Nebraska Construction Contractors FAQs

No. Contractor labor charges are not taxable as of October 1, 2007.  However, if an Option 1 contractor does not separately state its contractor labor charges on the customer’s invoice, the entire charge for the building materials and labor is taxable.

For the labor charges which are taxable, click on  Sales Tax Regulation 1-082

For a list of services which are taxable, go to the information guide, “ Nebraska and Local Sales Tax.”

For those taxable services enacted since 2002, see “Sales Tax on Services”.

Labor charges to install live plants are taxable. This is not a construction contractor project. You must collect sales tax on the total amount charged for the plants, any mulch put down in conjunction with the plants, and the labor charge to install the plants regardless of your contractor option. Additional information is available in the  Nebraska Sales and Use Tax Guide for Landscapers.

This is a construction contractor project, and the contractor option elected is important. If the work to put in the retaining wall, edging, and dirt is performed by an Option 1 contractor, the Option 1 contractor must collect sales tax on the amount charged for the building materials used for the retaining wall, edging (dirt, etc.). The labor charge is not subject to tax, provided it is separately stated on the invoice (an Option 1 contractor does not charge tax on contractor labor charges that are itemized separately). An Option 1 contractor is required to hold a Nebraska Sales Tax Permit. At the time of purchase, an Option 1 contractor will issue suppliers or vendors a  Nebraska Resale or Exempt Sale Certificate, Form 13, with Section C completed with the sales tax permit ID number.

If the work to put in the retaining wall, edging, and dirt is performed by an Option 2 or Option 3 contractor, the charge for the building materials and labor is not taxable.  Option 2 and Option 3 contractors do not collect any tax on the amount charged for the building materials and their labor.  Option 2 and Option 3 contractors must pay or remit tax on their purchase of the building materials.

Since the project is being completed for an exempt entity, you will not collect sales tax on any amounts billed to the general contractor, provided the general contractor issues to you a properly completed  Purchasing Agent Appointment, Form 17. Form 17 must be completed prior to the start of your portion of the project. 

When performing building cleaning services such as drain cleaning, you are a retailer and must collect sales tax on the total amount charged for these services. As a retailer, you must hold a sales tax permit. The contractor option you have elected is not applicable when performing taxable services, such as building cleaning services. A sales tax permit may be obtained by filing a  Nebraska Tax Application, Form 20.

No. A contractor's purchases of these services are taxable; nor can a contractor purchase these types of services tax exempt (for resale), because it is not in the business of providing these types of service. In addition, contractors cannot use a Purchasing Agent Appointment, Form 17, issued by a governmental unit or exempt entity to purchase these services tax exempt.

No. The labor charge to tear down the building is not taxable.  If a new building is built by an Option 2 or Option 3 contractor, the amount charged to the project owner is not taxable.  If the new building is built by an Option 1 contractor, sales tax will only be collected on the total amount charged for the annexed building materials, provided the labor charge is separately stated.  If not separately stated, then the entire amount charged by the Option 1 contractor is taxable. 

No. Charges for services such as the blowout and draining of the underground pipes and sprinkler heads are not taxable.

There are Contractor Information Guides that explain each option on the Construction Contractors web page. 

This information is now available in the Construction Registration Database. If an option has not been selected, the contractor is deemed, by law, to be an Option 1 contractor.

Yes. You are required to collect sales tax on the total amount charged for the building materials.  The charge for your contractor labor is not taxable, provided it is separately stated.

Yes. Contractors cannot purchase these services tax-free (for resale) because these services are not considered contractor labor for sales tax purposes; nor can these services be purchased tax exempt under a  Purchasing Agent Appointment, Form 17, issued by a governmental unit or exempt entity.

Yes. Charges for the clean-up of a building under construction are subject to sales tax as building cleaning services. Contractors cannot purchase such services tax exempt (for resale) from a third party. This service is not considered contractor labor for sales tax purposes; nor can these services be purchased tax exempt under a Purchasing Agent Appointment, Form 17, issued by a governmental unit or exempt entity.

Yes. Building cleaning services includes any work done to clean a fixture that has been annexed to real estate. This includes cleaning a furnace, air conditioner, heat pump, duct work, sewer, or drain located in or attached to a building. This kind of work is not considered contractor labor.

An Option 1 contractor must collect sales tax on the total amount charged for the furnace filter and parts. Option 2 and Option 3 contractors pay or remit tax on the furnace filter and repair parts and do not collect any tax on the amount charged to the customer. 

No. Since a built-in dishwasher is annexed to real estate, the general rules on taxing labor to install tangible personal property do not apply. The person "installing" the dishwasher is a contractor.

If the dishwasher is installed by an Option 1 contractor, the total amount charged for the dishwasher is taxable, and the separately stated charge for the contractor labor to install it is not subject to sales tax.  Separately stated labor charges are not taxable.

If the dishwasher is installed by an Option 2 or Option 3 contractor, the total amount charged for the dishwasher and the labor charge are not taxable.  The Option 2 or Option 3 contractor must pay or remit tax on its purchase of the unit. 

No. Contractors and third party installers who install parts that remain tangible personal property after installation are required to collect sales tax on the total amount charged for the parts and installation labor.  All security system wires and equipment (parts) that are annexed are taxed based on the contractor’s option. A definition of “annexed” is available at  Nebraska Sales and Use Tax Regulation 1-017.02A.

An Option 1 contractor is required to collect sales tax on the total amount charged for the annexed parts and labor, unless the labor charge is separately stated. Separately stated contractor labor charges are not taxable.

An Option 2 or Option 3 contractor will not collect any sales tax on the amount charged for the annexed parts and labor.

Yes. A security monitoring service that repairs a security system is required to collect sales tax on the total amount charged to repair the security system regardless of whether the item repaired is annexed or remains tangible personal property.  A definition of “annexed” is available at  Nebraska Sales and Use Tax Regulation 1-017.02A.

As required by the Contractor Registration Act and the Nebraska Revenue Act, before performing any construction work in Nebraska, a contractor is required to be registered in the Database.

This Database is only applicable to construction contractors performing construction services, and not other types of independent contractors (see question below for further information on who is a construction contractor for purposes of this Database).

A “construction contractor” is a contractor that is required to be registered in the Database, and may also be referred to in these Frequently Asked Questions as a “subcontractor.” The term "contractor" in this section can be either a general contractor or a subcontractor. Both contractors and subcontractors are required to be registered in the Database. All contractors making payments to other contractors (subcontractors), who are not listed in the Database, are required to withhold 5% of all payments to the subcontractor. This payment must be remitted as income tax withholding to the Nebraska Department of Revenue. Contact the Department of Revenue for additional details on the 5% income tax withholding requirements.

Electronically submit a Contractor Registration Application which is available at www.dol.nebraska.gov.  There is a $25 fee for most contractors. This registration is renewable annually for a 12-month period beginning with the month of registration.

To perform a search in the Database, go to dol.nebraska.gov/conreg/Search. Some suggestions for using the Database:

• Enter just the main parts of the company name. If you enter the entire name and your entry is not an exact match (including spacing, commas, periods, hyphens, apostrophes, etc.), it will not find a match;
• Drop parts of the name such as “company” or “Inc.” to assist in your search. For example, if the subcontractor’s name is “Carl Contractor Company”, just enter “carl contractor”. By dropping the word “company”, you may be more successful in the search;
• Drop punctuation like hyphens, commas, and periods;
• Try alternative names, spacing, and symbols. For instance, if the name has initials in it, try it with spaces between the initials or try it with the initials at the end of the name;
• If the name contains “and,” try searching it with the word spelled out, or substitute the “&” (ampersand) sign; or
• Try different abbreviations, for instance, “plumbing” might be entered as “plbg.”
   

The database is not case-sensitive. Here is an example of a possible search:

If the subcontractor’s name is “No Leak Plumbing Company, Inc.”, try entering “no leak plumb” and the subcontractor’s name should display.

When the subcontractor is located, we suggest that you print the Contractor Registration document. This is your proof that the subcontractor was in the Database when payments were made to the subcontractor. This registration verifies that the subcontractor is in the Database and you will not need to withhold 5% of the payments made to that subcontractor. This only applies to payments made to subcontractors performing construction services in this state.

Either one. The contractor is required to withhold 5% of payments made to a subcontractor that is not in the Database. Subcontractors are encouraged to locate their information in the Database and provide it to the contractors paying them to make it easier for those contractors to know they are in the Database. A contractor who has not received this confirmation must verify that the subcontractor performing construction services is in the Database, which releases them from the responsibility of the 5% income tax withholding on payments.

Contractors may change their option through the Department of Labor's Database. The new contractor option applies to all contracts in progress and also to all new contracts. You must notify the Department of Revenue if you make a change in your contractor option.

Yes. It is important to notify DOR if you change your contractor option because of differing responsibilities in how sales tax is paid on building materials depending on the contractor option selected. Contact DOR even if you make a change in your contractor option during your annual renewal process. Refer to the specific contractor information guide for  Option 1,  Option 2, or  Option 3 contractors for additional information on your sales and use tax reporting responsibilities if you change your contractor option.

Yes, the Department of Labor will email you a renewal application approximately one month prior to your annual expiration date.  The registration is good for 12 months from the month of registration.  You must notify the Department of Labor in order to change the information in the Database if:

1. The information in the Database is no longer current, such as address or phone number changes, etc.;
2. You decide to change the contractor option you have elected; or
3. You change your business form (for example, if you change from a sole proprietorship to a corporation).  A change in business form, or creating a new business, requires you to obtain new identification numbers with both the Department of Labor and Department of Revenue, for other tax programs for which your business is licensed.

No, once you have confirmed that a particular subcontractor is in the Database, this confirmation is good for any future payments for the remainder of that calendar year. If the subcontractor is hired for a single project that will last more than one calendar year, then the confirmation is good for payments on that project until it is completed.

This withholding is treated as income tax withholding. You will need to wait until you file your income tax return to determine if any of this is refundable. By registering in the Database and paying the appropriate fees to the Department of Labor, you will be in the Database and future payments will not be subject to the 5% income tax withholding.

You need to get licensed for Nebraska Income Tax Withholding, by filing a  Nebraska Tax Application, Form 20, with DOR. You will need to file the required Nebraska income tax withholding returns and remit the amount withheld. The primary income tax withholding returns are Forms 941N and W-3N. In addition, you must issue a Form 1099-MISC to the subcontractor at the end of the year.

No, the withholding requirement is not applicable to project owners such as homeowners or other commercial property owners who hire construction work to be done on their own property. Additionally, property management companies are not required to be in the Database. The income tax withholding required under this law applies to contractors paying other subcontractors who are in the business of performing construction services. 

For example, when a homeowner hires a remodeler to update a bathroom, the homeowner does not need to confirm that the remodeler is in the Database. It is the responsibility of the remodeler making payments to its subcontractors, such as the plumber and electrician, to confirm that these subcontractors are in the Database.

Generally, payments made to contractors for construction services performed for the above types of entities do not fall within the scope of these requirements. These entities are considered to be project owners and are generally not subject to the 5% withholding requirements.  However, contractors performing construction services for these project owners must confirm that their subcontractors performing construction services are in the Database.

For instance, if an SID hires contractors to install a wastewater system, the SID is not required to confirm that the contractors involved in the construction project are in the Database. However, any contractor hired by the SID who is making payments to subcontractors working on the wastewater system installation is required to confirm that those subcontractors are in the Database.

Yes. A temporary employment agency that provides workers performing construction services is required to be in the Database.