In 2015, Nevada’s legislature was busy enacting controversial legislation aimed at raising revenue in the state. These laws are yet another challenge for businesses.
Last year, Senate Bill (SB) 483 was signed into law by Governor Sandoval and became known as the “Commerce Tax.” This new law went into effect on July 1, 2015 and applies to businesses whose Nevada gross revenue in a taxable year exceeds $4,000,000. Under the law, a “business entity” is defined as a corporation (both S and C), partnership, LLC and sole-proprietorship (i.e., those who file schedule C), just to name a few. For a complete list of the business entities subject to the Commerce Tax, click here. Note that out of state companies are also subject to the Commerce Tax to the extent that they have nexus in Nevada.
This law was enacted a year ago, but the effects of it are now being seen by companies whose first Commerce Tax return is due for the year ended June 30, 2016. This tax must be remitted to the state within 45 days after the end of the taxable year (August 15, 2016). Companies may file an extension for 30 days, to allow them more time to comply with the new law. All Nevada business entities are required to file the return, even if total revenue is less than the $4,000,000 minimum.
What Does the Commerce Tax Apply to?
As stated above, this tax applies to businesses that generate “Nevada gross revenue” in excess of $4,000,000. Nevada gross revenue is simply the gross revenue earned by a business within Nevada. This is determined by starting with total “gross revenue” and implementing certain deductions specified by the new law. A few of these deductions are:
- gaming deduction
- liquor tax deduction
- mining deduction
There are several more deductions allowed under this law. For more information on these, please read more at the Nevada Department of Revenue.
What is the Rate?
Businesses will be subject to the Commerce Tax at varying rates, determined by their business classification or NAICS code. There are 26 different categories under which a business may be classified. For example, a business in the manufacturing industry would pay Commerce Tax at the rate of 0.091% and a business in the retail trade industry would pay a Commerce Tax at 0.111%. As an example, a retailer generating $4,000,000 of revenue in Nevada will pay a Commerce Tax of approximately $4,440. While it’s not a huge amount- it’s an added business expense and difficult to pass down to customers. For a complete list of all of the business categories and their corresponding tax rates, click here.
Additional Law for Remote Sellers- Click-Through Nexus
In addition to the new Commerce Tax, Nevada also enacted “Click-Through” Nexus Provisions. Formerly called Assembly Bill (AB) 380, it became effective October 1, 2015 and is now taking a toll on businesses that operate in Nevada. This new law requires out of state businesses to collect sales and use tax if they have an agent within Nevada.
Jumping on the already crowded bandwagon of other states that have enacted click-through legislation, this law will create nexus for an out of state company engaging an agent in Nevada to run banner ads or similar “click-through” mechanisms on their behalf. If click-through revenue generated is more than $10,000, the company is deemed to have created nexus in Nevada.
At Miles Consulting Group, we help businesses who are operating across state lines to understand the different tax ramifications in each state. If your company is doing business in the state of Nevada, and have questions about these new laws, please contact us.
