Nebraska enacts new sales and use tax exemption for ethanol producers

INSIGHT ARTICLE  | 

Authored by RSM US LLP


Nebraska Gov. Pete Ricketts recently signed into law Legislative Bill 595, enacting a new sales and use tax exemption for ethanol (ethyl alcohol) producers located in the state. The new law broadly exempts the sale, lease, or rental of and the storage, use or other consumption in the state of all catalysis, chemicals and materials used in the process of manufacturing ethyl alcohol and the production of coproducts. There are a large number of chemicals and other inputs used in ethanol manufacturing presumably included in the exemption such as yeasts, enzymes, demulsifies, corrosion inhibitors, sulfuric acid, and antibiotics, among others. The exemption is effective Oct. 1, 2021.

Legislative Bill 595 had widespread industry and legislative support. Many states provide sales and use tax exemptions for raw materials, ingredients, chemicals and other consumables used in manufacturing. However, manufacturing input exemptions in Nebraska are more narrow across many industries. Eliminating tax on manufacturing inputs is generally considered good tax policy as it avoids ‘tax pyramiding’ which occurs when sales tax is charged on the inputs and then also on sale of the final product. According to the fiscal notes of the bill, approximately $4.5 million in sales and use taxes was collected from ethyl alcohol manufacturing in 2019, with 20% of the tax collected attributable to enzymes, yeast and related products.

Nebraska ethanol producers should analyze their input purchases currently subject to sales and use tax to determine whether this exemption will apply beginning October 1. Taxpayers with questions should consult with their state and local tax adviser. 

Let's Talk!

Call us at (800) 627-0636 or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by Evan Fullmer, Brad Hershberger and originally appeared on 2021-06-29.
2021 RSM US LLP. All rights reserved.
https://rsmus.com/what-we-do/services/tax/indirect-tax/sales-and-use-tax/nebraska-enacts-new-sales-and-use-tax-exemption-for-ethanol-prod.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Lewis, Hooper & Dick, LLC is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.

For more information on how Lewis, Hooper & Dick, LLC can assist you, please call 1-800-627-0636.