United States

Nebraska: Department Issues Proposed Market-Based Sourcing Rules

Aug 03, 2015
From KPMG TaxWatch

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In 2012, Nebraska enacted legislation that replaced the costs of performance methodology for sourcing receipts from sales of other than tangible personal property with new market-based sourcing rules. These revised sourcing provisions became effective January 1, 2014. Under the revised law, receipts from sales of services are generally sourced to Nebraska if the sales are derived from a buyer within the state. Receipts from sales of intangible property are generally attributed to Nebraska if the buyer uses the intangible property in the state. Likewise sales of “application services,” are attributed to Nebraska if the buyer uses the application service in Nebraska. The revised law also addressed sourcing receipts from loans and credit cards, and income derived from a company’s treasury function. Certain types of receipts are specifically excluded from the sales factor under the revised law, including discharge of indebtedness income, amounts received from hedging transactions involving intangible assets, and net gains from marketable securities held for investment.

Recently, the Nebraska Department of Revenue issued draft market-based sourcing regulations. The regulations, per the explanatory statement, are based on the 2012 statute, supplemented by the Department’s current regulations, rulings, and policies. The draft regulations also adopt some material from other states that have previously moved to market-based sourcing. It is unclear when the regulations will be offered for formal hearing, or whether they will be applied retroactively. Please stay tuned to TWIST for future updates.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.