Nebraska Sales Tax Penalties & Interest Checklist
Understanding Nebraska Sales Tax Penalties and Interest
Nebraska sales tax penalties and interest are charges the state applies to late or unpaid sales tax obligations. The Nebraska Department of Revenue assesses these charges when you collect sales tax from customers but do not remit it on time, or when you fail to file required sales and use tax returns by the deadline.
What Penalties and Interest Mean
The Department of Revenue imposes a penalty of 10% of the unpaid tax or $25, whichever is greater, for both late filing and late payment. This penalty applies whether you failed to file a sales tax return by the deadline or failed to pay the tax when due.
Interest accrues on the unpaid tax amount at an annual sales tax rate determined every two years by the Tax Commissioner. For the period from January 1, 2025, through December 31,
2026, the sales tax rate for interest is 8% per year.
Interest is calculated using simple interest from the twentieth day of the month following the period for which the amount should have been returned until the date of payment. When you receive a Notice of Determination showing tax penalties and interest, the state has calculated these additional charges on top of your original tax liability.
Why the State Assesses These Charges
Nebraska applies tax penalties and interest to encourage the timely payment and filing of sales and use tax returns. These charges serve as a financial consequence for noncompliance with the Nebraska Revenue Act of 1967.
Under certain circumstances, the Tax Commissioner may waive or reduce penalties if the failure to comply with sales tax law was due to causes beyond your reasonable control and not due to negligence or intentional disregard of Nebraska law.
You must pay all tax and interest before the Department of Revenue will consider a penalty
abatement request. You must submit Nebraska Form 21 (Request for Abatement of Penalty)
with a complete explanation and supporting documentation. Submitting this request does not guarantee approval by the Tax Commissioner.
Consequences of Ignoring Notices
Ignoring a notice of deficiency or Notice of Determination allows the debt to continue growing because interest accrues daily at the annual sales tax rate. The state will send additional notices, and the case may be referred to the collection unit.
Nebraska has a three-year statute of limitations for issuing a deficiency determination from the later of the return due date or filing date. This period extends to six years if you failed to file a use tax return or if the deficiency determination exceeds 25% of the amount stated on the return.
Steps to Take After Receiving a Notice
Follow these steps when you receive a notice showing Nebraska sales tax penalties and
interest
1. Read the entire notice of deficiency carefully and note the tax period, original tax amount, penalty amount, interest amount, total tax liability, and any payment deadline.
2. Verify that the notice identifies the correct business, tax period, and original tax obligation for filing periods in question.
3. Gather your sales records, purchase records, exemption certificates, and any sales and use tax returns you filed for that period.
4. Review your filing history to confirm whether you filed a sales tax return for the filing periods shown on the notice.
5. Calculate what you believe you owe in original tax without including penalties or interest, and compare this to the tax liability shown on the notice.
6. Check the notice for any deadline or appeal period, which is typically sixty days from service of the deficiency determination for filing a petition for redetermination.
7. Prepare a written explanation with supporting documentation if the original tax amount appears incorrect, but do not pay the notice yet if you dispute the underlying tax.
8. Complete Nebraska Form 21 if the original tax amount is correct, but you believe penalties should be reduced or waived due to circumstances beyond your reasonable control under sales tax law.
9. Contact the Nebraska Department of Revenue at (402) 471-5729 or toll-free at
800-742-7474 (NE and IA) if you are unsure about any part of the deficiency determination.
10. Submit a response or make contact with the Department before any deadline passes, even if you plan to dispute the charges.
11. Contact the Department of Revenue to discuss payment options if you cannot pay the full tax liability, understanding that interest continues to accrue during any payment plan period.
12. Keep copies of the notice and all correspondence you send to the state, and document dates, times, and names of anyone you speak with by phone.
What Happens After You Respond
After you submit your response, the state reviews your documentation and the information in your deficiency determination. Re-examination of the period will result in either confirmation of the amount owed or issuance of a corrected Notice of Determination if you disputed the underlying use tax amount. When you request penalty reduction using Nebraska Form 21, the
Department of Revenue will review your explanation and supporting documents.
You will receive a follow-up notice that either confirms the original penalty and interest amounts, modifies them, or adjusts the total balance due. This notice includes any new payment or further action deadlines.
Appeal of a penalty abatement denial requires filing with the District Court of Lancaster County within thirty days after the mailing of the final determination. Filing the appeal within this timeframe is necessary to contest the determination.
Common Mistakes to Avoid
Never assume that receiving a notice is a mistake or that the debt will disappear if ignored. The state tax liability does not expire automatically, and interest continues to accrue at the current annual rate.
Review the notice for accuracy before paying if you believe the underlying tax is incorrect, because requesting a refund of disputed amounts after payment can be difficult and time-consuming. Meet any deadline listed on the notice for filing a petition for redetermination or requesting a hearing.
Send complete documentation when requesting penalty relief rather than vague explanations without supporting records. Follow up phone calls with written correspondence to create a clear record of your request and the state’s response.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.
We help with
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
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