What's Exempt from Sales Tax?


Gov. Dave Heineman wants to eliminate the income tax. He says that would improve the state's economic climate and help families and small businesses.

Income tax generates around $2.5 billion for the state. In its place, he recommends doing away with sales tax exemptions (with the exception of food). However, those exemptions total around $5 billion. So not all of the exemptions would have to be undone.

The governor has not announced which exemptions he would like to do away with.

Here are some of the items where Nebraskans currently do not pay sales tax:

  • Medical Equipment and Medicine - $114m – includes prescription drugs, home medical supplies, oxygen, etc.
  • Agricultural Machinery - $60m
  • Agricultural Chemicals - $77m
  • Seeds for Agricultural Purposes - $37m
  • Animal Life for Consumption or Apparel (Livestock) - $630m
  • Grains (animal feed) - $167m
  • Water and Medicines for livestock - $299m
  • Railroad Rolling Stock (parts and services) - $18m
  • Component/Ingredient Parts - $1.26 billion – anything that becomes part of a retail product
  • Manufacturing Machinery - $69m
  • Purchases by Political Subdivisions - $315m – includes counties, towns, airports, etc.
  • Purchases by Churches and Nonprofit Colleges and Medical Facilities - $163m
  • Nebraska Lottery - $15m
  • Motor Fuels - $248m
  • Energy Used in Industry - $124m – includes purchase of energy where 50% or more is used for manufacturing, processing, generation of electricity, or by a hospital
  • Energy Used in Agriculture - $82m – Includes purchase of electricity, gas, coal, propane, wood as fuel, corn as fuel, etc. when more than 50% of the amount purchased is used directly in irrigation or farming.