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Nevada’s New Tax: Are You Ready?

July 23, 2015 | By | No Comments

 

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Nevada Senate Bill No. 483 was signed into law on June 10, 2015 imposing a new gross receipts tax on Nevada sales.  The new law became effective July 1, 2015 and, in short, imposes a tax on any business entity engaged in business in Nevada with total annual Nevada sales over $4 million at a tax rate ranging from 0.051% to 0.331%.

Business entities subject to this new tax include C and S corporations, entities taxed as partnerships, sole proprietorships, and individuals reporting business activity directly on their income tax returns.  Entities exempt from the Commerce Tax include tax exempt, governmental, or not for profit entities, certain trusts, and REITs.

SB 483 defines nexus for the Commerce Tax as being engaged in business in Nevada with annual Nevada gross revenue in excess of $4,000,000.  Because the tax is not based on net income, but rather on gross receipts businesses are not afforded Public Law 86-272 protection from this tax.   “Engaged in business” means:

  • Commencing, conducting or continuing a business;
  • The exercise of corporate or franchise powers regarding a business; and
  • The liquidation of a business which is or was engaging in a business when the liquidator holds itself out to the public as conducting that business

Given this loose definition of engaged in business, and without PL 86-272 as a back stop, it may be presumed that the sales tax nexus standards apply for what constitutes engaged in business in the state.  Therefore, arguably a business entity without physical presence or agency or affiliate nexus (explained further below) may not be subject to the Nevada Commerce Tax merely by selling remotely into the state without any further connection.

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Delap LLP is one of Portland’s largest local tax, audit, and consulting accounting firms, located in Lake Oswego, Oregon.