Are Shipping Charges Taxable in Nebraska?

Understanding sales tax on shipping charges can be complex, as regulations vary significantly across states. In Nebraska, specific guidelines govern when shipping and delivery charges are subject to sales tax.

General Principles of Shipping Taxation

In Nebraska, charges for delivery, freight, postage, shipping, and handling are subject to sales tax if the items being shipped are taxable. This rule applies when these charges are paid directly to the retailer selling the goods. The Nebraska Department of Revenue considers these delivery charges part of the total “sales price” of the transaction.

Nebraska operates under a destination-based sales tax system, meaning the applicable sales tax rate is determined by the buyer’s ship-to address. The state sales tax rate is 5.5%, but local sales taxes can range from 0% to 2%, resulting in a combined rate as high as 7.5%.

Applying the Rules to Different Transactions

The taxability of shipping charges in Nebraska depends on the tax status of the goods being transported. If the tangible personal property being shipped is subject to sales tax, the associated shipping charges are also taxable.

Conversely, if the item being shipped is exempt from sales tax, the shipping charges for that item are also exempt. If a shipment contains a mix of both taxable and exempt items, and a single delivery charge is applied, the shipping charge must be allocated proportionally. This allocation can be based on the sales price or the weight of the taxable property relative to the total shipment.

The way shipping charges are presented on an invoice can also affect their taxability, though they remain taxable if paid to the retailer. An exception exists for separately stated charges for U.S. postage on direct mail, which are exempt from sales tax. For most other shipping and handling fees, they contribute to the taxable amount if the underlying goods are taxable, regardless of how they are listed on the invoice. While Nebraska does not tax services, if a service itself is taxable, any associated delivery charge for that service is also taxable.

Handling Sales Tax for Businesses

Businesses that meet certain criteria are required to register with the Nebraska Department of Revenue (DOR) for a sales tax permit. This requirement applies to businesses with a physical presence in the state, such as an office, warehouse, or employees. Additionally, remote sellers who do not have a physical presence but meet economic nexus thresholds must also register.

Economic nexus is established if a business has more than $100,000 in gross sales or 200 or more separate transactions into Nebraska within the current or preceding calendar year. Registration for a sales tax permit can be completed online through the DOR’s website or by mailing in Form 20, the Nebraska Tax Application. A separate permit is needed for each physical business location, though businesses with multiple locations under common ownership may apply for a combined filing.

Once registered, businesses are responsible for collecting sales tax on all taxable transactions, including applicable shipping charges, from their customers. This collected tax is considered a debt owed by the retailer to the state and must be clearly shown as a separate line item on customer invoices or receipts. The collected sales tax must then be remitted to the Nebraska Department of Revenue according to a filing frequency assigned by the DOR, which can be monthly, quarterly, or annually, based on the business’s estimated tax liability. Sales tax returns are due by the 20th day of the month following the end of the reporting period and can be filed online via the NebFile for Business portal or by mail using Form 10. Even if no sales tax was collected during a period, a “zero return” must still be filed to avoid potential penalties, which can include a 10% penalty (minimum $25) and interest for late payments.