Neb. Admin. Code § 316-1-105 — 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.) Print this regulation REG-1-107 Manufacturing Machinery and Equipment Exemption This regulation has been marked with an asterisk and has been affected by legislation or court cases, and is currently undergoing review. This regulation is currently undergoing review for amendment due to the decisions in Kerford Limestone Co. v. Nebraska Department of Revenue and Farmers Cooperative v. Nebraska Department of Revenue . Specifically, the provisions in Reg-1-107.02, 1-107.02A, 1-107.02C, and Reg-1-107.07 are not being applied based on these court decisions. 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.) Print this regulation