Are retail sales of wood or corn used as a fuel source subject to Nebraska sales and use tax?

Plain-English summary

Nebraska exempts certain energy sources from sales and use tax when they are used in specified commercial or agricultural activities. Revenue Ruling 01-10-1 explains that, beginning April 1, 2009, that exemption was expanded to cover wood and corn used as fuel.

What changed. The Legislature amended Neb. Rev. Stat. § 77-2704.13 through 2009 Legislative Bill 9 to add wood (for example, sawdust, wood chips, and wood pellets) and corn (for example, dry shelled corn) to the list of exempt energy sources, alongside the sources that were already exempt -- electricity, coal, gas, fuel oil, diesel fuel, tractor fuel, gasoline, coke, nuclear fuel, butane, and compressed fuels including compressed natural gas and propane (LP gas).

The 50% test. The exemption is not automatic. It applies only when more than 50% of the wood or corn purchased is used or directly consumed in one of these qualifying uses:

• manufacturing or processing;
• refining;
• the generation of electricity;
• irrigation;
• farming; or
• by any hospital.

The ruling defines each of these terms (see the original text below). Notably, processing includes grain drying and feed grinding at a commercial facility and freezing food products -- but not repairing property, erecting buildings, cold-storing food, or preparing food for immediate consumption. Farming means commercial agriculture (producing crops or raising food animals), including greenhouses, nurseries, tree farms, sod farms, and feedlots, and energy consumed by on-farm grain storage and processing counts as consumed in farming.

The certificate. To buy exempt, the purchaser must give the seller a completed Nebraska Energy Source Exempt Sale Certificate, Form 13E. Without it, the seller should charge tax.

What this means for you

Sellers of wood or corn fuel

If a customer buys wood or corn to use as fuel and gives you a completed Form 13E certifying that more than 50% will be directly consumed in a qualifying use, you do not charge sales tax on that sale. Keep the certificate. If no certificate is provided, treat the sale as taxable.

Farms, manufacturers, refiners, power generators, and hospitals

If you buy wood or corn to burn as fuel and more than half of it is directly consumed in your qualifying activity (farming, manufacturing/processing, refining, generating electricity, irrigation, or hospital use), you can buy it tax-free by giving the seller a Form 13E. Ordinary heating that is not part of a qualifying use does not qualify.

Everyone else (for example, home heating)

Wood pellets or corn bought to heat a home or for any non-qualifying use remain taxable -- the exemption is tied to the qualifying commercial and agricultural uses, not to the fuel itself.

Common questions

Q: What qualifies wood or corn fuel for the exemption?
A: More than 50% of the amount purchased must be used or directly consumed in manufacturing or processing, refining, the generation of electricity, irrigation, or farming, or by any hospital -- and the buyer must give the seller a completed Form 13E.

Q: What forms of wood and corn count?
A: The ruling lists wood such as sawdust, wood chips, and wood pellets, and corn such as dry shelled corn.

Q: Is home heating with wood pellets or corn exempt?
A: No. The exemption applies only to the qualifying uses listed above; fuel bought for home heating or other non-qualifying uses stays taxable.

Q: When did this take effect?
A: The wood and corn exemption applies to sales and purchases beginning April 1, 2009, under Neb. Rev. Stat. § 77-2704.13 as amended by 2009 Legislative Bill 9.

Citations and references

• Neb. Rev. Stat. § 77-2704.13 -- the energy source sales/use tax exemption, expanded by 2009 Legislative Bill 9 (effective April 1, 2009) to include wood and corn used as fuel.
• Nebraska Energy Source Exempt Sale Certificate, Form 13E -- the certificate the purchaser must give the seller to buy exempt.
• The 50% test -- more than half of the wood or corn must be used or directly consumed in manufacturing/processing, refining, generation of electricity, irrigation, farming, or by any hospital.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr011001.pdf

Original ruling text

Revenue Ruling 01-10-1
Sales and Use Tax

February 22, 2010
RETAIL SALES OF WOOD AND CORN AS FUEL
Issue:
Are sales and purchases of wood used as a fuel source or corn used as a fuel source subject to sales
or use tax?
Conclusion:
Beginning April 1, 2009, Neb. Rev. Stat. § 77-2704.13 provides that sales and use taxes shall not
be imposed on sales and purchases of wood used as a fuel source or corn used as a fuel source when
more than 50% of the amount purchased is used directly:
•

In manufacturing or processing;

•

In refining;

•

In the generation of electricity;

•

In irrigation;

•

In farming; or

•

By any hospital.

Definitions:
Manufacturing or Processing. Manufacturing or processing is an action or series of actions
performed upon tangible personal property, either by hand or machine, which results in that tangible
personal property being reduced or transformed into a different state, quality, form, property, or
thing. Processing includes grain drying and feed grinding in a commercial facility, and the freezing
of food products. Processing or manufacturing does not include repair of property, erection of
buildings, cold storage of food products, or preparation of food for immediate consumption.
Refining. Refining is the action or process of removing impurities from crude or impure materials,
such as glass, metal, sugar, and petroleum products. Refining includes the extraction of gas and
petroleum products.
Irrigation. Irrigation is the application of water to lands for raising agricultural crops.
Farming. Farming means commercial agriculture, which is the business of producing food products,
other useful and valuable crops, or raising animal life, the products of which ordinarily constitute
food for human consumption. The crops or animal life can either be sold or used by the grower.
Commercial agriculture includes commercial production in greenhouses, nurseries, tree farms, sod
farms, and feedlots. Commercial agriculture does not include animal life held in stockyards or sale
barns, or the storage of crops off the farm or in commercial elevators.

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

Revenue Ruling 01-10-1

February 22, 2010

Page 2 of 2

NOTE: Energy consumed by on-farm grain storage and processing is considered to be consumed
in farming.
Analysis:
Neb. Rev. Stat. § 77-2704.13 was amended by Legislative Bill 9 during the 2009 Legislature to
expand the exemption for energy sources to include the sale and purchase of wood (e.g., sawdust,
wood chips, and wood pellets) or corn (e.g., dry shelled corn) used as fuel. Sales and purchases
of electricity, coal, gas, fuel oil, diesel fuel, tractor fuel, gasoline, coke, nuclear fuel, butane, and
compressed fuel that includes compressed natural gas and liquefied petroleum gas (propane)
continue to be exempt when more than 50% of the amount purchased is used or directly consumed
in manufacturing, processing, refining, the generation of electricity, irrigation or farming, or by
any hospital.
The sale or purchase of wood or corn for use as an energy source is exempt from sales and use
taxes, provided the following conditions are met:

1. More than 50% of the wood or corn sold or purchased is used or directly consumed in
   manufacturing, processing, refining, the generation of electricity, irrigation or farming, or
   by any hospital; and
2. The purchaser gives the seller a completed Nebraska Energy Source Exempt Sale Certificate,
   Form 13E.
   APPROVED:

Douglas A. Ewald
Tax Commissioner
February 22, 2010