Nevada recently passed legislation enacting a new commerce tax on business taxpayers that have more than $4 million of Nevada-sourced gross receipts. This new tax will affect all businesses, including Individuals that file a Schedule C, E and/or F with Nevada activity. A partial list of exceptions are as follow:
- Certain entities with Nevada activities that are confined to owning, maintaining, and managing certain intangible investments.
- Certain passive entities, where greater than 90 percent of revenues come from investments
- Nonprofit entities
The commerce tax is a gross receipts tax. There is no deduction for the cost of goods sold or any other business expenses. The law does specifically exclude certain types of gross receipts and allows for certain deductions. A partial list of the exclusions and deductions are as follows:
- Receipts from sale of trademarks, copyrights, patents and other intellectual property
- Receipts from most investments, such as interest and dividends
- Receipts required to be paid to another entity or person
- Receipts for sub-contractors
- Commissions collected and then paid to non-employees
- Receipts from a member of an affiliated group
- Receipts used to calculate the Fees for State and County Gaming Licenses
The tax is imposed only on gross receipts in excess of $4 million. For example, assume a business has $5 million of Nevada gross receipts after all exclusions and deductions. The business would be taxed on $1 million of gross receipts ($5 million – $4 million).
The Commerce Tax has flat tax rates specific to each industry. These range from .051% to .331%. Examples of industries and their rates are as follows:
- Agriculture: 0.063 percent
- Utilities and telecom: 0.136 percent
- Retail trade: 0.111 percent
- Construction: 0.083 percent
- Manufacturing: 0.091 percent
- Real estate rental/ leasing: 0.25 percent
- Wholesale trade: 0.101 percent
- Healthcare: 0.19 percent
If an entity is involved in multiple industries, the primary business industry will determine the tax rate to apply.
Tax Year and Filing Requirements
The tax year for the commerce tax will be July 1 – June 30 for all businesses. This tax is effective beginning July 1, 2015 with the first tax return due August 14, 2016.