OF TAX OWED

006.01 Any taxpayer in possession of marijuana or controlled substances in amounts equal to or greater than the minimum threshold amounts shall purchase drug tax stamps from the Department of Revenue in an amount at least equal to the amount of tax due on the drugs.

006.02 Any person in possession of the threshold amount of any single type of drug shall be considered a dealer and shall be liable for taxes on all other drugs in his or her possession, regardless of whether or not the dealer possesses the other drugs in quantities sufficient to meet minimum threshold amounts.

006.03 In the event a dealer liable for drug taxes owes an amount unequal to any possible combination of drug stamp denominations, that dealer shall be required to purchase stamps valued at the next lowest amount possible which exceeds the actual amount of tax owed on the drugs the dealer possesses.

006.04 In the event a dealer purchases drug stamps in an amount at least equal to his or her tax liability for a quantity of marijuana or controlled substances but then subdivides the original quantity of drugs into smaller quantities, an appropriate amount of drug stamps must be affixed to each new container.

006.04A The amount of stamps affixed to each container of subdivided marijuana or controlled substance must reflect at least the tax owed on the quantity of marijuana or controlled substance therein.

006.04B Each container of marijuana or controlled substance must be affixed with a sufficient amount of drug stamps, regardless of the quantity of drug therein, if the aggregate amount of the drugs in the dealer‘s possession meets a threshold amount.

006.05 In the event a dealer affixes drug stamps to a container of taxable drugs in an amount insufficient to meet his or her tax liability for a quantity of marijuana or controlled substances, the dealer shall be liable only for the amount of tax still owed, a penalty equal to the amount of the tax owed, and any applicable interest.

006.06 A dealer is solely responsible for determining and affixing the proper amounts of drug tax stamps to all marijuana and controlled substances in his or her possession.

(Sections 77-4301(2), 77-4302, 77-4307, and 77-4309. February 2, 1992.)

REG-94-007 AMOUNT OF DRUGS POSSESSED; METHOD OF CALCULATING

007.01 In all cases, the purity of the drug shall not be considered in calculating the amount of tax owed. All voluntary payments or assessments shall be made as if the drug were 100% pure.

007.02 When an individual possesses a drug in a form that does not lend itself accurately to measurement based upon weight, dosage unit or volume, the Department shall utilize whatever method of measurement and assessment is reasonable and appropriate in the circumstances.

007.02A In the event an assessee disputes the Department’s calculation of the amount of taxable drugs in such a circumstance, the assessee may arrange with a court, at his or her own expense, to have the drugs weighed, sorted, cleaned, sifted or otherwise reevaluated, when said drugs have not been previously destroyed. The Department must receive notice of any hearing scheduled on an application to have drug quantities reevaluated and must also be notified of the time and place of any scheduled reevaluation testing.

007.02A(1) If provided with new information as a result of a reevaluation, the Department shall not be obligated to increase or decrease its assessment if it determines the reevaluation method was flawed.

007.02A(2) In the event a reevaluation is conducted without prior approval of the reevaluation method from the Department of Revenue, the Department need not alter its assessment based upon the reevaluation results but may consider the results should it determine an increase or decrease in the amount of the assessment is appropriate.

007.02A(3) The Department shall not unreasonably withhold approval of a reevaluation method, and the likelihood that a reevaluation would result in a decrease in the amount of an assessment shall not alone be cause for withholding approval of a reevaluation method.

007.02A(4) Nothing in these regulations shall be interpreted as giving an assessee the right to have drug weight or measurements reevaluated without an order of a court.

007.03 In the case of unmanicured marijuana, the Department shall not consider the weight of any attached dirt or part of the stalk in calculating the weight of the taxable marijuana unless otherwise provided by the Legislature.

007.03A For purposes of assessment, the Department shall rely upon the exact weight of the confiscated marijuana when available.

007.03B For purposes of assessment, if the exact weight of the marijuana is unavailable, the Department shall estimate the weight of the marijuana to equal one pound of marijuana per plant.

007.03B(1) For the purposes of estimating the total number of plants in a field, the Department may use any method of estimation reasonably calculated to arrive at a close approximation of the actual number. These methods may include averaging the actual number of plants in a small section and multiplying by the number of total square feet in the field or utilizing an accepted scientific determination, when such is available, of the number of marijuana plants that a given plot of land can sustain.

007.03B(1)(a) The determination of which method of estimating the number of plants in a field shall be the Department‘s, and nothing in these regulations shall be construed to prefer one reasonable method over another.

007.03B(1)(b) If an assessee disputes the Department’s estimate of the number of plants in a field and the field has not been destroyed, the assessee may arrange with a court, at his or her own expense, to count the actual number of plants in the field. Any count undertaken pursuant to this section must be conducted in the presence of a law enforcement agent, who must certify the tally with his or her signature and forward it to the Department.

007.03B(1)(c) The Department shall increase or decrease its estimate of the number of plants according to the actual number of plants counted, as appropriate.

007.03B(1)(d) Nothing in these regulations shall be interpreted to guarantee an assessee the right to count marijuana plants in a field if those plants have been destroyed pursuant to a lawful order of a court.

007.03C In the event an assessee disputes the Department‘s calculation of the amount of taxable marijuana confiscated and the marijuana in question is still available for weighing, the assessee may arrange with a court to have the marijuana manicured and weighed at his or her own expense. Any weighing of the marijuana must be conducted in the presence of a law enforcement agent with scales certified as being accurate by the State Department of Agriculture.

007.03C(1) If provided with additional information resulting from the manicuring and weighing, the Department shall increase or decrease its estimate of the marijuana weight according to the actual weight, as appropriate.

007.03C(2) Nothing in these regulations shall be interpreted to guarantee an assessee the right to weigh marijuana if that marijuana has been destroyed pursuant to a lawful order of a court.

007.04 For steroids or other liquids sold by volume, tax shall be calculated using a medically-approved dosage unit, when such a dosage unit opinion is available from a qualified health care professional or other qualified authority. When various levels of dosage units are possible, the smallest shall be used.

007.04A When a qualified medical dosage unit opinion is not reasonably available, tax shall be calculated based upon either the street dosage unit as obtained from a qualified law enforcement officer or the weight of the substance. In the event two or more possible tax liability amounts are calculated utilizing reasonable methods, the Department shall assess tax at the greatest amount.

007.04B For liquids sold by volume and not intended for ingestion by human beings, tax shall be calculated based upon a qualified medical dosage unit opinion when available, or upon the minimum street dosage unit when such a measurement can be obtained from law enforcement agents.

007.04C If no street dosage unit estimate is available, tax shall be calculated based upon the weight of the substance or upon any other manner reasonable and appropriate in the circumstances.

007.05 For substances in liquid form which are ordinarily sold either in liquid or subsequently in solid dosage units, tax shall be calculated based upon dosage unit when available or determinable, by weight of the substance, or in any other manner reasonable and appropriate in the circumstances.

007.05A No assessee may challenge the reasonability of a particular method of assessment solely on the basis that another method would result in a lower tax liability.

007.06 In the event an assessee possesses two or more like drugs which are not commonly sold in the same method of measurement (i.e., weight, dosage unit or volume), tax may be calculated utilizing whichever measurement method(s) the Department determines is appropriate, provided the method selected can be applied to each of the like drugs the Department determines should be grouped for assessment purposes. Utilization of a particular method of measuring the substances or excluding a like drug resulting in a higher tax obligation shall not be grounds for contesting the method as inappropriate.

007.06A If an individual possesses like drugs which are not commonly sold in the same method of measurement, but has paid an appropriate amount of tax on the substances as calculated using the most common method of measurement for each of the drugs, the Department shall not apply a different standard of measurement to the drugs which would result in an increase in the amount of tax owed on the drugs.

007.06B In the event an assessee possesses like drugs which are not commonly sold in the same method of measurement in quantities that would ordinarily be insufficient to meet threshold amounts, the department may aggregate the drugs and measure them in a manner appropriate to any one of the drugs even if such a process would result in taxes being owed on all the drugs.

007.07 In the event an individual possesses a drug in quantities that do not meet the minimum threshold amount when computed utilizing the most common method of measurement for that drug, the Department may utilize a method of measurement that is commonly used for a like drug even if that alternate method of measurement would result in tax being owed.

007.07A In determining whether tax is owed on a drug for which sufficient stamps have not been purchased and affixed, the Department may measure the quantity of that drug in the manner most commonly used for the sale of the drug, or it may measure the quantity of the drug in the manner most commonly used for the sale of any like drug, even if utilizing the alternate method of measurement would result in a higher tax being owed.

007.07A(1) In the event an individual has paid a sufficient amount of tax on a drug utilizing a commonly accepted method of measuring the amount of the drug, the Department shall not apply a different standard of measurement to the drugs which would result in an increase in the amount of tax owed on the drugs.

007.07A(2) Crack cocaine may be assessed according to weight or dosage unit.

007.08 For the purpose of determining the total amount of drugs possessed by an individual, the Department shall consider all the marijuana and controlled substances found in the possession or control of an individual in any single twenty-four hour period.

007.08A An individual possessing a container of taxable drugs with a sufficient amount of current drug stamps affixed to it shall not be subject to any additional tax liability for the drugs found in the container. The quantity of marijuana or controlled substance in the container may be added to and measured with the quantity of any other taxable or like drugs found in the individual’s possession or control within a single twenty-four hour period for the purpose of determining whether tax, penalty and interest is owed on the additional drugs.

007.09 Except as otherwise specifically described herein, all situations involving varying, ambiguous or contradicting methods of weighing, measuring or otherwise assessing taxable drugs shall be assessed using the method that results in the greatest tax liability.

(Sections 28-401, 77-4303(2), 77-4307, 77-4310, 77-4310.02(1), 77-4310.02(3), 77-4312, 77-4314, and 77-4316. February 2, 1992.)

REG-94-008 DRUG TAX ASSESSMENT; ADJUSTMENT OF AMOUNT

008.01 In addition to weighing or measuring the quantity of drugs found in his or her possession pursuant to these regulations, an assessee shall have the right to request that the Department consider any mitigating evidence which would result in a lower tax liability if accepted.

008.02 Regardless of any other provision in these regulations, the Tax Commissioner shall have the authority to abate any penalty or reduce the amount of any assessment levied pursuant to this program.

008.02A The Tax Commissioner shall have the authority to enter into payment agreements with any assessee.

008.02B A petition to the Tax Commissioner for redetermination must be in writing. Petitions for redetermination must be filed or postmarked within ten days of either service of the assessment or mailing of the assessment to the last known address of the assessee via registered or certified mail. All petitions for redetermination must be accompanied by payment of the tax or suitable security for the payment of the tax.

(Sections 77-4307, 77-4310, 77-4310.02, and 77-4312. February 2, 1992.)

REG-94-010 DRUG TAX PROGRAM; PROTESTED ASSESSMENT OR OVERASSESSMENT

010.01 Any assessee who desires to contest the amount of an assessment levied under the provisions of this program must file a protest with the Department, utilizing normal protest procedures, within ten days of the date the assessment was served in person, or within ten days of the mailing of the assessment notice by certified or registered mail to the last known address of the assessee.

010.01A Any jeopardy assessment in effect on October 1, 1991, shall become final if no protest or request for redetermination by the Tax Commissioner has been filed or postmarked by October 10, 1991.

010.02 Any assessee who successfully protests an assessment previously paid shall be entitled to a redetermination of the tax, interest and penalty in accordance with the results of the successful protest. An overpayment shall be refunded with interest only if the claim is not refunded within ninety days.

010.03 Any assessee who is assessed and pays an amount of tax , penalty and interest greater than is proper shall be granted a refund of the excess amount.

(Sections 77-4310.02, 77-4311, and 77-4312. February 2, 1992.)

REG-94-011 DRUG TAX ASSESSMENTS; INTEREST AND PENALTIES

011.01 If any individual possesses marijuana or controlled substances in amounts greater than or equal to the threshold amount and fails to purchase drug tax stamps, he or she shall be subject to a penalty of one hundred percent of the tax that is owed.

011.02 Payment of the tax and penalty is due no later than the tenth day from the date of personal service of the assessment, or ten days from the date of mailing of the assessment via registered or certified mail to the last known address of the assessee.

011.02A Failure to pay the tax within ten days shall result in the accrual of interest from the earliest known day of possession, at such rate as the Legislature has set, and collection of the tax, interest, and penalty by any method prescribed in the Uniform State Tax Lien Registration and Enforcement Act, subject to the limitations of section 77-4312.

(Sections 77-4309, 77-4310, and 77-4312. February 2, 1992.)

REG-94-012 DRUG TAX REVENUE; DISTRIBUTION OF FUNDS

012.01 Effective October 1, 1991, all revenue originating from a county as defined by the Marijuana and Controlled Substances Tax Act and obtained by the Department through the Drug Tax Program shall be remitted to the State Treasurer for distribution in the following manner:

012.01A Five percent to the Marijuana and Controlled Substances Tax Administration Cash Fund;

012.01B Forty-seven and one half percent to the County Drug Law Enforcement and Education Fund of the county from which the proceeds originated, but no county shall be entitled to receive more than forty-seven and one half percent of the actual amount collected from it;

012.01C Forty-seven and one half percent to the Nebraska State Patrol Drug Control and Education Cash Fund.

012.02 Effective October 1, 1991, 95% of all revenue not originating from a county but obtained by the Department through the Drug Tax Program shall be remitted to the State Treasurer for distribution to the Nebraska State Patrol Drug Control and Education Cash Fund.

012.03 No revenue obtained through the Drug Tax Program shall be distributed until either the jeopardy assessment has become final or a protest has been dismissed.

(Sections 77-4307, 77-4310.01, 77-4310.01(1), 77-4310.01(2)(a), 77-4310.01(2)(b), and 77-4310.03. February 2, 1992.)

History

• Effective 1992-02-02