Major Changes in Nevada Taxation – Including a New Tax
On June 9, 2015, Nevada passed Senate Bill 483, enacting several taxation changes for entities doing business in Nevada. Among the alterations to existing tax rates, the law also created a new Commerce Tax that could catch many taxpayers off guard.
The Commerce Tax is considered a modified gross receipts tax that bases the tax rate on the business category into which a taxpayer falls; the tax was modeled after gross receipts taxes in Washington and Ohio and—to some extent—the taxing regime in Texas. The tax will be imposed on all business entities with Nevada gross income in excess of $4 million, providing some relief to smaller taxpayers and out-of-state taxpayers with a small sales volume in the state.
As enacted, there’s no requirement to be physically located in the state, meaning taxpayers will need to pay close attention to revenues derived from sources in Nevada, as the $4 million threshold is the only nexus standard with this tax. The new law provides for the typical sourcing rules for revenues related to tangible personal property and transactions related to rents and royalties from property. For business entities selling something other than tangible personal property, such as services, the new laws dictate the revenue be sourced to Nevada in proportion to the purchaser’s benefit in the state, if determinable.
There are several other important takeaways from this new tax, including:
- The law creates a broad definition of “business entity” with few expressly listed exceptions.
- The standard tax year to be used for all taxpayers is July 1 through June 30.
- Returns will be due on or before the 45th day following the prescribed year-end.
- A 30-day extension period is available, but interest will be imposed during the extension period.
- There’s no deduction for cost of goods sold or other similarly related expenses.
- Since this is a gross receipts tax and not a net income tax, taxpayers will not be able to claim P.L. 86-272 protection.
If you have questions about how the Nevada tax law changes could affect your organization, contact your BKD state and local tax advisor.