Nebraska Business Taxes

Nebraska’s business tax system is designed to ensure that businesses of all sizes contribute to the state’s economic infrastructure, while also benefiting from certain incentives and credits. Whether you’re running a small local business or a large corporation, it’s important to understand the various taxes that may apply to your operations. These can include corporate income taxes, sales and use taxes, property taxes, and payroll taxes, among others. Knowing the tax structure not only ensures compliance with state laws but also helps you take advantage of potential tax credits and deductions that could save your business money. By staying informed, Nebraska business owners can better manage their financial responsibilities, allowing for more focus on growth and sustainability.

Nebraska Corporate Income Tax

Nebraska imposes a corporate income tax on all corporations that conduct business within the state. This tax is applied to a corporation’s net income earned in Nebraska. Corporations are taxed at two different rates based on the amount of their income:

• For income up to $100,000, the tax rate is 5.58%.
• For income over $100,000, the tax rate is 7.81%.

Any C corporation with business activity in Nebraska is required to file Form 1120N, the Nebraska Corporate Income Tax Return. S corporations don’t pay corporate income tax at the state level but must file informational returns and pass-through income to their shareholders. Corporations that operate in multiple states, including Nebraska, will need to use apportionment formulas to determine how much of their income is subject to Nebraska tax.

The Nebraska corporate tax return is due on the 15th day of the 4th month following the close of the corporation’s tax year. Extensions may be available, but interest will accrue on any unpaid taxes after the deadline.

Nebraska Sales and Use Tax

The sales tax in Nebraska applies to the sale of tangible personal property and certain services. Nebraska has a statewide sales tax rate of 5.5%, but local jurisdictions (such as cities or counties) can impose additional taxes, bringing the combined rates higher in certain areas.

If your business sells tangible goods or taxable services in Nebraska, you are required to:

• Collect sales tax from customers at the point of sale.
• Remit the collected tax to the Nebraska Department of Revenue.
• File periodic sales tax returns.

The use tax applies to goods purchased outside of Nebraska but used within the state when no sales tax was paid. Businesses are required to self-report and pay use tax on taxable items when out-of-state vendors do not collect Nebraska sales tax.

Property Taxes in Nebraska

Businesses in Nebraska are subject to property taxes, which are assessed and collected at the local level. Unlike some states, Nebraska does not levy a state property tax. Property taxes are assessed on:

• Real property (such as land and buildings).
• Personal property (business equipment, machinery, etc.).

Nebraska businesses must file a Nebraska Personal Property Return for all taxable personal property they own. These returns are due by May 1st each year, and businesses are assessed based on the value of the property.

Local counties assess property taxes, and the rates can vary depending on the location of your business. Valuations are typically based on the market value of the property, and tax bills are issued annually.

Nebraska Payroll Taxes

If you have employees, your business must comply with Nebraska’s payroll tax requirements, which include:

1. Withholding tax: Businesses must withhold Nebraska income tax from employees’ wages and remit it to the state.
2. Unemployment Insurance Tax: Nebraska requires employers to pay unemployment insurance tax, which funds benefits for unemployed workers.

Nebraska Income Tax Withholding

Nebraska businesses are required to withhold income tax from employee wages. This is done on a graduated rate depending on the income of the employee. Employers must regularly file withholding returns, typically on a monthly, quarterly, or annual basis, depending on the business’s payroll size.

Unemployment Insurance (UI) Tax

All employers in Nebraska are required to pay unemployment insurance tax, which is managed by the Nebraska Department of Labor. The rate for unemployment tax depends on the employer’s experience rating, which is influenced by the number of unemployment claims made by former employees.

Tax Incentives and Credits for Nebraska Businesses

Nebraska offers a range of tax incentives and credits to encourage business growth and investment in the state. Some of the key programs include:

1. Nebraska Advantage Act: This program offers tax incentives for businesses that invest in the state and create jobs. Benefits include corporate income tax credits, property tax relief, and sales tax refunds.
2. Nebraska Advantage Microenterprise Tax Credit: Small businesses with fewer than five employees may qualify for a refundable tax credit of up to 20% of the investment made in expanding their business.
3. Renewable Energy Credits: Businesses investing in renewable energy projects may be eligible for tax credits, encouraging environmentally friendly investments.
4. Research and Development Tax Credit: Businesses engaged in qualified research and development activities can claim a credit of up to 15% of research expenditures in Nebraska.

Tips for Staying Compliant with Nebraska Business Taxes

To avoid penalties and ensure compliance with Nebraska’s tax laws, businesses should:

• Maintain accurate records of all transactions, including sales, employee wages, and property values.
• File timely tax returns for corporate income, sales, and payroll taxes.
• Consult a tax professional to maximize the use of tax credits and incentives while avoiding common pitfalls.
• Use accounting software or services to streamline the tax filing process and reduce the risk of errors.

The Nebraska Department of Revenue offers an electronic filing system that simplifies the process for businesses. Through the Nebraska e-filing system, businesses can:

• File corporate income tax returns.
• Submit sales and use tax returns.
• Remit withholding taxes.
• Apply for business tax incentives.