Do out-of-state for-hire trucking companies that use Nebraska roads owe Nebraska corporate income tax?

Plain-English summary

A state can only tax a company's income if the company has enough connection ("nexus") to the state. This ruling addresses when an out-of-state for-hire trucking company that drives goods across Nebraska has enough connection to owe Nebraska corporate income tax.

The rule. Trucking companies that transport goods over Nebraska roads are subject to Nebraska corporate income tax because their services are physically performed in Nebraska. Federal Public Law 86-272 (15 U.S.C. § 381) shields only companies whose in-state activity is limited to soliciting orders for sales of tangible personal property -- it does not protect a company performing services (like hauling) in the state. Using Nebraska's roads is a significant benefit, and the trucks also draw on police and fire protection and rest stops while passing through.

But small in-state activity is excused ("de minimis"). Even though such carriers have nexus, a trucking company is not required to apportion income to Nebraska if, during the income year, it does none of the following:

• (a) owns or rents any real or personal property in Nebraska, except mobile property;
• (b) makes any pick-ups or deliveries within Nebraska;
• (c) travels more than 25,000 mobile property miles within Nebraska -- provided its total in-state mobile property miles do not exceed 3.0% of its total mobile property miles in all states; or
• (d) makes more than 12 trips into Nebraska.

If the carrier crosses any one of these lines, it must apportion income to Nebraska.

Key definitions. A "trucking company" is a motor common carrier, motor contract carrier, or express carrier that primarily transports others' tangible personal property by motor vehicle for compensation. "Mobile property" means motor vehicles, trailers, semi-trailers, containers, and chassis engaged directly in moving property. A "mobile property mile" is one unit of mobile property moved one mile, loaded or unloaded.

What this means for you

Interstate carriers that only pass through Nebraska

Simply driving through the state does not automatically create an apportionment obligation. Track your Nebraska activity against the four de minimis thresholds -- especially in-state pick-ups/deliveries, the 25,000-mile / 3% mileage test, and the 12-trip limit. Stay under all of them and you are not required to apportion income to Nebraska.

Carriers with any Nebraska footprint

If you keep property in Nebraska (beyond the trucks and trailers themselves), make in-state pick-ups or deliveries, exceed the mileage tests, or run more than 12 trips into the state, you have crossed the de minimis line and must apportion income and file. PL 86-272 will not shield you, because hauling is a service performed in the state.

Common questions

Q: Doesn't Public Law 86-272 protect me from state income tax?
A: Not here. PL 86-272 protects only certain solicitation of sales of tangible personal property. A trucking company performs services in Nebraska, which the law does not protect.

Q: I drive through Nebraska but never stop -- do I have to apportion income?
A: Not necessarily. If you make no in-state pick-ups/deliveries, keep no in-state property beyond mobile property, stay within the 25,000-mile / 3% mileage limits, and make 12 or fewer trips, you are within the de minimis standard and are not required to apportion.

Q: What single event forces apportionment?
A: Meeting any one of the four criteria -- for example, making even one in-state pick-up or delivery, or making a 13th trip into the state.

Citations and references

• Neb. Rev. Stat. § 77-2734.02 -- provides for the taxation of entities doing business in Nebraska.
• Neb. Rev. Stat. § 77-2734.04 -- defines "doing business in this state" as conducting activities exceeding the limitations in 15 U.S.C. § 381 (Public Law 86-272).
• 15 U.S.C. § 381 (Public Law 86-272) -- federal limit on state income taxation, which protects only certain solicitation of sales of tangible personal property, not the performance of services.

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/rr240801.pdf

Original ruling text

REVENUE RULING 24-08-1
April 9, 2008
Corporate Income Tax - Nexus
For-Hire Trucking Companies
Issue:
Are entities transporting goods for hire over Nebraska roads subject to the Nebraska corporate
income tax?
Conclusion:
Trucking companies transporting goods over Nebraska roads are subject to the Nebraska corporate
income tax because their services are physically performed in Nebraska. Such services are not
protected by Public Law 86-272. However, trucking companies are not required to apportion
income to Nebraska if the company’s activities within Nebraska do not exceed the de minimis
standard outlined below.
Definitions:
“Trucking company” means a motor common carrier, a motor contract carrier, or an express
carrier which primarily transports tangible personal property of others by motor vehicle for
compensation.
“Mobile property” means all motor vehicles, including trailers and semi-trailers and containers
and chassis engaged directly in the movement of tangible personal property.
“Mobile property mile” is the movement of a unit of mobile property a distance of one mile
whether loaded or unloaded.
Analysis:
Neb. Rev. Stat. §77-2734.02 provides for the taxation of entities doing business in this state. The
phrase “doing business in this state” is defined in Neb. Rev. Stat. §77-2734.04 as conducting
activities in Nebraska that exceed the limitations found in 15 U.S.C. §381 (Public Law 86-272).
Trucking companies which are physically present in this state and regularly take advantage of
Nebraska’s roads to produce income are required to become licensed for and pay income tax.
Trucking companies without a business location in Nebraska may frequently transport goods over
the roads of this state, which may or may not involve the pick-up or delivery of the goods in
Nebraska. Use of roads within this state constitutes a significant benefit to the trucking company. In
addition, while a trucking company’s mobile property is traveling through this state other benefits
such as police and fire protection and rest stops are available for this mobile property.

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

Revenue Ruling 24-08-1

April 9, 2008

Page 2 of 2

De Minimis Nexus Standard:
A trucking company is not required to apportion income to this state if the company, during the
course of the income year, neither:
(a) Owns nor rents any real or personal property in this state, except mobile property; nor
(b) Makes any pick-ups or deliveries within this state; nor
(c) Travels more than 25,000 mobile property miles within this state; provided that the total
mobile property miles traveled within this state during the income year does not exceed
three percent (3.0%) of the total mobile property miles traveled in all states by the trucking
company during that period; nor
(d) Makes more than 12 trips into this state.
Therefore, a trucking company is required to apportion income to this state when, during the
course of the income year, it meets any one or more of the following criteria: the company owns
or rents any real or personal property in this state, other than mobile property; makes any pick-ups
or deliveries within this state; travels more than 25,000 mobile miles within this state or the total
mobile miles within this state exceed three percent (3.0%) of the total mobile miles traveled in all
states; or, makes more than 12 trips into this state.
APPROVED:

Douglas A. Ewald
State Tax Commissioner
April 9, 2008