Bill Summary – FastDemocracy

LB1310                                                                             LB1310
                                                                               2024
                                 LEGISLATURE OF NEBRASKA
                              ONE HUNDRED EIGHTH LEGISLATURE
                                      SECOND SESSION
                       LEGISLATIVE BILL 1310
         Introduced by Albrecht, 17.
         Read first time January 17, 2024
         Committee: Revenue
    A BILL FOR AN ACT relating to revenue and taxation; to amend section
        77-3005, Reissue Revised Statutes of Nebraska, and section 77-382,
        Revised Statutes Cumulative Supplement,   2022;   to adopt the
         Advertising Services Tax Act; to eliminate certain sales and use tax
        exemptions; to harmonize provisions; to provide an operative date;
        to repeal the original sections;   to outright repeal section
         77-2704.38, Reissue Revised Statutes of Nebraska; and to declare an
         emergency.
  Be it enacted by the people of the State of Nebraska,
                                             -1-
LB1310                                                                                            LB1310
                                                                                              2024
           Section 1.        Sections 1 to 5 of this act shall be known and may be
  cited as the Advertising Services Tax Act.
           Sec. 2.     For purposes of the Advertising Services Tax Act:
           (1) Any term shall have the same meaning as used in Chapter 77,
  article 27, except as otherwise defined in the Advertising Services Tax
  Act;
           (2)   Advertising services means all services,     including digital
  advertising services,      directly related to    the creation,      preparation,
  production, or dissemination of advertisements. The term includes, but is
  not limited to,    layout,     art direction,       graphic design,     mechanical
    preparation, production supervision, placement, and rendering advice to a
    client concerning the best methods of advertising that client's products
     or services.    The term also includes online referrals,     search engine
  marketing and lead generation optimization, web campaign planning, the
  acquisition of     advertising space in    the Internet media,     and the
  monitoring and evaluation of website traffic for purposes of determining
  the effectiveness of an advertising campaign. The term does not include
 web hosting services and domain name registration or the services of a
    news media entity;
           (3) Assessable base means the portion of gross advertising revenue
     that is derived from sales to customers in Nebraska which are delivered
  or provided to a location within Nebraska according to the sourcing rules
     in subsections (2) and (3) of section 77-2734.14. A digital advertising
     service shall be deemed to have been provided within Nebraska if it is
  received on a user's device having an IP address located within Nebraska;
           (4) Digital advertising services means advertising services on a
    digital interface. The term includes advertisements in the form of banner
     advertising,     search engine advertising,      interstitial advertising,     and
  other comparable advertising services;
           (5) Digital interface means any type of software, including any part
  of an Internet website or application that a user is able to access;
                                                    -2-
LB1310                                                                                                 LB1310
                                                                                                   2024
        (6)      Gross advertising revenue means income or   revenue from
    advertising services sourced to the United States using the sourcing
     rules described in subdivision (3) of this section before any expenses or
  taxes, computed according to generally accepted accounting principles;
        (7)     IP     address means    a unique string of    characters or     other
    identifier assigned to     each device connected to    a network for
    communication;
        (8) News media entity means an entity engaged primarily in the
     business of    news gathering,       reporting,   or publishing articles or
 commentary about news,     current events,   culture,       or other matters of
    public interest. The term does not include an entity that is primarily an
    aggregator or republisher of third-party content;
        (9) Person has the same meaning as in section 77-2701.25;
         (10) Reporting period means the calendar year on which a report is
     based; and
         (11)     User means     a person or   individual who accesses      a digital
     interface with a device.
        Sec. 3.         (1) A tax is imposed on a person that is subject to the
    Internal Revenue Code or a group of persons subject to the Internal
    Revenue Code that are part of the same unitary group or would otherwise
    be members of the same unitary group, if incorporated, that are doing
    business in Nebraska and whose combined gross advertising revenue exceeds
    one billion dollars.
        (2) The rate of the tax imposed under this section is seven and one-
    half percent of a person's assessable base for the reporting period.
         Sec. 4.        The provisions of sections 77-2714 to 77-27,135 relating to
  deficiencies, penalties, interest, the collection of delinquent amounts,
 confidentiality, refunds, and appeal procedures for the tax imposed by
    section 77-2734.02 shall also apply to the tax imposed by section 3 of
    this act.
        Sec. 5.         The Tax Commissioner may adopt and promulgate rules and
                                                       -3-
LB1310                                                                                             LB1310
                                                                                               2024
     regulations necessary to   implement,       administer,       and enforce the
  Advertising Services Tax Act.
         Sec.    6.   Section     77-382,     Revised Statutes Cumulative Supplement,
  2022, is amended to read:
         77-382 (1) The department shall prepare a tax expenditure report
     describing (a) the basic provisions of the Nebraska tax laws, (b) the
  actual or estimated revenue loss caused by the exemptions, deductions,
  exclusions, deferrals, credits, and preferential rates in effect on July
 1 of each year and allowed under Nebraska's tax structure and in the
    property tax, (c) the actual or estimated revenue loss caused by failure
     to impose sales and use tax on services purchased for nonbusiness use,
     and (d) the elements which make up the tax base for state and local
 income, including income, sales and use, property, and miscellaneous
    taxes.
         (2) The department shall review the major tax exemptions for which
  state general funds are used to reduce the impact of revenue lost due to
  a tax expenditure. The report shall indicate an estimate of the amount of
  the reduction in   revenue resulting from the operation of   all tax
     expenditures. The report shall list each tax expenditure relating to
  sales and use tax under the following categories:
         (a) Agriculture, which shall include a separate listing for the
  following items: Agricultural machinery; agricultural chemicals; seeds
  sold to commercial producers; water for irrigation and manufacturing;
  commercial artificial insemination;        mineral oil as    dust suppressant;
    animal grooming;      oxygen for use in   aquaculture;        animal life whose
    products constitute food for human consumption; and grains;
         (b) Business across state lines, which shall include a separate
  listing for the following items:      Property shipped out-of-state;
  fabrication labor for items to be shipped out-of-state; property to be
  transported out-of-state; property purchased in other states to be used
 in Nebraska; aircraft delivery to an out-of-state resident or business;
                                                   -4-
LB1310                                                                                             LB1310
                                                                                               2024
    state reciprocal agreements for industrial machinery; and property taxed
    in another state;
         (c) Common carrier and logistics, which shall include a separate
  listing for the following items: Railroad rolling stock and repair parts
  and services; common or contract carriers and repair parts and services;
  common or contract carrier accessories; and common or contract carrier
  safety equipment;
        (d) Consumer goods, which shall include a separate listing for the
     following items:     Motor vehicles and motorboat trade-ins;        merchandise
  trade-ins;         certain medical equipment and medicine;        newspapers;
 laundromats;        telefloral deliveries;      motor vehicle discounts for the
    disabled; and political campaign fundraisers;
         (e) Energy, which shall include a separate listing for the following
  items: Motor fuels; energy used in industry; energy used in agriculture;
     aviation fuel; and minerals, oil, and gas severed from real property;
        (f) Food, which shall include a separate listing for the following
     items:   Food for home consumption;      Supplemental Nutrition Assistance
     Program;    school lunches;    meals sold by     hospitals;       meals sold by
     institutions at a flat rate; food for the elderly, handicapped, and
  Supplemental Security Income recipients; and meals sold by churches;
        (g) General business, which shall include a separate listing for the
    following items: Component and ingredient parts; manufacturing machinery;
     containers;     film rentals;    molds and dies;      syndicated programming;
 intercompany sales;    intercompany leases;        sale of   a business or    farm
    machinery; and transfer of property in a change of business ownership;
         (h) Lodging and shelter, which shall include a separate listing for
  the following item: Room rentals by certain institutions;
        (i) Miscellaneous, which shall include a separate listing for the
     following items: Cash discounts and coupons; separately stated finance
    charges;    casual sales;    lease-to-purchase agreements;       and separately
    stated taxes;
                                                 -5-
LB1310                                                                                             LB1310
                                                                                               2024
         (j)    Nonprofits,       governments,        and exempt entities,      which shall
 include       a separate listing for the following items:       Purchases by
 political subdivisions of the state; purchases by churches and nonprofit
 colleges and medical facilities; purchasing agents for public real estate
 construction improvements;    contractor as    purchasing agent for public
 agencies; Nebraska lottery; admissions to school events; sales on Native
 American Indian reservations;      school-supporting fundraisers;       fine art
 purchases by   a museum;   purchases by    the Nebraska State Fair Board;
 purchases by the Nebraska Investment Finance Authority and licensees of
 the State Racing and Gaming Commission; purchases by the United States
 Government; public records; and sales by religious organizations;
         (k) Recent sales tax expenditures, which shall include a separate
 listing for each sales tax expenditure created by statute or rule and
 regulation after July 19, 2012;
         (l) Services purchased for nonbusiness use, which shall include a
 separate listing for each such service, including, but not limited to,
 the following items: Motor vehicle cleaning, maintenance, and repair
 services; cleaning and repair of clothing; cleaning, maintenance, and
     repair of other tangible personal property; maintenance, painting, and
 repair of    real property;    entertainment admissions;     personal care
 services; lawn care, gardening, and landscaping services; pet-related
 services;          storage and moving services;        household utilities;      other
 personal services; taxi, limousine, and other transportation services;
     legal services; accounting services; other professional services; and
 other real estate services; and
         (m) Telecommunications, which shall include a separate listing for
 the following items: Telecommunications access charges; prepaid calling
 arrangements; conference bridging services; and nonvoice data services.
         (3) It is the intent of the Legislature that nothing in the Tax
 Expenditure Reporting Act shall cause the valuation or assessment of any
 property exempt from taxation on the basis of its use exclusively for
                                                    -6-
LB1310                                                                                       LB1310
                                                                                         2024
    religious, educational, or charitable purposes.
         Sec. 7. Section 77-3005, Reissue Revised Statutes of Nebraska, is
  amended to read:
        77-3005       (1) The occupation tax levied and imposed by the Mechanical
     Amusement Device Tax Act shall be in addition to any and all taxes or
  fees, of any form whatsoever, now imposed by the State of Nebraska or any
 of its subdivisions,     upon the business of    operating or    distributing
    mechanical amusement devices as defined in section 77-3001, or otherwise
    defined by the subdivisions and municipalities of the State of Nebraska,
    except as provided in subsection (2) of this section.
         (2) Payment that payment of the tax and license fees due and owing
    on or before the licensing date of each year shall exempt any such
    mechanical amusement device from the application of the sales tax which
     would or could otherwise be imposed under the Nebraska Revenue Act of
     1967, except that such exemption shall not apply to any cash device.
        (3) Nonpayment of the taxes or fees due and owing on or before the
     licensing date of   each year shall render the exemption provided by
     subsection (2) of this section inapplicable and the particular machines
  or devices shall then be subject to all the provisions of the Nebraska
  Revenue Act of 1967, including the penalty provisions pertaining to the
  owner or operator of such machines or devices.
         Sec. 8.       This act becomes operative on July 1, 2024.
         Sec.    9.      Original section    77-3005,       Reissue Revised Statutes of
 Nebraska, and section 77-382, Revised Statutes Cumulative Supplement,
    2022, are repealed.
        Sec.    10.      The following section is    outright repealed:    Section
    77-2704.38, Reissue Revised Statutes of Nebraska.
        Sec. 11.        Since an emergency exists, this act takes effect when
  passed and approved according to law.
                                                   -7-
Statutes affected: 
Introduced: 77-382, 77-3005