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Apportionment for Multistate Business

Market-Based Sourcing

This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (Department) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of the Department and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.

This guidance document may change with updated information or added examples. The Department recommends you do not print this document. Instead, sign up for the subscription service at revenue.nebraska.gov to get updates on your topics of interest.


The Nebraska Legislature’s enactment of LB 872 (2012), for tax years beginning on or after January 1, 2014, requires taxpayers who must apportion income to use a market-based sourcing method to apportion income derived from sales other than the sales of tangible personal property. Market-based sourcing replaces the former costs of performance method of apportionment used for tax years beginning before January 1, 2014.

Under the former costs of performance method, sales other than the sales of tangible personal property were sourced to the location where the income-producing activity was performed. Sales were only apportioned to Nebraska if a greater proportion of the income-producing activity was performed in Nebraska.

Market-based sourcing generally sources sales to the location where the market is, primarily where the service is received or the intangible is used. Market-based sourcing does not require a specific percentage of the market to be in Nebraska. Sales are apportioned to Nebraska based on the proportion of the receipt or use in Nebraska of the service, intangible, or any other sale other than sales of tangible personal property.

The provisions of LB 872 are found in Neb. Rev. Stat. §§ 77-2734.04 and 77-2734.14. These statute sections contain a more detailed set of sourcing guidance than previously provided in statute for costs of performance.

Type of Sale
(other than tangible
personal property)
Sourcing of Sale
(but is not limited to)


Neb. Rev. Stat. § 77-2734.14(3)(a)

Income from services is sourced to Nebraska if, when rendered, the service relates to:

  • Real property located in Nebraska;
  • Tangible personal property located in Nebraska;
  • An individual present in Nebraska at the time the service is received; or is provided to:
  • A trade or business operated in Nebraska.
    • If the business buyer uses the service within and outside Nebraska, the sales are apportioned to Nebraska by a reasonable method.

Application Services

Neb. Rev. Stat. § 77-2734.14(3)(b)
Neb. Rev. Stat. § 77-2734.04(2)

Income from application services is sourced to Nebraska for sales to:

  • An individual who uses the application service in Nebraska, based on the individual buyer’s billing address; or
  • A business to the extent the trade or business uses the service in the regular course of business in Nebraska.
    • If the location of the business sale cannot otherwise be determined, location will be based first, on the state where the order was placed; or if that cannot be determined, second, on the customer's billing address.
  • Software as a service (SaaS)
  • Platform as a service (PaaS)
  • Infrastructure as a service (IaaS)

Intangible Property

Neb. Rev. Stat. § 77-2734.14(3)(c)
Neb. Rev. Stat. § 77-2734.04(14)

Income from sales of intangible property is sourced to Nebraska to the extent the buyer uses the intangible at a location in Nebraska.

If the location where the intangible is used cannot otherwise be determined, the sale will be sourced to the buyer’s billing address.

  • Patents
  • Copyrights                   
  • Trademarks      
  • Trade names
  • Franchises
  • Service names
  • Technical know-how
  • Licenses
  • Royalties
  • Processes
  • Formulas
  • Techniques
  • Excludes money

Intangible Assets
(in connection with a Treasury Function)

Neb. Rev. Stat. § 77-2734.14(3)(d)
Neb. Rev. Stat. § 77-2734.04(26)

Income from intangible assets is sourced to Nebraska if it is included in taxable income and to the extent the investment, management, and record-keeping activities occur in Nebraska.

  • Interest
  • Dividends
  • Investment income
  • Excludes net gains from marketable securities


Neb. Rev. Stat. § 77-2734.14(3)(e) – (f)
Neb. Rev. Stat. § 77-2734.04(15)

Gross income from charges associated with loans and net gains from the sales of loans is sourced to Nebraska when the loan is:

  • Secured by real or tangible personal property located entirely in Nebraska, the entire amount will be sourced to Nebraska;
  • Secured by real or tangible personal property located in and outside of Nebraska, to the extent the property is located in Nebraska, and;
  • Not secured by real or tangible personal property, if the borrower’s billing address is in Nebraska.
  • Interest             
  • Fees
  • Points
  • Penalties
  • Servicing participations
Credit Cards

Credit Cards

Neb. Rev. Stat. § 77-2734.14(3)(g) – (h)
Neb. Rev. Stat. § 77-2734.04(11)

Gross income from credit card receivables, and net gains from the sale of credit card receivables, are sourced to Nebraska if the billing address of the card holder is in Nebraska.

  • Interest       
  • Fees
  • Points                     
  • Penalties                  

Real or Tangible Personal Property –

Neb. Rev. Stat. § 77-2734.14(3)(i) – (j)

Income from the sale, lease, rental, or licensing of real property or the lease, rental, or licensing of tangible personal property is sourced to Nebraska to the extent that the property is located in Nebraska.

  • Sale (real property)
  • Lease
  • Rental
  • Licensing


Neb. Rev. Stat. § 77-2734.14(3)(k)

Income from sales other than sales of tangible personal property not specifically addressed will be sourced to Nebraska in a way that fairly represents the extent of the taxpayer’s business activity in Nebraska. This requirement is satisfied if the sale is sourced for:

  • An individual – to the individual buyer’s billing address.
  • A businessfirst, to the state from which the order was placed; or if that cannot be determined, second, to the customer's billing address.

Communications Companies

Neb. Rev. Stat. § 77-2734.14(4)

Apportioning income from communications companies will not change and will continue to be sourced based on costs of performance.

Neb. Rev. Stat. § 77-2734.04(7)



Market-based sourcing applies to business entities generating income from business activity that is taxable within Nebraska and subject to tax in at least one other state. Market-based sourcing will impact corporations located in Nebraska with customers outside of Nebraska, as well as corporations located outside Nebraska with customers in Nebraska.

Sales Factor and Combined Reporting

The requirement to use a single factor, sales only, apportionment formula and combined reporting in Nebraska remain unchanged by LB 872. For more information on these topics, see Frequently Asked Questions About Nebraska Business Income Taxes and Neb. Rev. Stat. §§ 77-2734.02, 77-2734.04, 77-2734.05, and 77-2734.06.


The enactment of LB 872 does not change Nebraska’s corporate income tax nexus policy. Nexus and apportionment are separate considerations which should be analyzed independently from one another.

Forms and Regulations

Business forms and regulations are being updated to reflect the change to market-based sourcing and to provide any necessary clarification and guidance. Until updates are completed, current forms and regulations are in effect to the extent they are not in conflict with the new statutory provisions.

Contact Information

Tom Milburn
Revenue Tax Specialist


LB 872 (2012)
Neb. Rev. Stat. § 77-2734.04 (Definitions)
Neb. Rev. Stat. § 77-2734.14 (Sourcing Rules)
FAQ #2 – Nebraska Business Income Tax (unitary group/combined reporting)
FAQ #4 – Nebraska Business Income Tax (apportionment)

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