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Taxes for Canadian Businesses in the USA – Nebraska

This is the eighteenth FAQ of this series on taxes for Canadian businesses in the USA.

Question:

What state taxes does a Canadian business pay in Nebraska?

Answer:

Sales Tax

The Nebraska state sales tax rate is 5.5%. Depending on local municipalities, the total tax rate can be as high as 8%. Food and prescription drugs are exempt.

Use Tax

The Nebraska state use tax rate is 5.5%.

Unemployment Insurance (Payroll Tax)

If you have employees working in Nebraska, you must pay unemployment taxes on their gross wages up to the taxable wage base. As of 2020, the tax rate ranges from 0-5.4% (depending on your experience rating) on the first $9,000 in wages paid to each employee in a calendar year. The tax rate for new employers is 1.25%.

Withholding (Payroll Tax)

If you have an employee earning income while in Nebraska, you must withhold a certain percentage of their income from each payroll. The amount of tax you withhold from an employee depends on the length of your pay period, the employee’s gross pay and the number of withholding allowances/exemptions claimed on their W-4.

Corporate Income Tax

There are two rates of corporate income tax, 5.58% and 7.81%. The higher rate is for all corporate income greater than $100,000.

Discussion:

If you remain under certain thresholds in this state, you are not responsible for taxes.

TaxThreshold
Sales$100,000 or 200 separate transactions
Use$100,000

Availability of Treaty Benefits:

Use taxes are often treated as income taxes by the Canadian government when calculating income in Canada and applying for foreign tax credits. Meaning if you pay use tax in the USA but have no net profit, you will not benefit from a tax credit theoretically. The actual application is a bit more complex.

 Income taxes in the USA are almost always treated as income taxes by the Canadian government. Thus, in the majority of cases, if you pay tax in the state you don’t pay tax again in Canada unless the Canadian rate is higher.


If you are considering business in Nebraska, including sales over $100,000 to residents and businesses in Nebraska, please contact a member of the EPR tax team by completing the contact form below. Our tax experts can advise on the best structure to reduce or minimize the impact of the taxes.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. EPR Maple Ridge Langley, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.


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