The state of Nevada is often viewed as a safe haven from both individual and corporate income tax, and for the most part, that has not changed. However, in the wake of declining state revenues, the state of Nevada recently began imposing a new gross receipts tax called the “commerce tax.” The first reporting period for this tax is July 1, 2015 through June 30, 2016 with the return due within 75 days (filing extensions are available). The tax is due on apportioned Nevada gross revenue (not gross income) that exceeds $4,000,000.
The rate of tax applied to the taxable revenue varies by business classification. The retail trade industry group would have a tax rate of .111 percent. Excluded from the definition of gross revenue is amounts realized from the use of tradenames, trademarks, patents, and other similar intangible property. This keeps in place the extensive Nevada holding-company business operations that have mushroomed over the past 15 years.
The tax is imposed at the separate entity level and not the consolidated or combined level and returns are to be filed even if your business does not have over $4,000,000 of Nevada apportioned revenue. Returns will be filed but no tax is due. For business that current pay other forms of Nevada tax such as the Modified Business Tax, certain credits are available so that duplicate taxation does not occur.
The tax is imposed on each “business entity” engaged in business in Nevada. “Engaging in business” includes commencing, conducting, or continuing a business and the exercise of corporate of franchise powers regarding a business’ within the state of Nevada. This definition does not clarify what level of business activity must occur in Nevada before the tax returns must be filed. Despite this rather broad language the U.S. Constitution still requires some type of physical nexus with the state of Nevada before they could legally impose the tax. Because this is not an income tax, the sales tax nexus rules would likely be the ones to apply. That is, if your company has sent salesmen into the state or has some type of physical connection with the state a tax return would be filed in 2016. Only if your business had over $4,000,000 of Nevada receipts would any tax be due.
The Nevada Commerce Tax and You
So what does this mean for Amazon FBA sellers and any other out-of-state sellers who may have sales tax nexus in Nevada? Even though Nevada hasn’t been specific about which “business entities” have to file this return, you may indeed find you have to file it. But unless you made more than $4 million in receipts in Nevada then no tax would be due. This return is also not due until next year. If you feel a notice of this return has been sent to you in error, contact either the Nevada Department of Taxation or an accountant.
Do you have questions about the Nevada Commerce Tax? Start the conversation in the comments.