Summaries of Court Cases

2013  |  2012  |  2011  |  2009

2013 Cases

• Lyman‑Richey Corporation v. Department of Revenue
  Citation: CI12‑3031 District Court of Lancaster County (2013)
  This case may be appealed.
  

  Synopsis: On February 25, 2013, the Lancaster County District Court held that the three‑day rule in Neb. Ct. R. Pldg. § 6‑1106(e) (Three‑Day Rule) does not extend the 60‑day period contained in Neb. Rev. Stat. § 77‑2709(7) for filing a petition for redetermination in response to a notice of deficiency determination.

  In Lyman‑Richey Corporation v. Department of Revenue, the Lyman‑Richey Corporation (Lyman‑Richey) filed a petition for redetermination which was denied by the Nebraska Department of Revenue as untimely. Lyman Richey appealed the denial based upon the Three‑Day Rule, which adds an additional three days to the time allowed for a party to respond or appeal in a civil case. The court held that the plain language of Neb. Rev. Stat. § 77‑7209(7) clearly provided the deadlines applicable to a petition for redetermination, and that it was not appropriate to extend the deadline by applying the Three‑Day Rule.

2012 Cases

• Kerford Limestone Co. v. Department of Revenue and Mr. Douglas Ewald
  Citation: CI11‑3667 District Court of Lancaster County (2012)
  This case has been appealed.
  

  Synopsis: On December 17, 2012, the Lancaster County District Court held that the plain language of Neb. Rev. Stat. § 77‑2701.47 does not impose any minimum percentage of time which equipment must be used in manufacturing to qualify for the sales and use tax exemption for manufacturing machinery and equipment.

  In Kerford Limestone Co. v. Nebraska Department of Revenue and Mr. Douglas Ewald, Kerford Limestone Co. (Kerford) filed a petition for redetermination in response to a notice of deficiency determination issued by the Nebraska Department of Revenue (Department) for sales and use taxes related to the purchase of a motor grader which Kerford used to maintain inventory stockpiles and haul roads in and outside of Kerford’s limestone mine. The petition was denied because Kerford failed to establish that the motor grader was used for a qualifying manufacturing purpose more than 50% of the time. In Revenue Ruling 1‑05‑1, the Tax Commissioner ruled that machinery or equipment must be used in manufacturing more than 50% of the time to qualify for the sales and use tax exemption provided by Neb. Rev. Stat. § 77‑2704.47. Kerford appealed the denial.

  The district court held that: (1) the plain language of Neb. Rev. Stat. § 77‑2701.47 did not impose any minimum percentage of time which equipment must be used in manufacturing to qualify for the manufacturing machinery and equipment sales and use tax exemption contained in Neb. Rev. Stat. § 77‑2704.22; and (2) Revenue Ruling 1‑05‑1 was invalid to the extent it impermissibly narrowed the scope of the exemption. The court upheld the Department’s determination that the motor grader does not qualify as manufacturing machinery and equipment under Neb. Rev. Stat. § 77‑2701.47 because its relationship to the transportation of raw materials or products produced by the manufacturer was too remote. The court remanded the issue of whether using the motor grader to maintain inventory piles qualified it as manufacturing machinery or equipment under Neb. Rev. Stat. § 77‑2701.47.

  McGee v. Ewald
  Citation: CI12‑9410 District Court of Douglas County (2012)
  This case may be appealed.
  

  Synopsis: On December 3, 2012, the Douglas County District Court held that a party appealing a decision of a state agency must serve notice of the appeal on the Attorney General pursuant to the Administrative Procedures Act.

  In McGee v. Ewald, McGee filed an appeal with the district court and served notice of the appeal to the Tax Commissioner by certified mail. The court held the service was improper in accordance with the Administrative Procedures Act, which requires service upon the Attorney General, not the agency.

• Enterprise Rent‑A‑Car v. Nebraska Department of Revenue
  Citation: CI11‑3101 District Court of Lancaster County (2012)
  This case has been appealed.
  

  Synopsis: On November 5, 2012, the Lancaster County District Court held that optional damage waiver fees and refueling charges associated with the lease of a motor vehicle were subject to sales tax.

  In Enterprise Rent‑A‑Car Company v. Nebraska Department of Revenue, Enterprise Rent‑A‑Car Company (Enterprise) was assessed uncollected sales tax for damage waiver fees and refueling charges related to the lease of a motor vehicle. Enterprise appealed the assessment. The court held that the fees were part of the total consideration received by Enterprise, and thus part of the “gross receipts” from leasing the motor vehicle and subject to sales tax, regardless of whether or not the customer could waive coverage or the refueling charge. The court concluded that a customer could not lease a vehicle without either accepting or rejecting the damage waiver or refueling charges and these items were, therefore, part of the “gross receipts” of the lease transaction, and subject to sales tax.

• Banks v. Heineman
  Citation: CI11‑662 District Court of Lancaster County (2012)
  This case has been appealed.
  

  Synopsis: On July 30, 2012, the Lancaster County District Court held that the grant of a tax credit for previously paid property taxes was an unconstitutional commutation of tax.

  In Banks v. Heineman, Knox County challenged the constitutionally of a tax credit allowed for property taxes previously paid by the Elkhorn Ridge wind energy generation facility. Under LB 1048 (Laws 2010), an owner of a wind energy generation facility must annually pay a nameplate capacity tax on the total megawatt capacity of the wind energy generation facility. LB 1048 also allowed an owner of a wind energy generation facility to claim a tax credit for property taxes previously paid on a wind generation facility if the amount of tax previously paid on the wind generation facility exceeded the amount due under the newly‑created nameplate capacity tax. The Lancaster County District Court held that because the tax had already been levied on and paid by Elkhorn Ridge, the grant of a tax credit for the amount of taxes previously paid was an unconstitutional commutation of tax.

• Bridgeport Ethanol v. Nebraska Department of Revenue
  Citation: 284 Neb. 291 (2012)

Synopsis: On August 10, 2012, the Nebraska Supreme Court ruled that a refund claim for sales and use taxes paid on qualifying manufacturing machinery and equipment can only be made by the party that paid the sales and use tax. In addition, the court held that Option 3 contractors, who are deemed the purchaser/consumer of all manufacturing machinery and equipment they purchase, cannot qualify for the manufacturing machinery and equipment sales tax exemption, unless they are engaged in the business of manufacturing.  

In Bridgeport Ethanol v. Nebraska Department of Revenue, Bridgeport Ethanol (Bridgeport) filed a claim for refund of sales and use taxes paid on qualifying manufacturing machinery and equipment by its contractor on building materials and equipment used for the design and construction of an ethanol facility. The court held that Bridgeport was not entitled to a refund because the contractor, not Bridgeport, paid sales and use taxes on the building materials. In addition, the court held the appointment of the contractor as a purchasing agent pursuant to a contract was insufficient under state law for purposes of granting the sales tax exemption.

2011 Cases 

• Skylark Meats LLC v. Nebraska Department of Revenue — Citation: CI10‑ 703 District Court of Lancaster County (2011)
  Gibbon Packing LLC v. Nebraska Department of Revenue — Citation: CI10‑702 District Court of Lancaster County (2011)
  

  Synopsis: On May 6, 2011, the Lancaster County District Court ruled that a taxpayer bears the burden of requesting an administrative hearing on a sales and use tax refund claim and that such a request must be made upon filing a refund claim under the rules and regulations promulgated by the Department of Revenue (Department). 

  In both Skylark Meats LLC v. Nebraska Department of Revenue, and Gibbon Packing LLC v. Nebraska Department of Revenue, Skylark Meats (Skylark) and Gibbon Packing (Gibbon) filed refund claims for sales and use taxes paid on building cleaning services, which the Department denied. Skylark and Gibbon subsequently requested administrative hearings on the denials of the refund claims. The Department denied the requests for hearings because the requests were not timely. The court held that the Department properly denied the requests for administrative hearings under the rules and regulations promulgated by the Department and that Skylark and Gibbon should have requested hearings at the time of filing the refund claims with the Department.

• Cargill v. Nebraska Department of Revenue
  Citation: CI10‑2623 District Court of Lancaster County (2011)

  Synopsis: On March 28, 2011, the Lancaster County District Court held that for purposes of the Nebraska Advantage Act, employees of a company who were employed at other Nebraska locations and subsequently transferred to a project should be considered base‑year employees. The court also ruled that a “regular full‑time workweek for hourly employees” means the standard number of hours an employee is required to work to be considered full‑time by an employer.

  In Cargill v. Nebraska Department of Revenue, Cargill, Inc. (Cargill) filed a claim for a personal property tax exemption for purposes of the Nebraska Advantage Act (Act). The claim was subsequently denied by the Department on the basis that Cargill did not meet the required level of employment under the Act. The Department’s decision was appealed by Cargill. The court held that employees at other Nebraska locations who are subsequently transferred to the project should be considered base‑year employees; that Cargill had established its regular work week to be 40 hours; and that the number of hours in a year (except for “short” tax years) was 2,080 hours.

2009 Cases

• Swift & Co. v. Nebraska Department of Revenue
  Citation: 278 Neb. 763, 773 N.W.2d. 381 (2009)

  Synopsis: On October 23, 2009, the Nebraska Supreme Court held that the cleaning and maintenance of tangible personal property is taxable if it is incidental and related to the cleaning and maintenance of the building and fixtures.

  In Swift & Co. v. Nebraska Department of Revenue, several meatpacking plants paid sales tax on building cleaning services, which also included cleaning of machinery and equipment located within the plants. The meatpacking plants then filed a refund claim for sales tax paid for cleaning of machinery and equipment located within the plants. The Department denied the refund claim. The Nebraska Supreme Court held that a contract for cleaning a building, taxable under Nebraska law, that also included the cleaning of some tangible personal property located within the building, was taxable. Under Nebraska law, a contract for cleaning tangible personal property is not taxable; however, the cleaning and maintenance of tangible personal property is taxable if it is incidental and related to the cleaning and maintenance of the building and fixtures. 

• National Research Corporation v. Nebraska Department of Revenue 
  Citation: CI08‑2582 District Court of Lancaster County (2009)

  Synopsis: On July 16, 2009, the Lancaster County District Court held that a significant delay in the review of a tax incentive agreement was not unreasonable in‑and‑of‑itself, but dependent upon the facts underlying each proceeding. Additionally, the court held that the Tax Commissioner has discretion in denying amendments to a tax incentive agreement.

  In National Research Corporation v. Nebraska Department of Revenue, National Research Corporation (NRC) filed an application for tax benefits under the Employment and Investment Growth Act (Act) in 1997. In 2004, the Department issued a draft agreement; NRC subsequently requested amendments to the draft agreement, which the Department denied. The court held that the delay was reasonable based on the facts of the case and that the delay did not materially affect NRC’s ability to secure tax incentives under the Act. The court also held that the Department maintains discretion in approving or denying amendments to an agreement under the Act.

• Concrete Industries Inc. v. Nebraska Department of Revenue
  Citation: 277 Neb. 897, 766 N.W.2d. 103 (2009)

  Synopsis: On June 5, 2009, the Nebraska Supreme Court held that the purchase of parts assembled into manufacturing machinery and equipment qualifies as the purchase of manufacturing machinery and equipment, and was therefore exempt from sales tax.

  In Concrete Industries Inc. v. Nebraska Department of Revenue, Concrete Industries, Inc. purchased parts to build its own manufacturing machinery and equipment. The Nebraska Supreme Court held that the purchase of parts assembled into manufacturing machinery and equipment qualified as the purchase of manufacturing machinery and equipment since the law exempted assembled machinery from sales and use taxes. The Court determined that it made little sense to impose a tax on the purchase of the same parts when they were purchased to subsequently assemble the machinery and equipment in the first place.

• Berrington Corporation dba Eldorado Hills Golf Club v. Nebraska Department of Revenue
  Citation: 277 Neb. 765, 765 N.W.2d. 448 (2009)

  Synopsis: On May 15, 2009, the Nebraska Supreme Court held that fees charged to members of a golf course were subject to sales tax as taxable admissions because the fees did not grant the members the right to participate in the legal or business affairs of the organization, and therefore did not qualify as exempt membership fees under the state’s sales tax regulations.

  In Berrington Corporation dba Eldorado Hills Golf Club v. Nebraska Department of Revenue, the Department of Revenue issued an assessment on membership fees paid by Berrington’s members. While the membership dues allowed Berrington members to serve on an advisory board to the Berrington shareholders, the Berrington shareholders alone maintained direct control over the operations of the golf club. As a result, the Nebraska Supreme Court held that the fees were taxable admissions because members did not have the right to participate in the legal or business affairs of Berrington.