Sales tax on invoices in Nebraska

In Nebraska, the contractor option you elect decides whether your invoice carries sales tax. An Option 1 contractor collects tax on the building materials it annexes to real estate; Option 2 and Option 3 contractors pay the tax on their materials themselves and can’t collect sales tax on any part of an invoice for contractor work.

Construction labor is exempt; building materials are taxed

Nebraska’s contractor regulation, Reg-1-017, says gross receipts from construction projects or from repairing real estate or fixtures are generally exempt, while sales or purchases of building materials are in most cases taxable. A contractor is anyone who repairs property annexed to real estate, annexes property to real estate, or arranges for its annexation. Fixtures, equipment that must be annexed to a building to work properly yet stays identifiable as a separate item, include central air conditioners, water heaters, garbage disposals, built-in dishwashers and furnaces.

Property is annexed when it becomes real estate, or when installing or removing it takes specialized skills or tools and a recognized trade professional, someone required to be licensed such as a plumber or electrician, does or supervises the work.

Options 1, 2 and 3: one choice for every job

Before doing any construction work in Nebraska, a contractor must be registered in the Contractor Registration Database, and it elects one of three options for how its building materials are taxed. The option applies to all its construction contracts, it can’t use more than one at a time, and a contractor that doesn’t make an election is treated as Option 1.

Option	Building materials	Your invoice for contractor work
1: retailer	Tax-exempt inventory	Tax on the materials; none on separately stated labor
2: consumer, tax-paid	Tax paid when you buy them	No sales tax on any part
3: consumer, tax-free	Bought tax-free; use tax when removed from inventory or received at the job site	No sales tax on any part

• Option 1 contractors must hold a Nebraska Sales Tax Permit, which you get by filing a Nebraska Tax Application, Form 20, and they collect tax from all their customers, other contractors included, on the total charged for the building materials they annex or use to repair fixtures or annexed property. If they charge one amount for materials and labor, the tax applies to the whole amount.
• Options 2 and 3: the Department’s landscaper guide says these contractors can’t collect sales tax on any portion of the invoice when working as contractors, however the charges are stated. They need a sales tax permit if they also make retail sales.
• Changing options applies to every contract in progress as well as new ones. Moving from a tax-free inventory (Option 1 or 3) to Option 2 means remitting use tax on the building materials in inventory on the date the change takes effect.

Taxable under every option

Whatever its option, a contractor is a retailer of property it doesn’t annex. It collects tax on the total charged for installing items that don’t normally become annexed, such as draperies, window air conditioners and silt fencing, and for repairing or fabricating personal property it doesn’t annex. Building cleaning, pest control and security services a contractor provides are retail sales, taxed on the total charge. Cleaning up a building under construction and pest control before, during or after construction are taxable too, and a contractor can’t buy the cleanup tax-free for resale.

Tax line on a Nebraska invoice

Reg-1-039 requires retailers to charge the full state and local sales tax and to collect it as an item separate and distinct from the selling price. Regulations let certain retailers include the tax in the price instead, among them coin-operated machines, alcoholic liquors consumed on the premises, admissions and prepared food and beverage service. Otherwise it’s a Class IV misdemeanor to advertise or suggest that the tax will be assumed, absorbed or refunded, or won’t be added to the price, with phrases like “tax-free sale” or “we will pay your sales tax.”

When one invoice mixes retail sales, contractor work and exempt services, state the exempt part separately; otherwise the total amount charged is taxable.

Landscaping and lawn care

The Nebraska Sales and Use Tax Guide for Landscapers splits the work three ways:

• Retail sales (taxable): installing live plants, even ones the customer provides; selling live plants, planted or not; low voltage or solar-powered landscape lighting; and fine or finish grading or fabric and mulch installed with planting. In the guide’s York example, a design plan with planting is taxable in full, design fees, equipment and mileage included, however the invoice states them.
• Construction contractor projects: building or repairing fences, retaining walls, ponds, sidewalks, paths or berms; rough grading for a structure; hard-wired 110–120 volt landscape lighting; applying or reapplying mulch to existing beds; and installing or repairing underground sprinklers. The contractor labor is exempt, and the materials follow the landscaper’s option. A landscaper who is also a contractor must elect an option and register in the Contractor Registration Database.
• Exempt services: tree trimming, lawn mowing, applying fertilizer or weed control to live plants, aeration, raking, snow removal and de-icing, and dethatching. Grub, insect and animal control is a taxable pest control service, and a lawn program billed as one lump sum without the pest control itemized is taxable in full.

Building cleaning, power washing and HVAC

Building cleaning and maintenance is taxable in Nebraska, inside and outside commercial and residential buildings, homes and apartments: home and office cleaning, janitorial or maid services, carpet and floor cleaning, window washing, gutter cleaning, furnace, duct or chimney cleaning, and sewer and drain cleaning. So is sandblasting or power washing the exteriors of buildings. Providers collect local sales tax at the rate where the service is provided. Snow plowing and removal, lawn mowing and yard clean-up, outdoor swimming pool cleaning and septic tank cleaning aren’t building cleaning and maintenance.

The Department’s services FAQs treat cleaning a furnace, air conditioner, heat pump, duct work, sewer or drains in or attached to a building as taxable building cleaning, not contractor labor. Repairing a furnace follows the options: an Option 1 contractor collects tax on the filter and parts and none on separately stated labor, while Option 2 and 3 contractors pay tax on the parts under their option and collect no tax on the repair. For a built-in dishwasher, an Option 1 contractor collects tax on the dishwasher and none on separately stated installation labor, and an Option 2 or 3 contractor shows no tax on the invoice for either.

Local tax and Good Life Districts

Nebraska cities and counties may add a local sales and use tax, at rates from 0.5% to 2%. Generally the point of delivery determines the rate, and the Department’s Sales Tax Rate Finder gives the rate for a delivery address. An Option 3 contractor remits use tax at the rate where materials leave its inventory, usually its business location, or at the job site’s rate if they’re delivered there.

Good Life Districts (GLDs) have their own state rate rules. Since October 1, 2025, only GLD Avenue One (801) keeps the 2.75% GLD state rate, for retailers that elect to be good life district retailers, with some exclusions. The Sales Tax Rate Finder shows the district boundaries.