Reference Library -
Nebraska
Legislation & Sales Tax
Reference Library -
Nebraska
                    Legislation & Sales Tax

 

Current 2008 Nebraska Legislative Update report.

 

 

 

Nebraska Equipment Dealers Impact on the State Economy
By Mark Othmer, Nebraska Field Director

Is There An Identity Crisis?

     During recent conversations with state senators and legislative candidates, a common theme emerged. It appears the trend recognized most about our industry by this group is the declining number of equipment dealerships in Nebraska today compared to 10-20 years ago.

     Many Association members have also experienced similar discussions with elected officials. Quite often, a senator will ask how many dealers remain in Nebraska. When told, “around 150 dealers,” it’s often followed by, “Well, with so few businesses it’s very hard to get anything accomplished for your industry.” With that in mind, we at the Association felt it was time to try and get a real grasp on the collective impact our members have on the state economy.

Time For A Survey

     As many of you know, we recently sent out a survey asking you to report some very basic business numbers. This data included total dealership sales, new and used equipment sales, parts sales, service sales, number of employees, and annual payroll. We received information from business organizations representing 51 of the 150 locations in Nebraska, or one-third. By survey standards, this is a very good response rate.

     The information was received from some of the smallest businesses (less than 1.5 million dollars in sales), up to some of the largest groups (representing over 50 million dollars in sales), so I feel it provided an excellent snap shot of the Nebraska equipment dealer group. My thanks go out to members who took the time to complete the survey. As always, your individual numbers will be kept in strict confidence.

Survey Says!

     After determining the average per location of this group and multiplying it by the number of locations in Nebraska, we were able to determine the total economic impact of the farm equipment industry in the state of Nebraska. According to survey results, the total sales of farm equipment dealerships remain well over 1.3 billion dollars a year. Yes, that’s billion with a capital “B.”

     The total sales of new and used equipment in the state exceed one billion dollars, while total parts sales are over 243 million dollars and total service sales remain over 130 million dollars. Over 3,200 employees work in farm equipment dealerships, with a total annual payroll of over 115 million dollars. Only 27 organizations reported for the total of 51 locations, so the impact of multiple location dealers remains quite evident.

What Does All This Mean?

     Any time you interact with local leaders, state leaders, or members of the press, these numbers should be on the tip of your tongue. Our industry is suffering from an identity crisis. Few people recognize the size and scope of the equipment industry in the state of Nebraska.

     Without this recognition, elected officials, legislative leaders, educational officials, and the general public will place very little value on delivering and making available goods and services that equipment dealers depend on. This includes roads, highways, railroads, electricity, the Internet, education, phone systems, and an available pool of employees. Without any of this, it would be hard for the equipment industry to remain the economic juggernaut that it is for Nebraska.

     These facts will prove beneficial for our lobbyist in Lincoln to have at his fingertips. As one legislative official remarked after hearing the survey numbers, “We’ve done way more legislatively for industries in Nebraska that contribute way less to the economy than your group.”  For additional information, contact Mark at mother@kdsi.net.

 

Nebraska Legislative Update - April 2004

     Following is a brief look at legislation affecting members in Nebraska.

     The amended version of LB 118 passed in the Nebraska Legislature on March 3, 2005 by a vote of 40 to zero and was signed by the governor.  It will become a law on September 4, 2005.  The amended version reads, “If a supplier has contractual authority to approve or deny a request for a sale or transfer of a dealership or an equity ownership interest in a dealership, the supplier shall not unreasonably deny such request.  The dealer’s request shall be sent by certified mail and shall include reasonable financial information, personal background information, character references, and work histories for each acquiring person.  The approval or denial of a request made pursuant to this subsection shall be made in writing and sent by certified mail within sixty days after receipt of the request.  If the supplier has not approved or denied the request within the sixty-day period, the request is deemed approved.  If a supplier denies a request made pursuant to this subsection, the supplier shall provide the dealer with a written notice of such denial that states the reasons for denial.” 

     LB 317, the bill to change the minimum horsepower requirement for a permit to sell a tractor in Nebraska from 40 to 75 hp, was placed in General File on February 25, 2005.

     For the complete text of these bills and for updates on Nebraska legislature, visit http://www.unicam.state.ne.us.

 

Nebraska Legislative Update - Oct. 2004

By Denny Rasmussen, Nebraska Legislative Director

It has recently been brought to my attention that there have started to be problems with the delivery of farm equipment exceeding 10,000 lbs. gross weight.  This means that the truck, trailer and load cannot exceed 10,000 pounds on a delivery trailer unless brakes and turn signals are part of the trailer chassis.  Of course, according to Nebraska lawmakers’ opinions through the years, all farmers and other agriculture-oriented producers remain exempt.

Following are three sections of law that are on the books here in Nebraska.

60-625
Implement of husbandry, defined. 

Implement of husbandry shall mean every vehicle or implement designed and adapted exclusively for agricultural, horticultural or livestock-raising operations, or for lifting or carrying an implement of husbandry and used primarily off any highway.

60-6,226
Brake and turn signal light requirements; exceptions; signaling requirements. 

1)      Any motor vehicle having four or more wheels which is manufactured or assembled, whether from a kit or otherwise, after January 1, 1954, designed or used for the purpose of carrying passengers or freight, or any trailer, in use on a highway, shall be equipped with brake and turn signal lights in good working order.

2)      Motorcycles, motor-driven cycles, motor scooters, bicycles, electric personal assistive mobility devices, vehicles used solely for agricultural purposes, vehicles not designed and intended primarily for use on a highway, and, during daylight hours, fertilizer trailers as defined in section 60-301 and implements of husbandry designed primarily or exclusively for use in agricultural operations shall not be required to have or maintain in working order sign lights required by this section but they may be so equipped. The operator thereof shall comply with the requirements for utilizing hand and arm signals or for utilizing such signal lights if the vehicle is so equipped.

75-363 
Federal Motor Carrier Safety Regulations; provisions adopted; exceptions.

(1)   The parts of the federal Motor Carrier Safety Regulations, 49 C.F.R., as modified in this section and any other parts referred to by such parts, in existence and effective as of January 4, 2004, are adopted as Nebraska law. Except as otherwise provided in this section, the regulations shall be applicable to all carriers, drivers, and vehicles to which the federal regulations apply, to all vehicles of intrastate motor carriers with a gross vehicle weight rating, gross combination weight rating, gross vehicle weight, or gross combination weight over 10,000 pounds.

The big hang up on the 10,000-pound limit comes from the federal rules and regulations for roads that are uniformly adopted across the country. This, unfortunately, is coerced by the feds threatening to withhold highway funds for our many roads.

I had a lengthy and cordial meeting with Carrier Enforcement personnel and it appears that according to a law that came about by federal rules of the road this must be enforced. Anything delivered that amounts to less than 10,000 pounds (including the truck, trailer and load) can be done under state statutes without brakes and turn signals on the delivery trailer.  I would presume that if a member sold the equipment or attachments and had a customer pick them up at the business, this would be legal.  But, on the other hand, this 10,000-pound limit will not be going away at any time soon.  You will note in section 75-363, the word “all.”  This, of course, means all carriers, drivers and vehicles except people involved in agriculture, horticulture or livestock raising operations.

Again, I want to thank Carrier Enforcement for the in-depth talk we had on this subject.

 

New Sales Tax Rules Make Record Keeping Easier
By Mark Othmer, Nebraska Field Director

     Beginning October 1, 2004, some new sales tax record keeping rules will go into effect that will hopefully make life a little easier for equipment dealers.  The first change involves the form used to verify the qualification of an exemption for the sale of agricultural equipment.  In the past, form 13AG was used as the verification document.  On October 1, this form will be replaced by form 13, a form currently used to verify exemptions for the rental of farm equipment.  This form will sufficiently verify the exemption of all farm equipment sales, whether a rental, lease or final sale to an end user.

     A completed form 13 must remain on file to verify all exempt sales.  However, you will not be required to fill one out each time a customer buys equipment.  You may use the “blanket” category instead, which will cover the customer’s purchases for three years.  I recommend you have a form 13 on file for all of your customers.  Then, in the event they purchase a piece of farm equipment, the exemption certificate will already be on file and no additional paper work will be necessary at the time of the sale.

     Another sales tax regulation change deals with the “good faith” clause when accepting form 13 for a sales tax exemption.  In the past, when an entity (person, business, corporation) presented a retailer with a form 13 stating that the entity deserved a sales tax exemption, it was up to the retailer to verify that the entity really did deserve the exemption.  This caused much confusion, especially since the people involved in the transaction (parts counter personnel, entry level employees from other businesses) often did not understand how the sales tax law should be applied.

     Starting October 1, 2004, all of this confusion will go away.  If a retailer has a properly completed form 13 from an entity on file, that entity can receive the sales tax exemption without any fear of it coming back to the retailer.  It will remain the purchasing entity’s responsibility to make sure the use tax is paid.

 

Important Nebraska Sales Tax Updates
By Mark Othmer, Nebraska Field Director

During the last two regular legislative sessions there have been some important changes to sales tax law in Nebraska.  Judging from recent conversations with dealers and dealership office managers, this might be a good time to review the Nebraska sales tax law.

Most of the information in this article was obtained from the state of Nebraska’s website.  I encourage everyone to look at this site, www.nebraska.gov.  Once at the main site, open the “Your Government” tab and click on “State Agencies.”  This will bring up a page where you can select Agency websites.  Here, you can access the Department of Revenue website.  Anything listed in quotations in this article came directly from this website.

Definitions

It is appropriate that we review some definitions in conjunction with sales tax law.  “Agricultural machinery and equipment is tangible personal property that is used directly in cultivating or harvesting a crop, the raising or caring for animal life, or collecting or processing of an agricultural product on the farm or ranch.”

Example of direct use:  Equipment used to mow hay that the producer will feed or sell.

Example of indirect use:  Equipment used to mow under the fence lines.

“Sales of depreciable agricultural machinery and equipment are exempt from Nebraska and local option sales tax when purchased for use in commercial agriculture.  All exempt sales must be accompanied by a Form 13AG.”

Recent changes

During the 2002 legislative session, installation labor was added to the list of taxable sales.  Prior to this, most labor that I-NEDA members dealt with was exempt from sales tax.  Installation labor should not be confused with repair labor.  If a customer has a tractor with an AM/FM radio, buys an AM/FM-CD radio across the parts counter and has your shop install the radio, this labor should be taxed under the definition of installation labor.  If your customer has a tractor in the shop for a clutch repair job, the installation of a new clutch is not taxable.  The tractor already had a clutch before, so this qualifies as repair labor rather than installation labor.

During the 2003 legislative session, some repair labors will be added to the list of taxable sales.  This change will go into effect October 1, 2003.  Once again, repair labor on agricultural machinery and equipment is exempt.  Remember, if the equipment qualified for the sales tax exemption, then the charge for repair labor to fix it is also exempt.  Form 13AG does not have to be filed to exempt the repair labor charge from tax.  However, you are still required to collect tax on the charge for repair parts.  There is some double use equipment handled by dealers that can cause some confusion in the definition process.  Skid steer loaders are a prime example.  It is important to remember that the use of the equipment is what determines the exemption, not the equipment itself.

A skid steer loader purchased for use in a livestock feedlot operation would qualify for the exemption.  However, the same loader purchased for use on road construction would not qualify.  Lawn mowers purchased by farmers to mow their lawns do not qualify for the exemption since their lawn is not commercial or production agriculture.  If a farmer purchases a lawn mower to mow sod that he is growing for sale, the exemption would be allowed and repair labor on that mower would also qualify for the exemption.

As you can see, there is a fair amount of “gray area” in much of the current sales tax law.  I encourage everyone to study the Revenue Department’s website, www.revenue.state.ne.us to gain as much knowledge as possible on the subject.  As always, if you remain unclear, call your Association office for assistance in determining the correct procedure.

 

Motor Vehicle Waste Disposal Wells
(Floor Drains in Shop Areas Connected to a Leach Field)

The construction and/or use of motor vehicle waste disposal wells in Nebraska are prohibited as of April 2, 2002.

Motor vehicle waste can be anything that leaks, drips or is washed off any type of mechanized equipment used in agriculture, construction, industrial activities, maintenance, recreation or transportation.  A disposal well is an underground structure that accepts fluids and allows them to seep into the surrounding sediments.  An example of a motor vehicle waste disposal well is a floor drain in an automotive shop that is connected to a septic system.

Motor vehicle waste disposal wells that are currently in use must be properly closed.  Prior to any work being completed a closure plan must be submitted to the Nebraska Department of Environmental Quality (NDEQ) Underground Injection Program (UIC) for approval.  If there are questions about the rules or closure plans, please call David Miesbach, UIC Program Coordinator at (402) 471-4982.

Some options for closure include, but are not limited to, plumbing the floor drain to a holding tank which is periodically pumped and hauled; utilizing the existing mud pit as the holding tank and having it pumped; hooking up to a city sewer after installing an in-line oil/water separator or plugging the floor drain completely.  These options also apply to new construction where floor drains may be necessary.

Prior to pumping and hauling waste off-site, waste collected from the floor sumps (both liquid and solid) may need to have a waste determination performed.  In most circumstances, a sample(s) will need to be collected and analyzed prior to disposal to ensure the waste is non-hazardous.  As a rule, hazardous waste cannot be disposed at landfills and must be appropriately managed.  The NDEQ can assist you in determining if the waste needs to be tested and, if the waste is hazardous, what your regulatory requirements would include.  Waste determination questions should be directed to Jim Harford, Waste Management Section at (402) 471-8308.

Source:  Nebraska Department of Environmental Quality

 

Nebraska Makes Run for Border for Taxes
By John Taylor, Omaha World-Herald

Some Nebraska industrial-equipment dealers have found themselves caught in the middle of a sales-tax problem involving the sale of their products to governmental entities in other states.  Andrew Goodman, executive vice president of the Des Moines-based Iowa-Nebraska Equipment Dealers Association, says “it’s not a monster issue,” but one that his organization would like to see resolved by the Nebraska Legislature.

The issue is this:  The Nebraska Department of Revenue recently has been asking Nebraska companies that sold equipment to governmental entities in Iowa – and perhaps other Midlands states – to demand that the governments pay the 5.5 percent sales tax levied by Nebraska.

Although the companies have been under the impression that government entities are exempt from the sales tax, the companies have tried to comply with the Nebraska Department of Revenue’s request.

However, the out-of-state government entities have declined, saying they are in fact exempt from paying the Nebraska sales taxes.  The out-of-state governments are partly correct.

Tom Gillaspie, an attorney in the Nebraska Department of Revenue, explained:  If an out-of-state government entity – say, the State of Iowa – buys an item in Nebraska and takes possession of it in Nebraska, the government is subject to the Nebraska sales tax.  If, however, the State of Iowa buys an item in Nebraska, and the Nebraska retailer delivers it to Iowa, the item is not subject to sales tax either in Nebraska or Iowa.  The reasoning, Gillaspie said, is that “if you don’t take possession of it in Nebraska, then the sale hasn’t been completed in Nebraska.”

What makes the issue unique, said Goodman, is that Nebraska is the only state in the Midlands that applies the sales tax to items purchased by governments in other states.  Through reciprocal agreements, all the other Midlands states exempt from sales taxes all purchases made by governmental subdivisions, he said.  Goodman said he would like to see a similar reciprocal agreement with Nebraska.

Why can’t the problem simply be resolved by having the Nebraska retailer deliver all items purchased by out-of-state governments?  The reason, Goodman said, is that in some cases, a government agency may need a piece of equipment in such a hurry that it saves time to pick it up immediately, rather than wait on a delivery.  Goodman said his organization is working with the Nebraska Department of Revenue to resolve the problem. “It may require a change in the law to reconcile it,” he said.

The Nebraska law has existed for years but hasn’t presented a problem for the 480-member association until recently. The revenue department’s Gillaspie said he doesn’t know why the issue has come up now.  “I don’t think we’re on a campaign as a department to go hunt people down and collect the tax,” he said.

Goodman said it would be important to the Nebraska economy to resolve the issue.  “This would be an encouragement to keep those dealerships in Nebraska and not force them to move across the border, where they wouldn’t have to deal with this issue,” he said.

Source:  Omaha World Herald, October 12, 2002

 

Changes to State Regulations May Impact Equipment Dealers

The Nebraska Department of Environmental Quality (NDEQ) recently changed regulations that could impact how shop waste is handled at motor vehicle and equipment repair shops across the state.  NDEQ revised Title 122, Rules and Regulations for Underground Injection and Mineral Production Wells, in response to a federal law change in April 2000.  The changes to Title 122 took effect April 2, 2002.

The 2000 federal law change made it illegal to connect new motor vehicle shop floor drains to septic systems and leach fields.  The 2002 revised state law makes new and existing shop floor drains to septic systems and leach fields illegal across Nebraska.  Prior to the state regulation change, NDEQ worked with operators of known “motor vehicle waste disposal wells” (as floor drains to septic systems are called) to properly close these drains or to make some other arrangements for shop floor drain waste.  Other arrangements may have included piping the floor drain to a holding tank which is periodically pumped and hauled; utilizing the existing mud pit as the holding tank and having it pumped; hooking up to a city sewer after installing an in-line grease trap; or completely closing the floor drain.

Other changes were also made to Title 122.  Some of these included new construction standards and setback distances for Class V injection wells (such as large capacity septic systems, storm water drainage wells, and open loop heat pump wells).  All changes were made to better protect ground water quality and to bring the regulations into agreement with other state and federal laws.  

The revised regulations can be viewed on line at www.deq.state.ne.us.  If you would like a copy sent to you, or have questions regarding this revised law, call Dave Miesbach, Underground Injection Control program manager at NDEQ, 402-471-4982 or write to NDEQ at P.O. Box 98922, Lincoln, NE  68509.

 

2002 Legislative Sessions - Nebraska
By Andy Goodman - I-NEDA Executive Vice President

     The 2002 Iowa and Nebraska legislative sessions will start in less than 60 days.  Our Iowa and Nebraska legislative committees have met several times over the past six months to make preparations for the upcoming sessions.  Both committees have reviewed the issues, prepared the wording of proposed legislative bills and remain actively involved with our lobbyists and legislators.  Following is a review of the Nebraska issues.

Nebraska

     Over the past year in Nebraska, we worked on and obtained passage of LB 146, a bill that raised the origination fee limit on agricultural equipment sales and lease contracts from $10 to $100 for sales up to $25,000, and $250 on sales above $25,000.  This year, we would like to see legislation to raise the fees on industrial equipment sales and lease contracts to the same levels.
     Did you know that purchases made in Nebraska by governmental units of other states are not exempt from Nebraska sales tax?  This means if a county or city agency from another state comes to a Nebraska dealership and makes a purchase, the Nebraska dealer is required to charge sales tax.  One of our dealers discovered this through a tax audit.  During the upcoming legislative session, we will recommend that the Nebraska legislature pass a bill to allow “another state or a political subdivision of another state to be exempt from tax if that other state provides a similar reciprocal exemption for Nebraska and its political subdivisions.”  Iowa already has such an agreement with Illinois, Kentucky, North Dakota, and the District of Columbia.
     Once again, we will recommend that the Nebraska legislature enact a bill to provide an exemption on farm equipment parts sold in the state of Nebraska.  Since the summer of 2001, we have polled Nebraska farmers to determine how much money is sent out-of-state for the purchase of farm equipment parts.  We have received several hundred surveys indicating that the average farmer spends $3,200 on parts outside the state of Nebraska.  With slightly more than 44,000 farmers in the state, that extrapolates out to $140,800,000 annually.  Most agricultural states have an exemption on farm equipment parts, making it lucrative for mail order houses to establish themselves in those states and ship into Nebraska tax free, putting the local Nebraska dealer at a disadvantage.  If we could eliminate the sales tax on agricultural equipment parts, perhaps we could retain half of the lost $140,800,000 in revenue, providing jobs and circulating many times within the state.

Get Involved
     Now it’s time for you to get involved.  Call your State Senator or Representative today and invite them to visit your dealership.  Show them the jobs that you support in your local community and tell them why it is important to keep revenue in the state.  Explain that this legislation is vital to your existence as a local business and that it will be an added stimulus to the state economy.

 

UCC Filings - Are You Doing Enough to Protect Yourself?

     Over the past year, I’ve had several conversations with dealers regarding incidents where the dealer felt they were protected in connection with a UCC filing, only to discover they were not.  While I don’t profess to be an expert, I have done some research and feel most dealers could use some brushing up on UCC Law 101.  I cannot provide all of the answers, but hopefully this article will address some common issues and offer insight into what you must do in order to provide maximum protection to you and your business.  Remember, an ounce of prevention (minimal cost up front) is worth a pound of cure (thousands of dollars spent once the mistake is made).

I Made the Sale Without a Trade.  It Doesn’t Get Any Better Than This!

     You sold a piece of equipment and no trade was involved.  The customer asked to finance the machine through the lender of his choice, and you prepared the documents for him to sign.  At this time, a UCC was signed and filed with the Secretary of State, so everything was handled.  Not so fast, my friend.  A UCC filing is only good for five years, at which time it automatically expires.  If your customer signs a contract for longer than five years, you need to verify who will be responsible for renewing the UCC filing once it expires.  Hopefully, the finance company will be responsible, but don’t leave it to chance.  Find out for sure.  If it becomes your responsibility, put a record keeping strategy in place so you know when UCC filings need to be renewed.

I Made the Sale and Traded for a Machine at my Price.  It Couldn’t Get Any Easier Than This!

     Obviously, when you close a sale a certain amount of euphoria exists.  You’ve been negotiating with the customer, sometimes over the span of several months, and you finally reach an agreement.  As a salesperson, you have reached the point where you don’t want to do or say anything to mess up the delicate balancing act that brought the two sides together in agreement.

     Most of us do all the right things to make sure a retail finance agreement is put together the way the customer expects and we file a UCC so the dealership is protected on the sold piece of machinery.  The euphoria continues to grow and all the bases are covered, right?  Once again, not so fast my friend.

     What about the piece of machinery that the customer traded to you?  Sure, he told you that he still owed a finance company a specified amount on that piece of machinery, and you included a pay-off for it in the new finance agreement.  And when the customer signed the new finance agreement, you explained to him that he was assuring you that there were no outstanding liens filed against the machine he was trading, and he informed you that was the case.  But was that really the truth?

     In several cases I’ve discussed with dealers, they discovered at a later date that the traded machine was listed as collateral in another financing statement, usually with a bank.  The bank had filed a blanket lien on the customer, which listed all equipment owned by the customer.  Quite often, the customer doesn’t even realize that a blanket lien is a second lien on any machinery that he owns and fails to notify you that this lien exists.  Once the banker finds out that the customer has traded machines, he could put his stamp of approval on the deal, and no problems will follow.  

     However, if the banker did not want the customer to trade machines, problems could occur.  The banker could return to you, the trading dealer, and demand payment for the collateral that was traded to you.  All of a sudden you have a huge expense to cover that wasn’t included in the original deal.  Quite often this reaches into the tens of thousands of dollars.

How do I Protect the Dealership and Myself?

     The answer is really quite simple.  It is your responsibility to make sure that no liens exist on a piece of machinery traded to you from a customer.  The first thing you should do is to ask the customer if any other liens exist.  In addition, you must confirm with the customer that his bank doesn’t have a blanket lien on the equipment.  The best thing to do, even if you fear it may stop a deal from being made, is to ask the customer’s banker if there is a blanket lien on the customer.  If the answer is yes, you should get a release from the bank on the particular piece of equipment being traded to you.

Is There a Way to Find this Information Without Annoying my Customer with the Questions?

     While asking the customer himself and contacting the bank remains the best method, there are other options.  You can subscribe to Nebraska@Online, a website managed by the state of Nebraska that allows you to do UCC filing searches on customers.  It is fairly simple to use, with a minimal cost.  The domain name for this site is www.nol.org.

The Final Word

     Remember, an ounce of prevention is worth a pound of cure.  If you take the time and effort to make sure the equipment you trade for has no outstanding liens on it you won’t have to worry about the $10,000 headache you may get if you don’t take the time.

By Mark Othmer, Nebraska Field Director

 

Online Images of UCC and EFS Filings

To:        Interested Parties
From:    John Gale, Secretary of State
RE:        Online Images of UCC and EFS Filings

As part of our effort to make Secretary of State services more convenient for citizens and businesses throughout Nebraska, I am pleased to announce that images of Uniform Commercial Code (UCC) and Effective Finance Statement (EFS) filings have been made available online as of January 1, 2002.  For a number of years, the basic information (name, address, document number) in our database from liens filed with this office has been available online.  The new service will allow users access to the scanned image of the actual documents filed with the office, so all information, including collateral description, will be available.

You may access UCC images through either a document number search or a secured party name search.  Once you have identified the filing you seek, there will be a direct link to the image by simply clicking on the document number.  UCC images are provided at a cost of $0.50 per page.

In order to access UCC data online including the scanned images, you will need to subscribe the Nebrask@Online, the state managed gateway to Nebraska Government Information.  If you are a current subscriber, you may use your existing user name and password to access images and data.  If you are not current a Nebrask@Online subscriber, you may contact them at 1-800-747-8177 or (402)471-7810 for subscription information, or simply access the NOL site at http://www.state.ne.us. 

 

Increased Limits on Fees Charged on Installment Contracts

In Nebraska, we achieved success with bill LB146, which changed sections 45-338 in regard to fee limits charged on installment contracts.   Previously, the limit was ten dollars. This new legislation permits dealers and other agricultural equipment retailers to charge origination fees on installment contracts up to $100 on contracts under $25,000, and up to $250 on contracts over $25,000.  While our original goal was to have industrial dealers treated the same as farm equipment dealers, the Banking Committee decided otherwise.  LB146 will go into effect September 1, 2001.

 

Artisan’s Lien: How much protection does it provide?

When the farm economy starts on a downhill trend, most dealers begin to worry about accounts receivable and how they will get paid when their service department makes major repairs to a customer’s equipment. Many dealers hire a third party company, such as Farm Plan or Case Credit, to handle their open accounts. Often, these third party companies allow the dealer to stay in a non-recourse position on these open accounts.

The question, "What if the customer isn’t on our third party credit system, or what does a dealer do if he is handling his own accounts receivable?" always seems to haunt us. This is a loaded question that should not be taken lightly. While I don’t hold the law degree that it would take to completely answer this question, I will offer my opinion on this subject and narrow the scope to a particular set of events that recently occurred at a Nebraska dealership.

A customer delivered his combine to a Nebraska dealership to have the engine overhauled. The customer received an estimate of what the repair job would cost. As the repair work neared completion, the dealer called the customer to let him know when the combine would be ready for pick-up. The dealer knew the customer had been slow to pay in the past, and because of this, advised the customer that he would have to pay for the repair work before the combine would be released to him.

The customer arrived at the dealership on the appointed day to pick-up his combine. The customer reviewed the repair order and inspected the combine, all to his satisfaction, and wrote a check to the dealer for the repair. The dealer released the combine to the customer, who drove it home.

On the surface, it appears the dealer has done everything right. Nebraska law allows him to demand payment for a repair job on a piece of farm equipment before it is released to the customer. Statute 52-201 states that, "any person who makes, alters, repairs or in any way enhances the value of any vehicle, automobile, machinery, farm implement or tool . . . shall have the right to retain such property until such charges are paid." This law insures that a dealer remains well within their rights to retain possession of a customer’s machine until the dealer has received payment.

What happens if the customer’s machine is released before the repair charge is paid? The dealer has essentially given up his right to be first in line to receive payment. He may file an artisan’s lien, which would formally put him in line to be paid after any other previously filed liens. This process is defined in statute 52-202 which states that, "any person who makes, alters, repairs, or in any way enhances the value of any vehicle, automobile, machinery, or farm implement or tool . . . shall have a lien upon such vehicle, automobile, machinery, farm implement or tool, in cases when he or she has parted with the possession thereof." This statute goes on to say that the dealer must file a lien with the Secretary of State within sixty days of performing the work.

Statute 52-203 defines the status of the artisan’s lien. "Such lien shall be in force from and after the date it is filed, and shall be prior and paramount to all other liens upon such property except those previously filed." In other words, the artisan’s lien is last in line to all other liens that have been filed on that particular piece of machinery. If there is a foreclosure on this equipment, all other lien holders would have to be satisfied before the dealer could receive any payment.

Let’s continue with our story about the dealer who repaired the customer’s combine. About fifteen minutes after the combine was released to the customer, the dealer received a phone call from the customer. The customer stated that none of the gauges in the cab were working, so he was going to stop payment on the check he had just written. The dealer tried to convince the customer to let him fix the problem immediately, but the customer would not allow it. He told the dealer he could come to his farm to fix the combine when it was convenient for the customer, and not until then. Once again, the dealer is in a catch 22. He thought he had done everything right by getting a check from the customer before releasing the combine. All he ended-up with was a check where payment had been stopped, and his only recourse was to file an artisan’s lien.

The moral of the story has previously been, "Don’t give up possession until you have a check." The new moral of the story is, "If you really want to make sure you will get paid for a repair job, don’t give up possession until you receive a cashiers check." This remains the only way a dealer can be assured that they will receive payment from the questionable customer, and it is completely legal to demand such payment. Remember, these are my interpretations of the law as I see it. If you have further questions on this subject, it might be wise to speak to someone with a law degree.

 

Nebraska Sales Tax Review

The following is an update on a problem that seems to persist in how we go about collecting or not collecting sales tax on certain items. The purpose of this information is to explain the Nebraska and local option sales tax as it applies to purchases and leases of depreciable agricultural machinery and equipment.

Overview

Purchases and certain leases of depreciable agricultural machinery and equipment are exempt from Nebraska and local option sales and use tax when purchased or leased for use in commercial agriculture.

Personal property tax remains due on such items even if sales tax was erroneously paid. Should this occur, a claim for a refund of the sales tax may be filed with the department.

Definitions

Agricultural machinery and equipment is tangible personal property used directly in cultivating or harvesting a crop, the raising or caring for animal life, or collecting or processing of an agricultural product on the farm or ranch.

Agricultural machinery and equipment DOES NOT include: office equipment, registered or unregistered motor vehicles and trailers, well-drilling equipment, handling or processing equipment for agricultural products not on a farm or ranch, any building or fixture, or machinery and equipment purchased by veterinarians for use in their practices.

Commercial agriculture is the business of producing food products or other useful and valuable crops, or raising animal life. The crops or animal life can either be sold or used by the producer or grower to produce other products for sale.

Commercial agriculture includes commercial production in greenhouses, nurseries, tree farms, sod farms, and feedlots.

Commercial agriculture does not include storage of products off the farm, in commercial elevators, or animal like in stockyards or sale barns.

Depreciable tangible personal property means:

tangible personal property used in a trade or business, or used for the production of income, with a determinable life of longer than one year;

tangible personal property eligible for federal depreciation, but the owner chooses not to depreciate; or

all other tangible personal property where a taxpayer is claiming depreciation, amortization, or section 179 deductions on their federal income tax return.

Sales of Agricultural Machinery and Equipment

Sales of depreciable agricultural machinery and equipment are exempt from Nebraska and local option sales and use tax when purchased for use in commercial agriculture.

ALL exempt sales of such equipment MUST be supported by a Nebraska Sales and Use Tax Exemption Certificate for Agricultural Machinery and Equipment Purchases or Leases (Form 13AG). The seller must provide one copy of Form 13AG to the purchaser, keep one copy with their books and records, and attach a copy to their Nebraska and City Sales and Use Tax Return (Form 10).

Leases or Agricultural Machinery and Equipment

Leases of qualified machinery and equipment remain exempt from Nebraska and local option sales and use tax when leased for use in commercial agriculture.

Capitalized leases of qualified machinery and equipment for periods of more than one year must be supported by Form 13AG. The capitalized lease allows the lessee to depreciate the machinery or equipment for federal income tax purposes. The depreciation allowance makes the lessor responsible for the personal property tax assessment. The lessor must provide one copy of Form 13AG to the purchaser, keep one copy with their books and records, and attach a copy to their Nebraska and City Sales and Use Tax Return (Form 10).

Operating leases of qualified machinery and equipment for periods of one year or less must be supported by Form 13, Section B. The lessor is responsible for reporting the net book value for personal property assessment. The lessor must keep the completed Form 13 with their books and records.

Repair and Replacement Parts for Agricultural Machinery and Equipment

The sales of repair and replacement parts for agricultural machinery and equipment used in commercial agriculture are not exempt from sales and use tax. The seller is required to collect and remit the tax on sales of repair and replacement parts. The seller cannot accept a Form 13 or Form 13AG to exempt such sales from tax.

The purchaser may apply for a refund of the tax paid on depreciable repair and replacements for agricultural machinery and equipment that is directly used in commercial agriculture. The claim for refund must be filed within three years after the date of purchase.

As a general rule, repair and replacement parts are depreciable if they will appreciably prolong the life of the property, arrest its deterioration, or increase its value or usefulness, and are typically capital expenditures where a deduction is allowed only through the depreciation/cost recovery allowance. However, incidental repairs that merely keep the property in an ordinary operating or usable condition are deductible current expenses, and the tax paid for these items is not refundable.

Personal Property Tax

Personal property tax is due on qualified agricultural machinery and equipment EVEN IF sales tax is paid on the item. All depreciable agricultural machinery and equipment must be reported for personal property tax. If sales tax was paid, the purchaser may apply for a refund of the sales and use tax by filing a Nebraska Sales and Use Tax Refund Claim for Agricultural Machinery and Equipment Purchases or Leases (Form 7AG-1).

Improper Issuance of Form 13AG

If Form 13AG was improperly issued by a purchaser who is not engaged in commercial agriculture, the purchaser must remit Nebraska and applicable city use tax directly to the department by filing a Nebraska and City Consumer’s Use Tax Return (Form 2), or a Nebraska and City Individual Consumer’s Use Tax Return (Form 3). Any purchaser who provides a Form 13AG or Form 13 to a retailer for any purchase not exempt from sales and use tax may be assessed a penalty of $100 or 10 times the tax.

Improvements to Real Estate

Improvements to real estate do not qualify for this exemption because such improvements are not considered to be machinery and equipment. Examples include buildings and fences.

Equipment That Is Part of a Building

When qualified agricultural machinery and equipment are annexed to a building, the person installing such equipment is considered a contractor.

Only a contractor operating under Option 1 can take Form 13AG from their customer to exempt the qualified equipment from sales tax.

Contractors operating under Option 2 or Option 3 are the consumers of all materials, including qualified equipment, that they annex to a building. They cannot accept Form 13AG for equipment that they annex to a building.

Information relating to the contractor options is available in the Nebraska Taxation of Contractors General Information Guide.

For further information on any of these topics, please contact the Nebraska Department of Revenue at 1-800-742-7474.

Source: Nebraska Department of Revenue, August 1999

The following list provides examples of machinery and equipment that can qualify for the sales and use tax exemption when:

it is depreciable;
it is agricultural machinery or equipment;
and it is used in commercial agriculture.
ATV’s and snowmobiles
augers, portable
combines
movable concrete feed bunks
crop dusting airplanes
cultivators
disks
farrowing crates, pens and stations
feed boxes
feed wagons, not licensable
automatic feeders
fertilizer nurse tanks pulled behind a tractor or connected to center pivot
fertilizer spreaders or applicators
fish production equipment including feeding and seining equipment
gates, completed
gestation crates
grain bin equipment that dries or moves the grain
grain dryers, portable
harrows
hay balers
hay loaders
hay mowers
hay rakes
hog carts
hog slats/gang slats, concrete
hydraulic pole tampers and couplers
irrigation well equipment, such as motors, pivots, and pipes, but not casing and concrete          pads
manure handling equipment
milk separators
milk storage equipment on the farm location
milking equipment
panels, completed
planters
plows
stock racks
tractors
tractor duals
trash wheels
truck chassis/cabs modified to be feed wagons

 

Nebraska Dealership Wins Case Against Freightliner

Former Federal District Court Judge Layn Phillips has awarded $819,550.00, plus the potential for attorneys’ fees and costs, to Rose Equipment, Inc., a former Freightliner dealer, for Freightliner Corporation’s "constructive termination" of Rose Equipment’s right to continue as a Freightliner dealer in Lincoln, Nebraska. Judge Phillips found that Freightliner’s conduct violated both the Nebraska Motor Vehicle Dealer’s Act ("NMVDA") and the implied covenant of good faith and fair dealing.

In the four day arbitration, Rose Equipment, which had operated as the only Freightliner dealer in the Lincoln, Nebraska market since 1977, contended that the cumulative effect of Frieghtliner’s conduct — including Freightliner’s refusal to give it two new Freightliner product lines; Freightliner’s shrinking its assigned area of responsibility and allowing a neighboring Freightliner dealer to establish a service facility in Rose Equipment’s former territory; and Freightliner’s engaging in direct sales to Rose’s largest customer — had effectively terminated it as a Freightliner dealer.

Freightliner unsuccessfully contended:

that its conduct was permitted pursuant to the terms of the written dealer agreement;

that its conduct did not amount to a termination of the dealer relationship; and

that, even if its conduct did amount to a termination, Freightliner had "good business reasons" for engaging in this conduct which constituted the type of "good cause" which permitted termination under the NMVDA.

Prior to the arbitration hearing, Freightliner brought a motion seeking to dismiss Rose Equipment’s claim that the conduct of Freightliner amounted to a constructive termination in violation of both the NMVDA and the implied covenant of good faith and fair dealing. Judge Phillips, in a lengthy memorandum decision, denied this motion by Freightliner, and, in doing so, recognized the following significant principles of law:

Nebraska would recognize a cause of action for constructive termination under the NMVDA, and any such termination must be for "good cause."

Under Oregon law, a party to a contract can be liable for violation of the covenant of good faith, even if the written agreement allows the conduct complained of, if the wrongdoer’s conduct violated the reasonable expectations of the parties.

It is appropriate to look beyond the written integration clause at what was said, what was written, and the course of dealing between the parties to determine the parties’ reasonable expectations.

While a manufacturer may take a number of discrete steps that, standing alone, would be permissible, if the effect of those small steps is to drive a dealer from business, the dealer has been constructively terminated and a manufacturer may be found liable for breach of both the implied covenant of good faith and fair dealing, and any applicable dealer protection statute.

Editor’s Note: This information was submitted by the Attorneys for Rose Equipment — J. Michael Dady and Ronald K. Gardner of Dady & Garner, P.A.

 

Nebraska Value-Added Agriculture Initiative

Recently, Governor Mike Johanns requested that the Nebraska Department of Agriculture and the Nebraska Department of Economic Development put together a value-added initiative to simply add value to Nebraska products. As a result, the Department of Agriculture and the Department of Economic Development formulated an umbrella value-added initiative for the governor, in addition to a departmental initiative for both respective departments. The plan defines the roles and responsibilities in a clear and aggressive procedure.

Following is a summary of this plan as it was presented to Nebraska Agriculture Stakeholders during a formal meeting on September 13, 1999. I am intrigued by this proposal since it is not a band-aid approach. While the initiative will not affect this year’s crop prices, it could definitely work for future years.

Governor Mike Johanns

Mission Statement

According to Governor Mike Johanns, the mission of this initiative is "to engage the state’s resources to enhance agriculture profitability through the development of value-added capacity in Nebraska." His goals include:

Expanding Nebraska’s capacity to create value-added agricultural processes.

Working with existing Nebraska agricultural processors and agriculture-related manufacturers to expand value-added agricultural processing.

Attracting additional value-added agricultural processing to Nebraska.

Assisting in the development of new value-added agricultural processors in Nebraska.

Plan of Action

The governor also outlined the following plan of action for the initiative:

Establish a fully integrated plan for developing value-added agriculture in Nebraska.

Reallocate existing resources to the value-added initiative.

Propose legislation to establish additional resources to support value-added agriculture.

Establish public/private partnerships to provide resources to value-added agriculture.

Build upon the integrity of Nebraska’s existing value-added system to enhance product and process development.

Enhance research and development to encourage new products and markets.

Assist in the development of regional value-added agriculture plans within the state that are most appropriate to each region’s economic base and potential.

Maximize Nebraska’s existing value-added potential while establishing a long term direction for the development of the state’s agricultural and food processing base.

Explore new and emerging agricultural product markets.

Assist Nebraska agricultural processors with technology development opportunities.

Nebraska Department of Agriculture

Mission Statement

Merlyn Carlson, of the Nebraska Department of Agriculture, stated the department’s mission is to "link producers with products in new markets, while providing Nebraska’s farmers and ranchers with more consumer dollars spent on value-added agricultural products." Carlson added the Department of Agriculture and Department of Economic Development plan to work closely with producers, commodity associations, community organizations, food companies, domestic and foreign governments, international buyers and the University of Nebraska to accomplish this mission.

Strategies

Carlson outlined the following strategies:

Promote value-added products through a value-added initiative.

Continue aggressive involvement with foreign markets.

Develop proactive initiatives through all sectors of Nebraska’s economy.

Utilize Nebraska’s many resources to create a unified strategy aimed to satisfy the demands of consumers around the world.

Observations & Assumptions

The Department of Agriculture emphasized that it remains vital for Nebraska to build a positive image for quality feed production, while maintaining a positive balance of environmental and social concerns for the optimal and beneficial use of all resources. The department feels that while technology, capital, and talent will increase the ability to produce value-added products, consumer-driven value-added products will further link the Nebraska producer to the global consumer. As a result, the department expects to see a rise in total agriculture receipts; an increase in demand and value for further-processed agricultural products; as well as a rise in global demand for value-added agricultural products produced in Nebraska.

Objectives

According to Carlson, the long-term initiative of the Nebraska Department of Agriculture remains to ensure and support the implementation of the Governor’s Value-Added Initiative and to communicate the value and importance of agriculture to Nebraska. The Department plans to:

Work with commodity boards, associations, the university and current feed companies to develop new products.

Encourage the development of businesses to produce the new products.

Build upon relationships with foreign governments and foreign buyers who desire value-added products.

Pursue legislative opportunities to provide incentives for the development of local infrastructure to provide jobs and products for defined markets.

Enhance new research and technology for new product development.

Cooperate with the Department of Economic Development and appropriate partners to attract new capital to the state for adding value to Nebraska’s commodities.

Impact/Action

As a result of Nebraska’s Value-Added Team, the Department of Agriculture predicts that:

Commodity production for value-added products will be consumer-driven and market-driven.

The flow of value-added products will be enhanced.

New businesses and/or joint ventures will result in the development and distribution of value-added products.

Proper resources will be channeled to discover new and/or existing product-specific markets.

Technological research will enhance specific agricultural products linked to Nebraska businesses.

Future

The Department of Agriculture feels technology will continue to be a constant integrating and driving force in agriculture, resulting in a gradual transition from a commodity dominant economy to an equal sharing of these products to produce value-added products. The department forecasts a greater demand for specialty products in specialty markets, in addition to growing market opportunities for new agricultural derived products for feed and industrial uses. They also believe global competition will increase due to a persistent demand for feed, the phasing out of trade barriers, and the increased quality of feed.

Nebraska Department of Economic Development

Mission Statement

Allen Wenstrand, of the Nebraska Department of Economic Development, stated the department’s mission is to "identify and assist strategic business alignments and match resource opportunities that result in Nebraska value-added agriculture and processing companies achieving greater operational and profitability efficiencies in a global market." Wenstrand emphasized that the department must identify existing Nebraska ag production and processing-based care competencies; match with new, strategic resources identified globally; and create next generation business opportunities.

He explained that while Nebraska remains agriculture-based and rich in ag resources, changes in the ag structure continue to occur, creating an ag/rural development downturn. This downturn has resulted in an increased need for direct, meaningful and significant value-added economic impact.

Wenstrand identified 120 existing Nebraska-based businesses currently positioned to realize strategic partnerships with value-added agriculture. Forty-five of these businesses are locally owned, while the remaining 75 Nebraska operations have ownership outside the state.

Observations & Assumptions

The Department of Economic Development feels that:

New business opportunities identified through this initiative will always be directly or indirectly linked to Nebraska-based resources.

The marketing component will always be addressed in each business opportunity identified.

In addition to value-added agriculture and food processing capabilities, other key technological areas are shaping significant new and strategic market opportunities for Nebraska to develop its value-added potentials.

This initiative represents true economic development outcomes by attracting new outside resources into the state.

Generation of new, greater resource mixes will lead to an even stronger value-added position for the state with which to leverage further business opportunities.

Summary

According to Wenstrand, the Department of Economic Development’s portion of the partnership will focus on assisting existing value-added processors to expand in Nebraska; attracting new businesses, strategic partners, and capital investments in value-added ag to the state; and assisting in the start-up of value-added ag processors. The department plans to accomplish this through the reallocation of existing resources, in addition to working closely with its value-added partners.

It remains the hope of both of these departments to mold an aggressive plan all Nebraska agriculture stakeholders might embrace. This will result in bridging efforts to accomplish our goal to bring a greater share of the consumer dollar back to the producer.

 

Tractor Test Law Discriminates Against Nebraska Farmers,
LB 337 Will NOT Close University of Nebraska Tractor Testing Laboratory

 (Des Moines, IA) The Iowa Nebraska Equipment Dealers Association (I-NEDA), the Nebraska Farm Bureau Federation, and major agricultural equipment manufacturers are asking Nebraska farmers to take a stand regarding LB 337, known as the Nebraska Tractor Test Bill.

LB337, currently under debate in the Nebraska Legislature, would simply eliminate the permit requirement to sell tractors in the state. This bill does NOT close the University of Nebraska Tractor Laboratory, as the opponents of this bill would like you to believe. The Board of Regents of the University of Nebraska could cause the Tractor Test Laboratory to close if the Board determines that "such a program is no longer financially feasible or no longer necessary for teaching, research and public service." The fate of the testing facility lies in the hands of the University, not in the result of the passage of LB337.

Under present law, no one can legally sell a tractor in Nebraska if that specific model does not have a state-issued permit. For example, one manufacturer indicated that it produces fifty-eight models of tractors, with only thirty-eight percent of models tested (four out of every ten), and therefore legal to sell to farmers in Nebraska. This means that Nebraska farmers may be prohibited from purchasing the best machine on the market, (i.e. one that is available in the other 49 states) to perform their specific farming functions, due to the permit requirement. Therefore, the current permit requirement restricts their ability to farm to their highest efficiency.

The tractor test law, passed in 1920, was meant to protect consumers from fraudulent claims made by manufacturers regarding the performance of tractors. Although the law was necessary in 1920, today local dealers and manufacturer warranties provide the ultimate protection to consumers.

I-NEDA and the Nebraska Farm Bureau Federation believe that if consumer protection remains the primary goal of the current law, as the opponents argue, then certain issues have been overlooked, including:

Combines and tractors under 40 horsepower do not require a permit.

Other states do not require the same permit process.

The law only prohibits the sale of tractors and not leasing.

The average farmer does not know what tractors have been tested.

I-NEDA and the Nebraska Farm Bureau Federation advocate eliminating the permit requirement and establishing a system similar to other testing situations. Under a new system, an independent test laboratory (like the University test facility) would perform evaluations of machines offered for sale to area farmers to determine performance characteristics, power requirements, safety aspects and general suitability for local agriculture. The lab could then issue "Evaluated" decals for manufacturers to purchase and display on evaluated machines. When farmers contemplate an equipment purchase, they could be made aware (by the decals) that an independent evaluation report is available. The evaluation information could be disseminated to farmers, manufacturers, researchers, and other interested parties. While this alternative plan is not currently included in the legislation, it remains important for all parties to explore alternatives to closing the testing station.

I-NEDA and the Nebraska Farm Bureau Federation encourage Nebraska farmers and equipment dealers to take a stand and insist that their legislative representatives support the passage of LB337. All groups agree that it remains important that the University of Nebraska remain an OECD test site for the United States, and that tractors sold in Nebraska should be OECD tested. The current law, however, provides more challenges than solutions. It’s time for Nebraska farmers to enjoy the same tractor purchasing privileges allowed in the other 49 states.

 

Questions & Answers about Tractor Testing
Note: The following was compiled by Mark Othmer, Nebraska Field Director.

Who determines what tractor models farmers and ranchers buy?
The answer to this question should be, the farmer or rancher making the purchase determines what tractor model to purchase. Unfortunately, this is not the case in Nebraska. In Nebraska, the Nebraska Tractor Test Board first determines if a tractor model has been tested at an Organization of Economic and Cooperative Development (OECD) facility, such as the University of Nebraska Tractor Test Laboratory. If it has been tested, it can be sold in Nebraska. If it has not been tested, it is illegal to sell that particular tractor in the state. So, in a sense, the farmer or rancher no longer makes the decision of whether or not to purchase that particular model of tractor. Since the model is not available for sale in Nebraska, the purchasing decision has already been made for them.

Do producers in other states have the same road block when making a purchasing decision?
No other state requires that tractors be tested. All tractor models produced are available for sale in every other state.

Producers don’t complain about this problem much, so it must not be much of an issue.
The old axiom, "what you don’t know won’t hurt you" applies here. Few producers realize the true ramifications of this law. For example, even if a tractor has not been tested and somehow ends up in Nebraska, it still cannot be resold in Nebraska, no matter what the age. If it is resold, the seller must repurchase it. Few legitimate tractor dealers will take the risk of selling an untested tractor model for fear of having to buy it back. Consequently, when a farmer or rancher outlines his needs for a tractor, the dealer automatically eliminates the untested models that are unavailable in Nebraska. Once again, someone else is making the purchasing decision for the buyer.

Are there really that many tractor models not available in Nebraska?
At the current time, approximately 100 models have not been tested. Some argue that many of these models are specialty tractors, with a very small market in Nebraska. While this may be true, who should make that decision? Shouldn’t the buyer determine what product is right for them? While there definitely are specialty markets in Nebraska, specialty tractors that best fit these markets may not be available for sale.

If a producer determines their best tractor model is not available for sale in Nebraska, what should they do?
If they want to do business with their local servicing dealer, they will have to settle for the next-best-model available in Nebraska. However, the next-best-model may cost more, or might not fit their needs as well as the other model. So, if the producer still wants to purchase an unavailable model, they need to consider the following before going out of state to purchase the tractor:

  1. They must realize that legally, they will not be able to resell that tractor in Nebraska. This includes the ability to trade it in on another tractor. So, they will either own the tractor until it is junk, or have to sell or trade it out of state.
  2. They also need to remember that even though their local dealer sells the same brand of tractor, they may not be equipped or properly trained to service their model. The buyer may have to take the tractor out of state if any repairs become necessary.

How can we eliminate this restriction?
Repeal the law that requires all tractors above 40 horsepower to be tested at an OECD test facility.

What risks are there in repealing this law?
The test laboratory at the University of Nebraska, which does most of the OECD testing in the United States, may not receive enough income to remain in operation. This test laboratory is self-supporting, since no tax dollars are used in its operation and the only money generated is from test fees.

Who protects the consumer if the test lab isn’t there?
Although the Nebraska Tractor Test Laboratory is known worldwide as the best testing facility available, it cannot simulate the true operating conditions under which a tractor must perform. The tests at the laboratory make sure that all tractors are tested on an equal basis, thus allowing for an equal condition operating performance comparison. Unfortunately, many of the tests are performed on an asphalt track. This is a poor test of true tractor performance, since few tractors are operated on asphalt tracks at farms or ranches.

In addition, many of these tests such as PTO horsepower, can easily be performed by a local dealer. Many times, a local dealer will demonstrate a tractor at the customer’s location using their machinery - the true test of tractor performance. This also allows the customer to make a competent purchasing decision about what is best for their operation. The ultimate protection of the customer is provided by their local dealer and the manufacturers’ warranty. When this law was originally put in place, there were some real concerns about local dealers and manufacturers’ warranties. The same cannot be said today.

So what is the real issue here?
Do we want to continue restricting technology in the state of Nebraska, or should we let Nebraska producers have the same opportunities their counterparts in every other state have available to them?

 

 

Nebraska Legislative Update

By Denny Rasmussen

Lots of things going on, but I wanted to clarify a few things on leases, conditional sales and depreciable property.

Leases

Net Book Value is calculated using the owner’s (lessor’s) Nebraska adjusted basis and date of acquisition. (NOTE: The amount of the lease payments and the date of the lease are NOT used in calculating the net book value.)

Property may be reported by either lessor or lessee, but always based on the owner’s basis and date of acquisition.

Taxes may be paid by either lessor or lessee. This is between the two parties, typically spelled out in the lease agreement.

Leases with a purchase option at the end of the lease period are treated as any other lease, until the buy-out option is exercised. When the lessee exercised his buy-out option, he is then the owner of the property and the net book value is then determined by using his basis (buy-out price) and date of acquisition (buy-out date).

Example: A farmer leases a combine for five years beginning in March, 1992. The lease contains a buy-out option at the end of the lease. In March, 1997, the farmer exercises his buy-out option and purchases the combine for $12,000.

For tax years 1993-1997, the combine’s net book value is determined using the lessor’s (owner’s) basis and date of acquisition (not the lease date).

Beginning tax year 1998, the combine’s net book value is determined using the farmer’s (owner) basis ($12,000) and the date of acquisition (March, 1997).

 

Conditional Sales

Conditional sales (see Revenue Ruling 41-89-3) are essentially financing agreements, not true leases. In a conditional sale, the ownership of the property is deemed to rest with the "lessee" at the inception of the lease and it is also the "lessee" not the "lessor" who is able to take federal depreciation of the property. Therefore, in a conditional sale, the "lessee’s" basis and the date of acquisition is used to determine the net book value as they are considered the owner. (When in doubt whether a lease agreement is in fact a true lease or a conditional sale, find out which party is able to take the federal depreciation. Whoever is able to take the federal depreciation is considered the owner and their basis and date of acquisition is used in determining net book value.)

 

Personal Property Tax

All depreciable tangible personal property is taxable. This includes property which is eligible for depreciation but for which the owner chooses not to depreciate. This may also include property which is "fully depreciated" for federal income tax purposes (when the recovery period for property tax purposes is longer than the actual recovery period chose for federal depreciation). If you purchase property with a recovery period of seven years, but depreciate it fully in five years, the property will still be taxed for seven years.

Depreciable property which is leased is also taxable. In a true lease agreement, the lessor is able to depreciate the property. If the lessee is unable to determine the lessor’s Nebraska net book value of leased property, they must provide the name and address of the lessor so this information can be obtained. The lessor must list and determine the net book value of all leased property for which the lessee has not provided the net book value.

Review Revenue Ruling 41-89-3 dealing with conditional sales. When a conditional sale exists, the ownership of the property is deemed to rest with the lessee and the lessee may depreciate the property. In these situations, the lessee should be able to provide the net book value, as it will most likely show up on their depreciation worksheet.

 

 

1998 Calendar of Nebraska Tax Form Due Dates

Monthly

15 From 510N, Nebraska Monthly Withholding Deposit (not to be filed in January, April, July, and October)

25 Form 10, Nebraska and City Sales and Use Tax Return

        Form 64, Nebraska and County Lodging Tax Return

       Form 67, Nebraska Fertilizer Fee Return

       Form 93, Nebraska Tire Fee Return

January

15 Form 1040N-ES, Nebraska Individual Estimated Income Tax Payment Voucher, last date for final installment          for 1997

        Form 1040N-ES, Nebraska Individual Estimated Income Tax Payment Voucher, last date for farmers,             ranchers, or fisherman to pay for 1997

25 Form 10, Nebraska and City Sales and Use Tax Return (1997 calendar-year basis and fourth quarter of          1997)

        Form 93, Nebraska Tire Fee Return (fourth quarter of 1997)

31 Form 941N, Nebraska Quarterly Withholding Return (fourth quarter of 1997)

 February

15 Federal Forms W-2, W-2G, 1099-R, and 1099-MISC, last date for forms to be furnished to                    employees/payees indicating Nebraska income tax withheld

March

1 Form 1040N, Nebraska Individual Income Tax Return, last date for farmers to file 1997 income tax return in         lieu of making payments of estimated Nebraska income tax

15 Form W-2, W-2G, 1099-R, 1099-MISC, and W-3N last date for employer orpayer to furnish Nebraska         Department of Revenue with statement of wages, gambling winnings or pensions and annuities paid and income          tax withheld for filing state returns

        Form 1120N, Nebraska Corporation Income Tax Return

        Form 1120-SN, Nebraska S Corporation Income Tax Return

        Form 1120NF, Nebraska Financial Institution Tax Return

        Form 4466N, Corporation Application for Adjustment of Overpayment of Estimated Tax

April

15 Form 1040N, Nebraska Individual Income Tax Return, last date for filing and paying remaining tax in full

        Form 1040N-S, Nebraska Individual estimated income Tax Payment Voucher, last date for filing and paying          at least first installment estimated tax for individuals required to file such payments

        Form 1065N, Nebraska Partnership Return of Income

        Form 1120N-ES, Nebraska Corporation Estimated Income Tax Payment Voucher, last date for paying first          installment

        Form 1041N, Nebraska Fiduciary Income Tax Return, last date for filing for a decedent’s estate or for a trust

25 Form 10, Nebraska and City Sales and Use Tax Return (first quarter)

        Form 93, Nebraska Tire Fee Return (first quarter)

30 Form 941N, Nebraska Quarterly Withholding Return (first quarter)

 June

15 Form 1040N-ES, Nebraska Individual Estimated Income Tax Payment Voucher, last date for paying second         installment

        Form 1120N-ES, Nebraska Corporation Estimated Income Tax Payment Voucher, last date for paying              second installment

30 Form 458, Nebraska Homestead Exemption Application or Certification of Status, last date for filing with the         county assessor

 July

15 Form 10, Nebraska and City Sales and Use Tax Return (second quarter)

        Form 93, Nebraska Tire fee Return (second quarter)

31 Form 941N, Nebraska Quarterly Withholding Return (second quarter)

 September

15 Form 1040N-ES, Nebraska Individual Estimated Income Tax Payment Voucher, last date for paying third         installment

        Form 1120N-ES, Nebraska Corporation Estimated Income Tax Payment Voucher, last date for paying third          installment

 October

1 Form 28, Nebraska Litter Fee Return (July 1, 1997 through June 30, 1998)

        Form 94, Nebraska Waste Reduction and Recycling Fee Return (July 1, 1997 through June 30, 1998)

25 Form 10, Nebraska and City Sales and Use Tax Return (third quarter)

        Form 93, Nebraska Tire Fee Return (third quarter)

31 Form 941N, Nebraska Quarterly Withholding Return (third quarter)

 December

15 Form 1120-N-ES, Nebraska Corporation Estimated Income Tax payment Voucher, last date for paying         fourth installment

 

31 Form 1120NF-ES, Nebraska Financial Institution Voluntary Estimated Tax return, last date to pay voluntary         estimated payment

The sales and use tax portion will address questions typically posed by new permit holders and serve as a refresher to current permit holders. Topics covered will include: documenting tax-free sales, inventory purchases, out of state purchases, filing requirements, labor charges, maintenance agreements, computer programming, utilities, nonprofit organizations, governmental units, manufacturing, services, farming and ranching, telecommunications, and printing.

The contractor portion will provide information regarding the application of the sales and use tax regulations to this industry and cover such topics as: contractor options, purchases of materials, purchases of tools, jobs with exempt entities, and filing requirements.

These seminars are provided as a service by the department. The facility in which the seminar is held, however, may charge a fee which will be the responsibility of the attendee.

In addition to regularly scheduled seminars, the Department of Revenue will provide free tax seminars to any interested business or organization. To arrange a tax seminar or presentation contact Rick Willis at the Department (402) 471-5807.

 

When Is Form 13 Used?

A Nebraska Resale or Exempt Sale Certificate for Sales and Use Tax, Form 13, must be completed for all exempt leases or rentals of qualified agricultural machinery and equipment that’s leased or rented for periods of less than one year. In order for the purchaser (lessee) to issue a properly completed certificate, they must include:

1. Identification of both the purchaser and the seller

2. Check the type of certificate (single or blanket)

3. Check the Box "Exempt Purchase"

4. Complete Section B by inserting a "2" for exemption category, provide a description of the agricultural machinery or equipment purchased (leased or rented), indicated the intended use of the item by inserting the words," to be used in commercial agriculture"

5. Complete the signature block information

A retailer who repeatedly leases qualified agricultural machinery and equipment to the same purchaser (lessee) may take a blanket exemption certificate. A blanket certificate is valid for three years from the date of issuance. All Forms 13 must be retained as part of the retailers’ records.

A Follow-Up

Hopefully all of you Nebraska dealers read the article in the January issue entitled, "To Tax Or Not To Tax - That Is The Question." Well, Clifford W. Thomas, a Tax Law Conferee with the Legal Division of the Nebraska State Department of Revenue, read it. He offered the following clarifications:

When is Form 13AG Used?

Nebraska farm machinery and equipment retailers must obtain from the purchaser a properly completed Nebraska Sales and Use Tax Exemption Certificate for Agricultural Machinery and equipment purchases or leases, Form 13 AG, in order for them to exempt the following sales from sales and use tax.

1. Sales of qualified agricultural machinery and equipment where possession of the machinery and equipment is transferred to the purchaser in Nebraska, and

2. Leases of qualified agricultural machinery and equipment leased or rented for periods of more than one year.

 

 

To Tax Or Not To Tax - That Is The Question

By Mark Othmer, Nebraska Field Director

Nothing seems to cause more confusion in Nebraska than sales tax laws. During our district meetings and recent phone calls with several dealers, it became quite clear to me that all dealer members probably need to rethink this issue. Local county assessors and accountants that may not completely understand the law seem to be contributing to the problem. Add some minor changes made by the Nebraska Department of Revenue and a customer looking for a way to save some tax dollars (farmers would never do this, would they?) and you have the perfect equation for total confusion.

I don't claim to have all the answers concerning sales tax laws, but I do think I may be able to help clear up some of the confusion. The first thing I would ask is that everyone wipe their minds clean of any thoughts or notions they may have about sales tax so we can start from scratch.

Quoting from a recent publication by the Nebraska Department of Revenue, "On or after January 1, 1993, anyone who purchases, leases, or rents agricultural machinery or equipment used in commercial agriculture may file an exemption certificate and make the purchase without paying any Nebraska or city sales and use tax."

This publication goes on to say that "Items of property purchased pursuant to this exemption are subject to personal property tax." These are pretty straight forward statements when taken separately. Unfortunately, some people would like to combine the two statements and their definitions.

The use of the words, "may file an exemption" in the first statement and, "...this exemption are subject to personal property tax," from the second statement have been construed to mean that the customer has a choice on whether or not he wants to pay sales tax depending on whether or not he wants to put it on his personal property tax statement. This could not be further from the truth. If this situation happens, the customer pays sales tax and does not list the personal property on his statement, he will have made a nice contribution to the Department of Revenue, which he will have a hard time getting back, plus he may have an irate county assessor on his doorstep asking for back taxes and penalties for personal property taxes.

So always remember this. Anyone who purchases, leases, or rents agricultural machinery used in commercial agriculture will be allowed to file for an exemption from sales and use tax. Property taxes have nothing to do with sales tax. They are governed by a completely different set of rules under the tax code. The only choice the customer has is whether or not he wants to file for the sales tax exemption.

Now that we have completely separated the issues of sales tax and property tax, we must go on to defining the phrase "commercial agriculture." In the same previously mentioned publication, commercial agriculture is defined as, "The business of farming or ranching. It is the production of food products or other useful and valuable crops, or the raising of livestock. It includes commercial production in greenhouses, nurseries, tree farms, sod farms, and feedlots. It does not include the storage of agricultural products off the farm location or in commercial elevators, or the storage of livestock in stockyards or sale barns."

Notice this definition does not include any words or phrases like predominant use, used the majority of the time, or more than half the time. This means that the sale, rent, or lease of an item for which the exemption applies must have one, and only one, purpose - use in commercial agriculture.

A 20 horsepower tractor with a front end loader used by a farmer to clean his feedyard pens qualifies for the exemption. If that same tractor has a belly mower or rear mower used one time to mow lawn or weeds in the road ditch disqualifies it from the exemption.

The last area we need to understand is the record keeping process that must be used once a sale, lease, or rent is deemed to be exempt from sales and use tax. For every sale, lease, or rent of agricultural machinery or equipment that qualifies for the exemption, you must complete a Nebraska Sales and Use Tax Exemption Certificate, form AG13, and submit it with your monthly sales and use tax remittance.

This is a recent change in procedure by the Nebraska Department of Revenue. Previously you were allowed to use the regular Form 13 for a repeat rent or lease customer, and keep it on file in your dealership. The Form 13 could be used for rents or leases by a customer that occurred in one calendar year. This is no longer the case. Every exempt sale, lease, or rent must be accompanied by a Form AG13 taken in good faith by the retailer from the customer.

This last statement holds some very important keys to your dealership concerning liability and exposure to sales tax fraud penalties. If you do not know the customer you are dealing with, and he assures you that his purchase qualifies for sales tax exemption and signs a Form AG13, you have taken it in "good faith" and may be relieved from any penalties concerning sales tax fraud.

If you know the customer and assume his purchase qualifies for the exemption, you have breached the "good faith" clause and have opened the door for legal action against your dealership. If you know the customer and know his purchase does not qualify for the exemption, but still exempt it and file a form AG13, you can expect the Nebraska Department of Revenue to be very upset with you.

I realize this has been a fairly lengthy explanation of Nebraska Sale and Use Tax laws, but there have been some misunderstandings around the state, and in some instances it has cost members time and money.

There are basic questions you can ask yourself whenever you are exempting a sale, lease, or rent from sales and use tax.

• Is this a sale, lease, or rent of agricultural machinery or equipment?

• Will its sole use be for commercial agriculture?

• Have I taken a Form AG13 from the customer in good faith?

• Am I taking a Form AG13 with every exempt sale, lease, or rent and sending it in with my monthly sales and use tax remittance?

If you can answer yes to these four questions, your dealership should be safe from most sales tax problems you could encounter concerning exemptions for use in commercial agriculture. This appears to be the law and rules as I interpret them. If you have further questions, call Cliff Thomas at the Nebraska Department of Revenue at (402) 471-2971.

 

LB 886 Provides Opportunity

By Mark Othmer, Nebraska Field Director

During the last few months of travel around the state of Nebraska visiting your dealerships, I have found many things in you have in common. Highest on the list is that I find great people managing, and working, in your dealerships. I always receive a warm welcome and, if the time is available, I always end up having an enjoyable and educational visit.

During these visits and observations, I have found another common denominator. Many of you have recently completed, are in the process of, or are planning in the near future, a renovation or addition to your existing facilities. Along with these renovations or additions are also plans for adding more employees. The combination of these two factors make your businesses prime targets for the advantages of utilizing LB 886.

This law is the baby brother to LB 270, which provides the opportunity to capture tax credits from the state of Nebraska due to business expansion. LB 270 was created for the big guys, but LB 886 was written with small businesses in mind. If you can prove that additional people have been hired at or near the same time an expansion in facilities was made, your business may qualify for tax credits.

If this sounds like free money, that’s almost true. There is a catch, though. It is not easy money. There are rules, and you must abide by them and prove that you qualify for the tax credits. For expansions and hirings that have already been made, this can be a time consuming process. If you are in the middle of an expansion, or planning one in the near future, it becomes a little easier.

I encourage anyone who is in the facility expansion and employee hiring mode to check out the advantages of LB 886. Some dealers already have, and have been successful at earning tax credits. If you want more information on LB 886, please don’t hesitate to get in contact with me, or call the Department of Revenue directly at (402) 471-5753. This law does seem to be working, so I encourage all dealers to take advantage of it if possible.

 

 

 

Does Your Purchase, Lease, or Rental of Agricultural Machinery or Equipment Qualify for a Sales Tax Exemption? Dec. 1996

 On or after January 1, 1993, anyone who purchases, leases, or rents agricultural equipment used in commercial agriculture, may file an exemption certificate and make the purchase without paying any Nebraska or city sales and use tax.

Items of property purchased pursuant to this exemption are subject to personal property tax.

What is Agricultural Machinery or Equipment?

It is machinery or equipment that is used for planting, tilling, harvesting, haying, fertilizing, or irrigating crops; and machinery or equipment used in raising or feeding livestock.

Items that DO Qualify for Exemption in Nebraska

Tractors
Combines
Hay mowers
Cultivators
Harrows
Plows
Irrigation equipment
Automatic feeders
Truck chassis/cab modified to be a feed wagon
Portable grain dryers
Portable augers
Tractor duals
Hay balers
Hay rakes
Cultivators
Disks
Planters
Grain bin equipment that dries or moves grain
Stock racks
Power washers
Completed gates or panels
Fish production equipment including feeding, and seining equipment
Gestation