Nebraska

Home Services Buying Guide

Navigating Home Services in the Cornhusker State: Licensing, Sales Tax, and Verification in Nebraska

A white silhouette of the state of nebraska on a black background.

For homeowners in Nebraska, understanding the regulatory landscape for home service contractors can be a bit nuanced. While the state doesn't have a single statewide "general contractor" license, there are crucial registration requirements and specific licenses for specialized trades, alongside a unique approach to sales tax on construction projects.


Licensing Requirements for Home Service Contractors in Nebraska


Nebraska's contractor regulation primarily operates on two levels: state registration and local licensing for certain trades and cities.

  • State-Level Registration:
  • Nebraska Contractor Registration Act: All contractors and subcontractors doing business in Nebraska are required to register with the Nebraska Department of Labor (DOL). This is a fundamental statewide requirement, regardless of project size or location.
  • Workers' Compensation Insurance: If a contractor has one or more employees, they must provide proof of workers' compensation insurance to the Nebraska Department of Labor.
  • Contractor Bonds: For contracts over $2,500, a contractor license bond is required. The bond amount varies: $1,000 for contracts between $2,500 and $10,000, and 10% of the first $100,000 plus 5% of any amount exceeding $100,000 for larger contracts.
  • Specialized Trades Require State Licenses (often through local exams/reciprocity):
  • Electricians: Electrical contractors and journeyman electricians must be licensed. While the state issues licenses, the exams are often based on approved municipal programs (e.g., Omaha, Lincoln, Fremont, Hastings). This involves experience and passing an exam based on the National Electrical Code and Nebraska's Electrical Act.
  • Plumbers: Similar to electricians, plumbing licenses (Journeyman and Master Plumbers) are typically regulated at the local level (e.g., city of Omaha) after completing an apprenticeship and passing an exam.
  • Other Specialized Licenses: Other trades, such as well drillers, pump installers, and some HVACR contractors, may have specific state or local licensing requirements, often through the Nebraska Department of Health and Human Services or local building departments.
  • Local Municipal Licensing: This is a critical aspect of Nebraska's system. Many cities and counties, especially those with larger populations (e.g., Omaha/Douglas County, Lincoln/Lancaster County), have their own extensive licensing requirements for general contractors and specific trades. These local requirements often include:
  • Exams: Passing an exam (e.g., International Code Council - ICC exams for building contractors).
  • General Liability Insurance: Mandatory general liability insurance coverage, often with significant minimums (e.g., $1,000,000 for Class A/B in Omaha).
  • Surety Bonds: Local bonds in addition to the state bond.
  • Fees: Varying application and renewal fees.

Before hiring any contractor, it is imperative to check with your local city or county building department for specific local licensing, bonding, and permitting requirements for the type of work you plan to undertake. Operating without the necessary local licenses can result in fines and issues with permits.


How Sales Tax Applies to Home Service Projects in Nebraska


Nebraska has a state sales tax rate of 5.5%, and local jurisdictions can add up to an additional 2%, making combined rates vary by location. The application of sales tax to home service projects in Nebraska is complex and depends on how the contractor is classified by the Department of Revenue:

Nebraska classifies contractors into three "options" for sales tax purposes, which dictate how they handle sales tax on materials and labor:

  • Option 1 Contractor (Sales Tax Permit Holder):
  • These contractors hold a Nebraska Sales Tax Permit.
  • They collect sales tax from the customer on the total amount charged for building materials they annex to real estate, provided the labor is separately stated. If labor and materials are not separately stated, the entire charge is taxable.
  • They do not collect sales tax on separately stated labor charges for real property improvements.
  • They purchase materials for their inventory tax-free by issuing a resale certificate to their suppliers.
  • Option 2 Contractor (Consumer of Materials - Pays Tax on Purchases):
  • These contractors do not collect sales tax from their customers on either labor or materials for real property improvements.
  • They are considered the "consumer" of the materials. Therefore, they pay sales tax to their suppliers when they purchase building materials and fixtures.
  • They cannot purchase materials tax-free using a resale certificate.
  • Option 3 Contractor (Consumer of Materials - Purchases Tax-Free for Specific Jobs):
  • Similar to Option 2, these contractors do not collect sales tax from their customers on either labor or materials for real property improvements.
  • They can purchase building materials and fixtures tax-free from suppliers by issuing a resale certificate, but then they must remit use tax on the cost of those materials to the Nebraska Department of Revenue. This option is typically for very large contractors.


What this means for homeowners:

  • In most cases, for typical home improvement projects (new construction or improvements to real estate), you will likely not see a separate line item for sales tax on the contractor's invoice for the overall project if the contractor is an Option 2 or 3. If the contractor is Option 1, you might see sales tax on the materials portion, assuming labor is separate.
  • Repair and Maintenance Services: Charges for general repair, maintenance, and installation services that do not result in a permanent improvement to real estate (e.g., cleaning a furnace, pest control, security system repair, non-built-in appliance installation) are generally taxable on both labor and materials. If both taxable and non-taxable services are provided, they must be separately itemized on the invoice, or the entire invoice may become taxable.


Due to the complexity of these rules, it's advisable to discuss sales tax application with your contractor and ensure clarity in your contract regarding how taxes are handled.


How to Verify Licensing in Nebraska


Verifying a contractor's credentials in Nebraska involves checking both state-level registration and local licenses.


Nebraska Department of Labor (DOL) Contractor Registration Search: This is the primary tool for verifying state registration.

  • Website: Visit the Nebraska Department of Labor's Contractor Registration search: https://dol.nebraska.gov/conreg/search (or look for a "Contractor Search" link on the DOL website).
  • Search: You can usually search by contractor name or registration number. This will confirm if they are registered with the state and if their workers' compensation insurance is on file.

Local City/County Building Departments: This is a crucial step, especially in larger cities.

  • Contact Information: Search online for the official website of your city or county's "Building Department," "Permits and Inspections," or "Planning Department."
  • Inquire: Call or visit their office to ask about specific licensing requirements for the type of work you need done and how to verify a contractor's local license or registration. For example, the City of Omaha's Planning Department handles contractor licensing for Omaha.

Nebraska Department of Health and Human Services (DHHS): For licenses related to well drilling, pump installation, or other environmental health-related contractors.

  • Website: Check the DHHS website for professional licensure lookups, or contact them directly.

Proof of Insurance and Bonding:

  • Always request proof of general liability insurance and, if applicable, workers' compensation insurance and surety bonds. You can contact the insurance or bonding company directly to verify coverage.


Always perform these checks before making a commitment to a contractor. A properly registered and licensed contractor offers greater consumer protection and adherence to state and local regulations.


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