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Frequently Asked Questions
About Nebraska Contractors

Questions about the Contractor Database


CONTRACTOR DATABASE


Further Questions?
Contact Nebraska Taxpayer Assistance
at 800-742-7474 (NE & IA) or 402-471-5729


Are “Contractor Labor” charges taxable?

No. Contractor labor charges are no longer taxable as of October 1, 2007.  However, if an Option 1 contractor does not separately state it’s contractor labor charges on the customer’s invoice, the entire charge for the building materials and labor is taxable.

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Are there other types of labor or services that remain taxable?

For the labor charges which are taxable, click on Sales Tax Regulation 1-082

For a list of services which are taxable, go to the information guide,“Nebraska and Local Sales Tax.”

For those taxable services enacted since 2002, see “Sales Tax on Services”.

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I am a prime contractor and have hired a subcontractor to perform part of a remodeling contract. May I purchase the subcontractor's labor tax-free by issuing him or her a Nebraska Resale or Exempt Sale Certificate, Form 13?

Beginning October 1, 2007, contractor labor charges are not taxable.  Therefore, contractors will no longer be required to obtain a Nebraska Resale or Exempt Sale Certificate, Form 13, when billing other contractors for contractor labor charges.

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Is a cost-plus contract with a guaranteed maximum considered a fixed-price contract?

No. Cost-plus contracts and cost-plus contracts with a guaranteed maximum price are not fixed-priced contracts for sales and use tax purposes.

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I am an accrual-basis contractor. I have recorded sales of contractor labor before October 1, 2007, but will receive payment for such labor after October 1, 2007. How do I report the sales tax on my contractor labor charges?

If you have consistently reported the tax when you prepared the bill, any bill issued prior to October 1, 2007, is taxable even if you received payment after October 1, 2007. 

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As an accrual-basis contractor, must I wait until payment is received before sales tax is remitted on my contractor labor charges?

No. Accrual-basis contractors must remit sales tax on their contractor labor charges when the customers are billed.  Note, however, that beginning October 1, 2007, contractor labor charges are not taxable.

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Are labor charges to repair or replace structures such as fences, sidewalks, and driveways taxable?

No. Effective October 1, 2007, contractor labor charges are not taxable.

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I have been hired to landscape a customer's property. On what labor must I collect tax?

Labor to install live plants is taxable.  You must collect sales tax on the total amount charged for the plants, mulch put down in conjunction with the plants, and the labor charge to install the plants regardless of your contractor option. 

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I have been hired to put in a retaining wall, edging, and dirt to change the slope of the yard.  On what labor must I collect tax?

If the work to put in the retaining wall, edging, and dirt is performed by an Option 1 contractor, the Option 1 contractor must collect sales tax on the total amount charged for the retaining wall, edging, dirt, and labor charge unless the labor charge is separately stated.(An Option 1 contractor does not charge tax on separately stated labor charges.)

If the work to put in the retaining wall, edging, and dirt is performed by an Option 2 or Option 3 contractor, the charge for the building materials and labor is not taxable.  Option 2 and Option 3 contractors will not collect any tax on the amount charged for the building materials and their labor.  Option 2 and Option 3 contractors must pay or remit tax on their purchase of the building materials.

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I am a subcontractor and have been hired to install plumbing for a remodeling project. The project owner is an entity which is exempt from sales tax. Do I need to collect tax on any of my charges to the general contractor?

Since the project is completed for an exempt entity, you will not collect sales tax on any amounts billed to the general contractor, provided the general contractor issues to you a properly completed Purchasing Agent Appointment, Form 17. Form 17 must be completed prior to the start of your portion of the project. 

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If a building is torn down and replaced, is the labor taxable?

No. The labor charge to tear down the building is not taxable.  If a new building is built by an Option 2 or Option 3 contractor the amount charged to the project owner is not taxable.  If the new building is built by an Option 1 contractor, tax will only be collected on the total amount charged for the annexed building materials, provided the labor charge is separately stated.  If not separately stated, then the entire amount charged by the Option 1 contractor is taxable. 

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I am a plumbing contractor and provide drain cleaning services for my customers. Do I need a sales tax permit and must I charge sales tax on the drain cleaning service?

When performing building cleaning services such as drain cleaning, you are a retailer and must collect sales tax on the total amount charged for such services. As a retailer, you must hold a sales tax permit. A sales tax permit may be obtained by filing a Nebraska Tax Application, Form 20.

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I am a contractor who has been hired to complete a construction project for an entity which is exempt from sales and use tax. In the performance of this project, can I purchase building cleaning services, security services, and pest control services tax-free?

No. A contractor's purchases of these services are taxable. Nor can a contractor purchase these types of services tax-free (for resale), because it is not in the business of providing these types of service. In addition, contractors cannot use a Purchasing Agent Appointment, Form 17, issued by a governmental unit or exempt entity to purchase these services tax-free.

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Is the charge to winterize underground sprinklers taxable?

No. Charges for services such as the blowout and draining of the underground pipes and sprinkler heads are not taxable.

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How do I know which option a contractor has selected?

This information is now available on the CONTRACTOR REGISTRATION DATABASE. If an option has not been selected, the contractor is deemed, by law, to be an Option 1 contractor.

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How do I change my contractor option?

Contractors may change their option through the Department of Labor's Contractor Registration Database.

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I am an Option 1 subcontractor and have been hired by the general contractor to complete part of a construction project. Do I need to collect tax on any of my charges to the general contractor?

Yes. You are required to collect sales tax on the total amount charged for the building materials.  The charge for your contractor labor is not taxable, provided it is separately stated.

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Are building cleaning services, pest control services, and security services purchased by a contractor and performed at a construction site subject to tax?

Yes. Contractors cannot purchase such services tax-free (for resale) because these services are not considered contractor labor for sales tax purposes. Nor can such services be purchased tax-free under a Purchasing Agent Appointment, Form 17, issued by a governmental unit or exempt entity.

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Is construction site clean-up subject to tax?

Yes. Charges for the clean-up of a building under construction are subject to tax as building cleaning services. Contractors cannot purchase such services tax-free (for resale) from a third party. This service is not considered contractor labor for sales tax purposes. Nor can such services be purchased tax-free under a Purchasing Agent Appointment, Form 17, issued by a governmental unit or exempt entity.

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Are charges to clean a furnace, air conditioner, heat pump, duct work, or drains taxable?

Yes. Building cleaning services includes any work done to clean a fixture that has been annexed to real estate. This includes cleaning a furnace, air conditioner, heat pump, duct work, sewer or drain located in or attached to a building. Such work is not considered contractor labor.

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What happens when a contractor responds to a service call to repair a furnace blower and takes a few minutes to change out the furnace filter?

An Option 1 contractor must collect sales tax on the total amount charged for the furnace filter and parts. Option 2 and Option 3 contractors will pay or remit tax on the furnace filter and repair parts and will not collect any tax on the amount charged to the customer. 

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I install a built-in dishwasher for my customer. Is the installation charge subject to sales tax as taxable installation labor?

No. Since a built-in dishwasher is annexed to real estate, normal installation labor rules do not apply. The person "installing" the dishwasher is a contractor.

If the dishwasher is installed by an Option 1 contractor, the total amount charged for the dishwasher and contractor labor charge to install it is taxable unless the labor charge is separately stated.  Separately stated labor charges are not taxable.

If the dishwasher is installed by an Option 2 or Option 3 contractor, the total amount charged for the dishwasher and the labor charge are not taxable.  The Option 2 or Option 3 contractor must pay or remit tax on its purchase of the unit.   

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Do security services include the installation of the security system wires and monitoring equipment?

No. Contractors and third party installers who install parts that remain tangible personal property after installation are required to collect sales tax on the total amount charged for the parts and installation labor.  All security system wires and equipment (parts) that are annexed are taxed based on the contractor’s option. A definition of “annexed” is available at Nebraska Sales and Use Tax Regulation 1-017.02B.

An Option 1 contractor is required to collect sales tax on the total amount charged for the annexed parts and labor unless the labor charge is separately stated.

An Option 2 or Option 3 contractor will not collect any sales tax on the amount charged for the annexed parts and labor.

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Is a business which provides security services required to collect sales tax on the charge to repair the security system?

Yes. A security monitoring service that repairs a security system is required to collect sales tax on the total amount charged to repair the security system regardless of whether the item repaired is annexed or remains tangible personal property.  A definition of “annexed” is available at Nebraska Sales and Use Tax Regulation 1-017.02B.

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Contractor Database

I can't find the Revenue Contractor Database, What happened to it?

Effective January 1, 2010, the Revenue Contractor Database is no longer active. This Database will remain on Revenue’s Website until January 31, 2010 but there have been no updates done to this Database after December 28, 2009.  Information on the Revenue Contractor Database can be referred to until it is removed, but it may not be the most current information.

Per 2009 legislation (LB 162), the Departments of Revenue and Labor were required to merge their separate contractor databases into one combined Contractor Registration Database (Database) for construction contractors.  Contractors have been required to be registered on both Databases in the past.  The combined Database will be managed by the Department of Labor.  The Database has been altered to now contain the information that was previously on the Revenue Contractor Database.  This new Database will contain, among other information, the contractor’s business name and the contractor’s option elected for paying sales tax on building materials.  The 5% withholding requirement for any contractor who is NOT on the new Database remains in place.

This Database is only applicable to construction contractors performing construction services and not other types of independent contractors (see question below for further information on who is a construction contractor for purposes of this Database).

A “construction contractor” is a contractor that is required to be registered on the Database and may also be referred to in these Frequently Asked Questions as a “subcontractor.” The contractor that has hired subcontractors is referred to as a contractor. Both contractors and subcontractors are required to be on the Database.

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Why do I need to be registered on the Contractor Registration Database?

As required by the Contractor Registration Act and the Nebraska Revenue Act, before performing any construction work in Nebraska, a contractor is required to be registered on the Contractor Registration Database (Database).

All contractors making payments to another contractor (subcontractor), who is NOT listed on the combined Database, are required to withhold and remit 5% of all payments to such subcontractor.  This payment is to be submitted as withholding tax to the Department of Revenue.

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How do I get registered on the Contractor Registration Database?

Electronically submit a Contractor/Subcontractor Registration Application which is available at www.dol.nebraska.gov.  There is a $40 fee for most contractors.  This registration is renewable annually for a 12-month period that begins with the month of registration.

The Revenue Contractor Database and Election, Form 16, is no longer used for registering on the Database.  The Form 16 is not an active form and will not be accepted or processed by the Department of Revenue

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Why do I need to be on the new combined Contractor Registration Database?

Registration on the Database is very important because all payments made on and after January 1, 2010, by a contractor to its subcontractors for performing construction services in Nebraska, will be subject to a mandatory 5% withholding requirement UNLESS the subcontractor is included on the Database.

Additionally, there are many requirements related to the Department of Labor.  See Labor’s Website for additional information.  Any contractor not registered and listed on the Database is subject to fines of up to $5,000.00 in addition to the 5% withholding requirement.

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How do I search the Database?

To perform a search in the Database, enter the name or part of the name of the subcontractor in question. Both the legal name and doing business as (DBA) name will be searched. To assist in narrowing the search, you may also enter the city where the subcontractor is located.

Some suggestions for using the Database:

  • Enter just the main parts of the company name. If you enter the entire name and your entry is not an exact match (including spacing, commas, periods, hyphens, apostrophes, etc.), it will not find a match;
     
  • Drop parts of the name such as “company” or “Inc.” to assist in your search. For example, if the subcontractor’s name is “Carl Contractor Company”, just enter “carl contractor”. By dropping the word “company”, you may be more successful in the search;
     
  • Drop punctuation like hyphens, commas, and periods;
     
  • Try alternative names, spacing, and symbols. For instance, if the name has initials in it, try it with spaces between the initials or try it with the initials at the end of the name;
     
  • If the name contains “and,” try searching it with the word spelled out, or substitute the “&” (ampersand) sign; or
     
  • Try different abbreviations, for instance, “plumbing” might be entered as “plbg.”

The database is not case-sensitive. Here is an example of a possible search:

If the subcontractor’s name is “No Leak Plumbing Company, Inc.”, try entering “no leak plumb” and the subcontractor’s name will display.

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I have found my subcontractor in the Database. What do I do now?

When the subcontractor is located, we suggest that you print the Contractor Registration document. This is your proof that the subcontractor was on the Database when payments were made to the subcontractor. This registration verifies that the subcontractor is on the Database and you will not need to withhold 5% of the payments made to that subcontractor on and after January 1, 2010. This only applies to payments made to subcontractors performing construction services in this state.

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As a contractor, do I need to confirm that ALL my “subs” are registered in the Database?

  • No. The subcontractors that are required to be in the Database are just those subcontractors that “PERFORM CONSTRUCTION SERVICES.” A very simple definition of “performing construction services” is annexing or attaching building materials to real property or performing repairs on real property. Examples of “performing construction services” include, but are not limited to:
    • demolition;
    • construction;
    • plumbing;
    • electrical;
    • heating;
    • cooling;
    • mechanical;
    • paving;
    • finishing;
    • roofing;
    • painting; or
    • installing floor coverings.
  • Those persons who do NOT perform construction services are not required to be in the Database. While some of these services are taxable to their contractor, the person performing the service is not subject to the 5% withholding requirement and does not need to be in the Database. Examples include, but are not limited to:
    • consultants;
    • materials suppliers;
    • vendors;
    • delivery - transporters;
    • rental of tools or equipment;
    • rental of portable toilets;
    • refuse/garbage removal companies;
    • pest control service providers; and
    • building cleaning providers.

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I am ready to make a payment to a subcontractor, but cannot locate the subcontractor in the Database. What should I do?

  • It is recommended that you contact the subcontractor first. Confirm the name it has registered under on the Database or ask the subcontractor to provide a copy of its own Contractor Registration document.  A Registration document is mailed to every contractor that is registered.
     
  • If the subcontractor has not filed a Contractor/Subcontractor Registration Application and submitted it to the Department of Labor, then encourage the subcontractor to complete the Application and submit it to the Department of Labor immediately.  The Database is updated on a daily (Monday through Friday) basis, so the subcontractor's information will be entered on the Database very quickly after the Application and payment is received. If it is possible to delay payment for several days until the subcontractor is on the Database, you will not have to apply the otherwise mandatory 5% withholding to the payment.
     
  • However, if the subcontractor fails to file a Contractor/Subcontractor Registration Application and is not included on the Database, then the contractor making payments to that subcontractor on or after January 1, 2010 for construction services performed in Nebraska must withhold 5% of all payments. This amount is remitted to the Department of Revenue in the same manner as income tax withholding. The amount withheld is submitted to the Department of Revenue on the Nebraska Withholding Return, Form 941N.  A 1099-MISC is to be issued to the subcontractor at the normal time to show the amount withheld. This information is to be included in the information on the Nebraska Reconciliation of Income Tax Withheld, Form W-3N. Contractors that do not currently file and pay withholding taxes must register with the Department of Revenue by filing a Nebraska Tax Application, Form 20, to report the amount withheld from a payment to a subcontractor that is not registered on the Database.
     
  • If the subcontractor has filed a Contractor/Subcontractor Registration Application with the Department of Labor and paid the required fees but still cannot be found on the Database, contact the Department of Labor at 402-471-2239.

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Who needs to provide the confirmation of being in the Database, the subcontractor or the contractor?

Either one. The contractor is required to withhold 5% of payments made to a subcontractor that is not on the Database. Subcontractors are encouraged to locate their information on the Database and provide it to the contractors paying them to make it easier for those contractors to know they are on the Database. A contractor who has not received this confirmation must verify that the subcontractor performing construction services is on the Database, which releases them from the responsibility of the 5% withholding on payments.

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Do I need to reapply each year to be in the Database?

Yes, the Department of Labor will mail you a renewal application prior to your annual expiration date.  The registration is good for 12 months from the month of registration.  You must notify the Department of Labor in order to change the information on the Database if:

  1. The information on the Database is no longer current, such as address or phone number changes, etc.;
     
  2. You decide to change the contractor option you have elected; or
     
  3. You change your business form (for example, if you change from a sole proprietorship to a corporation).  A change in business form, or creating a new business, requires you to obtain new identification numbers with both the Department of Labor and Department of Revenue, for other tax programs for which your business is licensed.

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Do I need to check the Database each time I make a payment to a subcontractor?

No, once you have confirmed that a particular subcontractor is on the Database, this confirmation is good for any future payments for the remainder of that calendar year. If the subcontractor is hired for a single project that will last more than one calendar year, then the confirmation is good for payments on that project until it is completed.

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If I had the 5% withheld from my payment because I was not in the Database, what must I do to get this back and prevent further withholding?

This withholding is treated as income tax withholding. You will need to wait until you file your 2010 income tax return to determine if any of this is refundable. By submitting the Contractor/Subcontractor Registration Application and paying the appropriate fees to the Department of Labor, you will be on the Contractor Registration Database and future payments will not be subject to the 5% withholding.

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I do not have employees so I do not remit withholding. If I hire a subcontractor who is not registered in the Database, how do I remit the 5% withholding on this subcontractor?

You need to get licensed for Nebraska Income Tax Withholding, by filing a Nebraska Tax Application, Form 20, with the Department of Revenue. You will need to file the required Nebraska withholding returns and remit the amount of withholding with those returns. The primary withholding returns are Forms 941N and W-3N. In addition, you must issue a Form 1099-MISC to the subcontractor at the end of the year.

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I am a project owner (e.g., home owner, commercial property owner) hiring contractors to do construction work on my property. Do I need to confirm that these contractors are registered on the Database and withhold 5% from their payment if they are not on the Database?

No, the withholding requirement is not applicable to project owners such as homeowners or other commercial property owners who hire construction work to be done on their own property. Additionally, property management companies are not required to be on the Contractor Registration Database. The withholding required under this law applies to contractors paying other subcontractors who are in the business of performing construction services. 

For example, when a homeowner hires a remodeler to update a bathroom, the homeowner does not need to confirm that the remodeler is on the Database. It is the responsibility of the remodeler making payments to its subcontractors, such as the plumber and electrician, to confirm that these subcontractors are on the Database.

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I am a utility service provider Sanitary and Improvement District (SID), county engineer, or other similar entity hiring construction services to be performed for my construction project. Do I need to be on this Contractor Registration Database? Do I need to be on this Contractor Registration Database? Are payments I make to contractors I hire subject to the 5% mandatory withholding requirements?

Generally, payments made to contractors for construction services performed for the above types of entities do not fall within the scope of these requirements. These entities are considered to be the project owner and are generally not subject to the 5% withholding requirements.  However, contractors performing construction services for these project owners must confirm that their subcontractors performing construction services are on the Database.

For instance, if an SID hires contractors to install a wastewater system, the SID is not required to confirm that the contractors involved in the construction project are on the Contractor Registration Database. However, any contractor hired by the SID who is making payments to subcontractors working on the wastewater system installation is required to confirm that those subcontractors are on the Database.

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As a general contractor, occasionally I use a temporary employment agency to hire a day laborer. Does the temporary employment agency need to be registered in the Database?

Yes, a temporary employment agency that provides workers performing construction services is required to be in the Contractor Registration Database.


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