Tax Alert

Nevada Adds New Tax for Entities Doing Business in the State

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January 20, 2016

Nevada enacted a new annual non-income-based gross receipts commerce tax for the period July 1-June 30 which affects every business entity engaged in business in the state. Initial reports and payment are due August 15, 2016. Going forward, there will be a 30-day non-automatic written extension allowed.

Who must file and who is taxed

Any business entity engaged in business in Nevada is required to file Schedule C (Profit or Loss From Business), Schedule E (Supplemental Income and Loss), or Schedule F (Profit or Loss From Farming) of Form 1040, U.S. Individual Income Tax Return, with the IRS. These business entities include business associations, partnerships, limited liability companies, limited liability partnerships, C corporations, S corporations, trusts, professional associations, joint stock companies, holding companies and individual taxpayers engaged in business. To clarify, this tax requirement affects not only businesses based in Nevada, but also any entities simply doing business in the state.

Tax is imposed on every business whose Nevada gross revenue exceeds $4 million (with no deduction for cost of goods sold or other expenses incurred in operating the business), although every business is required to file. There are exclusions for government, 501(c) entities, REITs, passive entities, and for an entity that solely manages investments.

Where to file

File returns either electronically or on a hard copy.

The initial report cements a company’s NAICS (2012 North American Industry Classification System, published by the Bureau of the Census of the United States Department of Commerce) industry, which determines the entity’s tax rate. There are 26 business categories. If a single business entity has multiple types of businesses under its single entity that do not fall under the same NAICS code (for example, a pizza parlor and laundromat), the NAICS would be the category where the highest percentage of revenue comes from. The rates range from 0.051% to 0.331%

Nevada gross revenue includes the amounts of revenue received as follows:

  1. For revenue related to the sale, lease, or royalties of tangible personal property sold to a consumer who is located in Nevada, whether it is shipped, delivered into Nevada or purchased at a physical location in Nevada.
  2. For revenue related to the sale of services, it is the location where the purchaser receives benefit. Draft tax return instructions have a list of items to exclude from revenue, and certain deductible items.

There are a number of exclusions and deductions available under the new tax.

Audit examinations

The commerce tax requires that business entities with out-of-state records pay for audit examinations.

Three-year averaging, the Modified Business Tax (MBT) credit, and the recovery charge are techniques which may lessen the tax impact. Attaching a statement of Nevada revenue to the report could reduce the possibility of an examination and paying employee audit fees.

For more information about state tax issues, please contact your AGH professional or Jerry Capps, senior vice president of state and local tax, below.

Gerald Capps, JD

Senior Vice President
State and Local Tax

Jerry Capps and his State and Local Tax (SALT) team provide sophisticated state and local tax planning, strategic advice and advocacy to numerous mid-market, Fortune 100 and industry-leading companies. The team has returned many millions of dollars in one-time and recurring tax savings to companies.

In addition to planning and compliance, the SALT practice includes legislation and policy, litigation, and controversy matters involving income, franchise, sales and use and property taxes. His work involves critical questions on nexus, apportionment, the Multistate Tax Compact, and the equal protection, due process, and commerce clauses of the United States Constitution. Capps is also a respected advocate on issues of tax policy. He represents clients in all phases of state and local tax controversy, including audit assistance and administrative hearings, and he provides counsel on state and local income and transactional costs for mergers, acquisitions and corporate reorganizations. He has been engaged as a keynote speaker for organizations including the Institute for Professionals in Taxation, state and local CPA societies, university and professional accounting conferences, and chambers of commerce.

Capps is a member of the Institute for Professionals in Taxation, the Kansas Society of Certified Public Accountants, the American Bar Association, and the Kansas Bar Association.

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NOTE: Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein.