Nebraska has a structured approach to taxing the wages of both resident and nonresident remote employees, characterized by specific employer withholding obligations and provisions concerning the sourcing of wages.
Employer Withholding Obligations: Employers in Nebraska are required under the Nebraska Revenue Act of 1967 to deduct and withhold income taxes from employee wages. This obligation extends to payments made to both residents and nonresidents engaged in personal services within the state. Specifically, for nonresident individuals performing services in Nebraska, withholding applies to payments exceeding $600, with different rates based on the amount of the payment (4% for payments under $28,000 and 6% for higher amounts) [1].
Nonresident Wage Sourcing: Regarding the sourcing of nonresident wages, income earned by nonresident individuals for services performed entirely within Nebraska is taxable. However, compensation for services performed outside the state may not be sourced to Nebraska if the individual’s presence in the state is for fewer than seven days during the taxable year or if their total compensation while in the state does not exceed $5,000 [2]. Also, compensation earned by nonresident individuals serving on boards of directors is exempt from Nebraska income tax [1].
Reciprocity Agreements: Nebraska does not have active reciprocity agreements with other states, which means nonresident employees are subject to Nebraska income tax regardless of their state of residence. This is significant as it implies that nonresidents cannot avoid taxation by virtue of their primary residence in a reciprocating state.
De-minimis Threshold: The state recognizes a de-minimis threshold wherein nonresident individuals are exempt from taxation if they do not exceed five employment duty days in Nebraska within a taxable year and earn less than $5,000 during that period. Additionally, if the employee's presence is solely for attending a conference or training and stays within the limits specified, this income may not be taxable [2].
Local/City Wage Taxes: There are no local or city wage taxes imposed in Nebraska, simplifying the taxation landscape for employees and employers alike.
In summary, Nebraska’s taxation framework for remote employees involves employer withholding requirements, specific criteria for nonresident wage sourcing, a lack of reciprocity agreements, a nominal de-minimis threshold for tax exemption, and an absence of local wage taxes.