Local sales tax rates increase in 2021 for some jurisdictions

Many Nebraska cities levy local sales taxes in addition to the state rate. Cities and counties in Nebraska are authorized to levy a local sales tax under the Local Option Revenue Act (applicable to cities) or Neb. Rev. Stat. §§ 13-319 to 13-326 (applicable to counties).

This law allows cities and counties to levy their own sales tax after it is approved by a majority vote of the people. Nebraska state law allows the local sales tax rate to be set at 0.5%, 1%, 1.5%, 1.75%, or 2% of the retail sales within the boundaries of the city. This additional local sales tax in many cities places the average combined sales tax rate in Nebraska at around 7%, although many cities are higher.

Cities of the metropolitan class (Omaha) are not allowed to levy a local sales tax above 1.5%.

If your city has a rate greater than 1.5%, then that rate must terminate no later than 10 years after its effective date – except – if the proceeds from the amount above 1.5% are pledged for the payment of public infrastructure project bonds. In that case, the rate above 1.5% will terminate when the bond is paid off.

The interesting loophole in the local sales tax law is that “Any county sales and use tax applies to retail sales sourced within the boundaries of the county, except that a county sales and use tax does not apply within the boundaries of any incorporated city which has a local sales and use tax pursuant to Neb. Rev. Stat. § 77-27,142.”

Beginning January 1, 2021, the local sales tax rates for Gordon, Greeley and Juniata will each increase from 1% to 1.5%, which brings the total to 127 cities in Nebraska with a 1.5% sales tax rate.

Beatrice has the highest sales tax area in the state at 8%. Twenty-nine cities levy a 2% tax, for a total state and local combined rate of 7.5%. The city of Lincoln is the only one to levy a 1.75%.

Eighty-nine cities have a local rate of 1 percent, and only two jurisdictions, Clatonia, Ewing, and Upland, have a local rate of 0.5%.

Currently, Dakota County and Gage County are the only counties authorized to have a sales tax. Dakota County may only levy their sales tax on locations outside of the municipalities within the county that impose a local sales tax.  The Gage County rate is imposed on all taxable transactions inside the county limits and is added to any other local sales taxes levied, which is the reason for the city of Beatrice having the highest rate in the state.