NE 01-02-3 Sales and Use Tax 2002-09-30

Are purchases by a Nebraska Drainage District exempt from sales and use tax, and how does the District claim the exemption?

Short answer: Yes. Under Revenue Ruling 01-02-3 and Laws 2002, LB 123, purchases by a Nebraska Drainage District are exempt from sales and use tax effective October 1, 2002. To buy tax free, the District issues a Nebraska Resale or Exempt Sale Certificate (Form 13) to its vendors; because governmental units are not assigned exemption numbers (Reg 1-093.01), the District indicates exemption category #1 on the Form 13. The exemption does not cover purchases used in furnishing gas, water, electricity, or heat. A District may appoint a prime contractor as its purchasing agent to buy building materials annexed to District property by issuing Form 17, but its exempt status cannot be extended to someone buying property or services to donate to the District. Tax paid in error on or after October 1, 2002 can be refunded if the refund is $2.00 or more by filing a Claim for Overpayment of Sales and Use Tax (Form 7).

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This page answers the general question as of 2002. Ezel answers yours, under current Nebraska tax law, with citations.

Disclaimer: This is an official Revenue Ruling of the Nebraska Department of Revenue, a guidance document stating the Department's interpretation of how Nebraska tax law applies. Each Nebraska guidance document carries the notice that it 'is advisory in nature but is binding on the Nebraska Department of Revenue until amended.' Unlike a private letter ruling, a Revenue Ruling is a general statement of Department policy rather than advice to a single taxpayer, but it can be amended, superseded, or made obsolete by a later ruling or a change in statute or regulation, many rulings in this series have been rescinded or superseded, so confirm it is still in effect before relying on it. Nebraska's local option sales and use taxes are administered by the Department, not self-collected by home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Nebraska tax professional about your situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Nebraska's 2002 tax bill LB 123 added Nebraska Drainage Districts to the list of governmental units whose purchases are exempt from sales and use tax, effective October 1, 2002. This ruling explains how a District claims the exemption and where it doesn't apply.

How to buy tax free. The District gives its vendors a Nebraska Resale or Exempt Sale Certificate (Form 13). Governmental units aren't assigned exemption numbers (Reg 1-093.01), so the District marks exemption category #1 on the Form 13.

Where the exemption stops. Purchases used in furnishing gas, water, electricity, or heat are not eligible. And the District's exempt status cannot be extended to a person or business buying property or services to donate or give to the District — the buyer there owes tax.

Building projects. A District may appoint a prime contractor as its purchasing agent to buy building materials that will be annexed to District-owned property, by issuing a Purchasing Agent Appointment and Delegation of Authority (Form 17).

Fixing tax paid in error. For purchases on or after October 1, 2002, tax paid in error can be refunded if the refund is $2.00 or more, by filing a Claim for Overpayment of Sales and Use Tax (Form 7).

What this means for you

A Nebraska Drainage District

Get a supply of Form 13s and mark category #1 to buy tax free from October 1, 2002 forward. Remember the carve-out: anything you buy to furnish gas, water, electricity, or heat is still taxable. For construction, appoint your prime contractor with a Form 17 so it can buy annexation materials tax free on your behalf.

A vendor or contractor dealing with a District

Honor a valid Form 13 marked category #1. But don't treat purchases as exempt when someone is buying goods or services to donate to the District — the District's exemption doesn't pass through to a donor.

Common questions

Q: When did Drainage District purchases become exempt?
A: October 1, 2002, under Laws 2002, LB 123.

Q: What exemption number does the District use?
A: None — governmental units aren't assigned exemption numbers; the District marks exemption category #1 on Form 13.

Q: Is everything the District buys exempt?
A: No. Purchases used to furnish gas, water, electricity, or heat are not exempt, and the exemption can't be extended to someone buying items to donate to the District.

Q: How does the District recover tax paid by mistake?
A: File a Claim for Overpayment of Sales and Use Tax (Form 7); refunds are issued when the amount is $2.00 or more.

Citations and references

Laws 2002, LB 123 — exempts Nebraska Drainage District purchases from sales and use tax effective October 1, 2002.
Reg 1-093.01 — governmental units are not assigned exemption numbers (hence category #1 on Form 13).
Regs 1-012.02C and 1-093.04 — incomplete to the extent they don't list a Nebraska Drainage District as an exempt governmental unit.
Forms — Form 13 (exempt purchase certificate), Form 17 (purchasing agent appointment), Form 7 (overpayment claim).

Source

Original ruling text

REVENUE RULING 1-02-3
September 30, 2002
Sales and Use Tax - Drainage Districts. EFFECTIVE OCTOBER 1, 2002, PURCHASES BY A
NEBRASKA DRAINAGE DISTRICT ARE EXEMPT FROM SALES AND USE TAX.
Laws 2002, LB 123, provides an exemption from sales and use tax for purchases by a Nebraska
Drainage District (District). For purchases made on and after October 1, 2002, the District must
issue a Nebraska Resale or Exempt Sale Certiﬁcate, Form 13, to its vendors in order to purchase
items tax free. As provided in Nebraska Sales and Use Tax Regulation 1-093.01, governmental units
are not assigned exemption numbers. Therefore, the District must indicate exemption category #1
on Form 13. Purchases by a District for use in furnishing gas, water, electricity, or heat are not
eligible for the exemption.
A District may appoint as its agent a prime contractor to purchase building materials that will be
annexed to property owned by the District. The appointment of the prime contractor as its agent
is completed by issuing to the contractor a Purchasing Agent Appointment and Delegation of
Authority for Sales and Use Tax, Form 17. The exempt status of a District cannot be extended to a
person or business purchasing property or services to be donated or given to the District.
Sales or use tax paid in error on purchases made on and after October 1, 2002, can be refunded
provided the amount of the refund is $2.00 or more. To receive a refund, the District must ﬁle a
Claim for Overpayment of Sales and Use Tax, Form 7.
The provisions of Sales and Use Tax Regulations 1-012.02C and 1-093.04 are incomplete to the
extent they do not include a Nebraska Drainage District as an exempt governmental unit.
APPROVED:

Mary Jane Egr
State Tax Commissioner
September 30, 2002

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

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