Neb. Admin. Code § 316-21-001 — 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.)