Current through March 20, 2024
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.
