Are purchases by a nonprofit certified community-based developmental disabilities service provider exempt from Nebraska sales and use tax, and how do they claim it?

Plain-English summary

In 2006, the Nebraska Legislature (LB 1189) created a new sales and use tax exemption for a specific kind of nonprofit: a certified community-based developmental disabilities service provider ("DD Provider"). This ruling explains who qualifies and the steps to actually get and use the exemption.

Who and what is exempt. Effective July 1, 2006, purchases by any nonprofit organization certified by the Nebraska Department of Health and Human Services (HHS) to provide community-based services for persons with developmental disabilities are exempt from Nebraska sales and use tax.

How to claim it — a two-step process:

1. Apply for a Certificate of Exemption. File the Nebraska Exemption Application for Sales and Use Tax, Form 4, with the Department of Revenue, and include a copy of the HHS certification. On approval, the Department assigns an exemption number.
2. Give vendors a Form 13. To buy tax-free, the DD Provider issues a Nebraska Resale or Exempt Sale Certificate, Form 13, to its vendors, filling in Section B with exemption category #3 and its assigned exemption number.

Limits on the exemption:

• It covers only property or services used by and for the purposes of the organization, and only the activities covered by the HHS certification.
• It cannot be extended to any related person, business, foundation, or affiliated/subsidiary organization — even one operating in support of or under the DD Provider's guidance.
• The DD Provider must still collect sales tax on its own taxable sales of property or services.

The ruling supersedes Sales and Use Tax Regulations 1-090 (Nonprofit Organizations) and 1-012 (Exemptions) to the extent those regs did not already include DD Providers.

What this means for you

Nonprofit developmental-disabilities service providers

If HHS has certified you as a community-based DD service provider, your purchases for the organization's own purposes can be made tax-free — but only after you file Form 4 (with your HHS certification), receive an exemption number, and hand vendors a properly completed Form 13 citing category #3. The exemption is not automatic on the strength of the statute alone.

Vendors selling to DD Providers

Accept the exemption only against a completed Form 13 showing exemption category #3 and a valid exemption number. Purchases must be for the organization's own use; you should not extend the exemption to affiliated entities or to the provider's resale activity.

Affiliated and support organizations

Being connected to a certified DD Provider does not make your purchases exempt. The exemption is confined to the certified organization itself and its certified activities.

Common questions

Q: When did this exemption take effect?
A: It applies to purchases made on and after July 1, 2006.

Q: What forms are involved?
A: Form 4 (Nebraska Exemption Application for Sales and Use Tax) to obtain the Certificate of Exemption, and Form 13 (Nebraska Resale or Exempt Sale Certificate) — marking exemption category #3 — to make tax-free purchases from vendors.

Q: Does the DD Provider still have to charge sales tax on things it sells?
A: Yes. DD Providers must still collect sales tax on their sales of property or services that are subject to tax.

Q: Can affiliated or subsidiary organizations use the exemption too?
A: No. The exempt status cannot be extended to any person, business, foundation, or affiliated or subsidiary organization, even if they operate in support of or under the guidance of the DD Provider.

Citations and references

• Laws 2006, LB 1189 -- created the sales and use tax exemption for purchases on and after July 1, 2006 by a nonprofit certified community-based developmental disabilities service provider.
• Nebraska Sales and Use Tax Regulation 1-090 (Nonprofit Organizations) and Regulation 1-012 (Exemptions) -- superseded to the extent they do not include DD Providers.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr010605.pdf

Original ruling text

REVENUE RULING 1-06-5
August 8, 2006
Sales and Use Tax - Nonprofit Certified Community-Based Developmental Disabilities Service
Provider. EFFECTIVE JULY 1, 2006, PURCHASES BY ANY NONPROFIT ORGANIZATION
CERTIFIED BY THE DEPARTMENT OF HEALTH AND HUMAN SERVICES TO PROVIDE
COMMUNITY-BASED SERVICES FOR PERSONS WITH DEVELOPMENTAL DISABILITIES
ARE EXEMPT FROM SALES AND USE TAX.
Laws 2006, LB 1189, provides an exemption from sales and use tax for purchases made on and after
July 1, 2006, by a nonprofit certified community-based developmental disabilities service provider
(DD Provider). Purchases will be exempt after the DD Provider has applied for and received
a Nebraska Exempt Organization Certificate of Exemption from the Nebraska Department of
Revenue. The Nebraska Exemption Application for Sales and Use Tax, Form 4, must be completed
by the DD Provider to apply for the certificate of exemption. A copy of the Health and Human
Services Certification must be included with the application. Upon approval of this application, the
organization will be assigned an exemption number which must be used in claiming this exemption.
An approved DD Provider must issue a Nebraska Resale or Exempt Sale Certificate, Form 13, to
its vendors in order to make tax-free purchases. Section B of the Form 13 must indicate exemption
category #3, and it must contain the exemption number issued by this department.
The issuance of a Nebraska Exempt Organization Certificate of Exemption to a DD Provider
allows tax-free purchases of property or services that are to be used by and for the purposes of
the organization. The exemption only applies to the activities covered by the Health and Human
Services Certification. The exempt status cannot be extended to any person, business, foundation,
or affiliated or subsidiary organizations, even though they may be operating in support of or under
the guidance of the DD Provider.
DD Providers are still required to collect sales tax on their sales of property or services that are
subject to tax.
The provisions of Sales and Use Tax Regulation 1-090, Nonprofit Organizations, and Regulation
1-012, Exemptions, are superseded to the extent that they do not include DD Providers.
APPROVED:

Mary J. Egr Edson
State Tax Commissioner
August 8, 2006

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