Nevada Implements Commerce Tax

On June 10, 2015, Nevada Gov. Brian Sandoval signed into law S.B. 483, which imposes an annual Commerce Tax on each business entity engaging in a business within the state during the tax year. The new Commerce Tax is levied on the gross receipts of businesses with at least $4 million in revenue in Nevada. This bill took effect on July 1, 2015.

The new Commerce Tax will have a drastic effect on all entities engaging in a business in Nevada. It specifies that any business entity is deemed to be engaged in a business if the entity commences, conducts, or continues a business in the state. This broad definition creates an opportunity for the Department of Revenue to levy tax on any business entity with more than $4 million in Nevada gross revenue, less certain allowable exclusions and deductions.

S.B. 483 specifies that this new industry-specific tax is subject to 26 different rates. Each business category is assigned its own gross receipt tax with rates ranging from 0.051% to 0.331%. Businesses that do not fit into any other categories are taxed at the 0.128% rate as “unclassified businesses”.

To avoid any ambiguity, this bill furnishes a list of business entities subject to this tax. This list includes, but is not limited to: corporations, proprietorships, LLC’s, LLP’s, business trusts and etc. However, passive entities, entities with activities limited to owning, maintaining, and managing intangible investments as well as real estate investment trusts are excluded from this list, subject to specific limitations.

The tax year for all taxpayers is a twelve-month fiscal period starting from July 1 through June 30, regardless of the taxpayer’s accounting year end. The reports are due 45 days after the end of the tax year, which means the first report is due on August 14, 2016. There is a 30-day extension provision. After the first year of Commerce Tax, a partial credit will be offered against the payroll tax for tax payments made under the Commerce Tax.

How does this affect my business?

Taxpayers with greater than $4 million in revenue in Nevada should prepare for this new filing requirement. It appears that all affected businesses must file a report and pay this tax within 45 days after each June 30th period. When a 30-day extension is factored into consideration, the maximum allowable time to comply is only 75 days, which is a very short time period for most business entities and comes at an unusual time when compared to other state tax filing periods.

For questions about this law or other state and local tax matters, please contact us.